The Eleventh Circuit’s most recent decision regarding Regulation X, 12 C.F.R. § 1024.1, et seq., of the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2601, et seq., will come as a relief to mortgage lenders and borrowers alike—although not to the individual plaintiff in Landau v. RoundPoint Mortgage Servicing Corp. Relying on the plain language of Regulation X and the consumer-protection purpose of RESPA, the Court held that a mortgage servicer is not prevented from rescheduling a previously-ordered foreclosure sale while considering a borrower’s loss-mitigation application.
After Rachel Landu’s mortgage became seriously delinquent, her lender filed a foreclosure action in Florida state court. In February 2016, the lender obtained a final judgment, and the court scheduled the foreclosure sale for June 2, 2016. Then, RoundPoint began servicing the loan and offered Landu a trial mortgage modification.
After Landu accepted, the original lender moved to reschedule the foreclosure sale, explaining that the loan was now “in active loss mitigation.” Landu promptly filed suit, arguing that the motion to reschedule the foreclosure sale violated both Regulation X and the Fair Debt Collection Practices Act.
Rescheduling a Foreclosure Does Not Violate RESPA
The portion of Regulation X at issue in Landu was § 1024.41(g), which prohibits a loan servicer from moving for a “foreclosure judgment or order of sale” if a borrower submitted a complete loss mitigation application sufficiently in advance of a foreclosure. The Eleventh Circuit held that this language plainly refers to substantive, dispositive motions seeking a “judgment” or permitting the foreclosure sale. It does not encompass a “housekeeping-type motion that does no more than seek permission to change the date of sale that the court has previously ordered.”
Because the motion to reschedule the foreclosure sale at issue in Landu was not moving for a judgment but merely moving an already-scheduled sale, the motion did not violate Regulation X and Landu’s claims failed. Indeed, the mortgage servicer was required to prevent the previously-scheduled sale while Landu was performing under the trial mortgage modification, and guidance from the Consumer Financial Protection Bureau indicated that the servicer could elect to “suspend”—rather than cancel—the foreclosure sale. To hold otherwise, the Eleventh Circuit noted, would actually harm consumers because “servicers would be heavily disincentivized against offering loss-mitigation options to delinquent borrowers and helping them complete loss-mitigation applications” once a foreclosure sale was ordered.