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Keen v. Helson

United States Court of Appeals, Sixth Circuit

July 18, 2019

Tara L. Keen, Plaintiff/Counter-Defendant-Appellant,
Robert C. Helson, Defendant/Counter-Plaintiff-Appellee, Ocwen Loan Servicing, LLC, Defendant-Appellee, Bank of New York Mellon Trust Company, N.A., formerly known as The Bank of New York Trust Company, N.A., as successor to J.P. Morgan Chase Bank, N.A., as Trustee for Residential Asset Mortgage Products, Inc., Mortgage Asset-Backed Pass Through Certificates Series 2005-RP3, Third-Party Defendant-Appellee.

          Appeal from the United States District Court for the Middle District of Tennessee at Nashville. No. 3:17-cv-00982-William L. Campbell, Jr., District Judge.

         ON BRIEF:

          Kerry Dietz, David Tarpley, David Kozlowski, LEGAL AID SOCIETY OF MIDDLE TENNESSEE & THE CUMBERLANDS, Nashville, Tennessee, for Appellant.

          Edmund S. Sauer, Brian R. Epling, BRADLEY ARANT BOULT CUMMINGS LLP, Nashville, Tennessee, for Appellee Ocwen Loan Servicing.

          Before: GUY, THAPAR, and NALBANDIAN, Circuit Judges.



         To sue someone, you must have a cause of action. And you only have a cause of action under a federal statute if the statute's text provides you one. The Real Estate Settlement Procedures Act (RESPA) creates a cause of action but says that only "borrower[s]" can use it. 12 U.S.C. § 2605(f). A "borrower" is someone who is personally obligated on a loan-i.e., someone who is actually borrowing money. Tara Keen does not fit that description, so she does not have a cause of action under RESPA. Instead, she will have to vindicate her rights in state court under state law.


         This case turns on the difference between loans and mortgages. So we need to start by explaining what they are.

         When you buy a house, you usually need a loan and a mortgage. The loan is a contract between you and the lender. The lender gives you money now so you can afford the house, and, in return, you agree that you will pay back that amount (plus interest) on a set schedule. Obduskey v. McCarthy & Holthus LLP, 139 S.Ct. 1029, 1033-34 (2019). If you fail to pay on time, the lender can sue you to get back what you owe. But litigation can be time-consuming and expensive. So most lenders want extra assurance that you will pay the loan back. That is where the mortgage comes in. Under a mortgage, you give the lender a legal interest in the house such that, if you do not pay back the loan on schedule, the lender can foreclose. Id.; see also Restatement (Third) of Property: Mortgages § 1.1 (Am. Law Inst. 1997). By foreclosing, the lender can take possession of your house-either for themselves or to sell it to someone else in order to satisfy the unpaid debt you owe. Black's Law Dictionary (11th ed. 2019) (defining "foreclosure").

         Put simply, a loan obligates you to pay the lender back, while a mortgage gives the lender the ability to take your house if you fail to meet that obligation. Thus, although most people get both a loan and a mortgage when they buy a house, the two are separate agreements setting forth different rights and obligations.

         Tara and Nathan Keen, like most of us, got a loan and took out a mortgage when they bought their house. Both of them signed the mortgage. But only Nathan signed the loan.[1] So only Nathan got money from the lender, and only Nathan promised to pay it back. That is not a minor technicality. Rather, this fact had legal and practical impact. For example, if Nathan defaulted on the loan, and the foreclosure sale of the house was not enough to satisfy the debt, then the lender could only go after Nathan's personal assets, not Keen's. Nathan was the one on the hook. Indeed, the mortgage made this abundantly clear. It said that anyone "who co-signs this [mortgage] but does not execute the [loan]"-i.e., Keen-"is not personally obligated to pay the sums secured by this [mortgage]." R. 34-2, Pg. ID 455.

         The pair later divorced, and Nathan gave Keen full title to the house. He died shortly afterwards. Although Keen was not legally obligated to make payments on the loan after Nathan died, she made payments anyway so she could keep the house. But she later ran into financial trouble and fell behind on those payments. Hoping to prevent foreclosure, Keen contacted the loan servicer, Ocwen Loan Servicing, LLC. She had a number of discussions with Ocwen representatives and submitted several applications for different forms of relief. Ultimately, those attempts failed. Ocwen proceeded with the foreclosure, and Keen's house was sold to a third-party buyer-Robert Helson.

         Soon after foreclosure, Keen sued both Ocwen and Helson under federal and state law. Her only claims relevant to this appeal alleged that Ocwen violated the Real Estate Settlement Procedures Act (RESPA). See 12 U.S.C. § 2601 et seq. RESPA requires that loan servicers, like Ocwen, take certain steps when a borrower asks for options to avoid foreclosure. Id. § 2605; see also 12 C.F.R. ยงยง ...

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