Source: https://consumerfsblog.com/2018/11/6th-cir-holds-no-federal-jurisdiction-for-claim-under-garn-st-germain-act/
Timestamp: 2019-04-18 19:23:25+00:00

Document:
In a 2-1 decision, the U.S. Court of Appeals for the Sixth Circuit recently held that, because a complaint’s sole federal claim under the Garn-St. Germain Depository Institutions Act of 1982 did not provide a private cause of action, and because the state law claims did not implicate significant federal issues, the trial court lacked jurisdiction.
Accordingly, the Sixth Circuit vacated the trial court’s judgment with instructions to remand the case to state court.
A copy of the opinion in Estate of Cornell v. Bayview Loan Servicing, LLC is available at: Link to Opinion.
The borrower died with an outstanding balance on his mortgage loan. Although he was current on his mortgage loan at the time of his death, in the first five months following his death the loan went unpaid.
As a result, the defendant mortgagee foreclosed on the mortgage and purchased the home by sheriff’s deed at a public auction. The mortgagee later sold the home to a third-party purchaser.
The borrower’s estate subsequently filed a complaint in state court against the mortgagee asserting claims for lack of standing to foreclose under the Garn-St. Germain Depository Institutions Act of 1982, 12 U.S.C. § 1701j-3, and Mich. Comp. Laws § 445.1626.
The mortgagee and purchaser (collectively, “defendants”) then moved for judgment on the pleadings in part based on the argument that the Garn-St. Germain Act does not authorize a private right of action.
The trial court agreed, ruling that the Garn-St. Germain Act does not authorize a private right of action and that the Garn-St. Germain Act did not apply to the estate’s claims. The trial court therefore granted the defendants’ motion on all counts and entered judgment in their favor.
As you may recall, the Garn-St. Germain Act prohibits states from banning due-on-sale clauses, providing in principal part that “[n]otwithstanding any provision of the constitution or laws (including judicial decisions) of any State to the contrary, a lender may, subject to subsection (c) of this section, enter into or enforce a contract containing a due-on-sale clause with respect to a real property loan.” 12 U.S.C. § 1701j-3(b)(1).
Thus, a “due-on-sale clause is presumptively valid unless it qualifies as one of nine exceptions listed in § 1701j-3(d),” and states can therefore only regulate nine types of due-on-sale clauses. In response to the Garn-St. Germain Act, Michigan created its own cause of action for borrowers harmed by one of those nine banned due-on-sale clauses. See Mich. Comp. Laws § 445.1626.
In reaching its conclusion, the Court first examined whether the Garn-St. Germain Act created a private cause of action. To make that determination, the court “begin[s] with the text of the statute,” which may provide for an express or implied private cause of action.
The Sixth Circuit next examined whether the state law implicated a “substantial question of federal law” that would open the door to federal court.
Accordingly, the Sixth Circuit vacated the trial court’s judgment and instructed the district court to remand the matter to state court.

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