Summary:
In Vibal v. Data Mortgage, Judge Terrence W. Boyle dismissed a federal lawsuit challenging a completed North Carolina foreclosure, providing a useful warning about both Rooker-Feldman and how consumer claims should be pleaded following foreclosure.
The homeowner alleged that the defendants lacked authority to foreclose, relied on a fabricated note, and misrepresented their authority. But the Cumberland County Clerk had already authorized foreclosure, the Superior Court affirmed, and the sale occurred.
Judge Boyle held that Rooker-Feldman barred claims requiring the federal court to conclude that the state foreclosure court got it wrong. Arguments about standing, the validity of the note and allonges, and authority to foreclose were therefore barred.
The more important point for consumer attorneys concerns the homeowner's TILA, RESPA and FCRA claims. The court expressly recognized that these statutes can support claims independent of a foreclosure judgment. The problem was that Vibal pleaded them as additional reasons why the foreclosure itself was invalid.
His attempted FCRA amendment failed for a different reason. Under the Fourth Circuit's Roberts v. Carter-Young test, a plaintiff must adequately allege a CRA dispute, notice of that dispute to the furnisher, and the furnisher's failure to conduct a reasonable investigation. Vibal failed to sufficiently identify what was inaccurately reported or why it was inaccurate.
Commentary:
Vibal should not be read as giving mortgage servicers immunity once they complete a foreclosure. Instead, it emphasizes the difference between:
"The state court wrongly allowed the foreclosure"
and
"The servicer independently violated RESPA, FCRA, TILA, the Bankruptcy Code, or another law."
The first may be barred by Rooker-Feldman. The second may still be actionable—but it needs to be pleaded as an independent violation causing an independent injury.
For bankruptcy attorneys, that is also another reason to investigate mortgage problems before the foreclosure sale: review the proof of claim and payment history, use Rule 3002.1, send RESPA Requests for Information and Notices of Error, and identify servicing and accounting violations while there is still time to do something about them.
Federal consumer statutes can be swords against mortgage misconduct.
They just aren't substitutes for an appeal of a state foreclosure judgment.
To read a copy of the transcript, please see:
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