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37 » VISIT US ONLINE @ DSNEWS.COM servicing rights to a new servicer, when a loss mitigation application was pending with the transferor servicer. What rights do servicers have under the loss mitigation regulations? Servicers are not required to review untimely submitted loss mitigation applications, specifically those that are submitted less than 37 days before a foreclosure sale. e Consumer Financial Protection Bureau, which drafted the regulations, did not want to create an incentive for borrowers to avoid foreclosure sales merely by submitting loss mitigation applications that cannot realistically be reviewed before the sale. Additionally, the regulations benefit servicers by defining a complete loss mitiga- tion application liberally as "an application in connection with which a servicer has received all of the information that the servicer requires from a borrower in evaluating applications for the loss mitigation options available to the borrower." In this respect, servicers are held to a "reasonable diligence" standard to collect additional documentation when loss mitigation applications are incomplete. Finally, servicers are only required to review one complete loss mitigation applica- tion after the effective date of the regulations, January 10, 2014, and multiple loss mitigation applications need not stop the progress of a foreclosure action once a complete applica- tion has been reviewed and did not result in a resolution. What rights to litigate the loss mitigation regulations do borrowers have? With the exception of Section 1024.41, borrowers do not have a private right of action under RESPA Section 2605(f) to litigate claims that servicers have violated these regulations. Federal district courts have denied that borrowers hold the right to enforce provisions of these regulations: (i) requiring servicers to enact loss mitigation policies and procedures (Section 1024.38), (ii) to make early live contact with borrowers regarding loss mitigation options (1024.39), and (iii) to ensure continuity of contact with borrowers (Section 1024.40). Instead, the full extent of borrowers' rights to enforce the loss mitigation regulations is contained in Section 1024.41. Furthermore, as with all RESPA claims, borrowers must have suffered actual damages caused by the servicers' violation of the loss mitigation regulations to establish liability. What are some of the trends in loss mitigation litigation? In many cases, borrowers have asserted claims against servicers without understanding the limited nature of their rights under the regulations. Often borrowers fail to acknowledge that they cannot rescind judicial sales by asserting actions against servicers under these regulations and that they are only entitled to review of one complete and timely submitted loss mitigation application. For these reasons, borrower complaints in district court are frequently dismissed for failure to state a claim under Rule 12(b)(6). Under Rule 12(b)(6), complaints are subject to dismissal if they do not contain sufficient factual allegations to enable the trier of fact to conclude that the defendant is liable. is can easily occur when borrowers attempt to assert claims under these regulations for which they have no private right of action or when they cannot allege that they submitted a timely and complete loss mitigation application to the servicer. Nor do the regula- tions bind assignees or investors, only servicers, and nonborrower spouses lack the standing to recover under the regulations. What are some of the better strategies to defend against borrower claims? At this time, probably the way to defend against borrowers' claims against servicers under these regulations is to challenge whether the borrower's pleading contains sufficient facts to state a claim against the servicer for a violation under Section 1024.41. However, several district courts are tak- ing notice that many borrower claims are so fact-intensive as pleaded that the district court will deny a servicer's motion to dismiss. For instance, if the timing of the borrower's sub- mission of a loss mitigation application leaves doubt as to when the application was complete and submitted, the district court may deny the motion to dismiss. District courts may also deny the motion because all reasonable inferences of fact are resolved in favor of the borrower under the 12(b)(6) standard, and the remedial nature of the loss mitigation regula- tions requires that the regulations be liberally construed in favor of the borrower. Besides a borrower's failure to allege the correct facts against a servicer to support a vio- lation, the borrower's complaint could never- theless be subject to dismissal under the appli- cable state's res judicata doctrine or the federal Rooker-Feldman doctrine. If the borrower had the opportunity to raise the alleged violation in state court, or did raise it, the federal court may dismiss for lack of jurisdiction. If borrower claims are not resolved through the servicer's filing a motion to dismiss, they may be resolved at summary judgment as the correct dates and documents submitted are put before the court. But trials are a possibil- ity when real factual disputes arise regarding whether servicers complied with their duties within the applicable time frames. "… borrowers' rights under these regulations are limited to induce the servicer to review the application, to delay the start or the progress of a foreclosure action while the review is conducted, and to trigger the duty of the servicer to communicate the results of the review."

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