Court Opinion

ID: 4657138
Source: CourtListenerOpinion
Date Created: 2021-02-03 20:00:40.053825+00
Date Added: 2024-06-11T08:01:11.408795
License: Public Domain

NOT PRECEDENTIAL

                       UNITED STATES COURT OF APPEALS
                            FOR THE THIRD CIRCUIT

                                       ___________

                                       No. 18-3829
                                       __________

                                    CAROL LLOYD,
                                             Appellant

                                             v.

         NEW JERSEY HOUSING AND MORTGAGE FINANCE AGENCY;
                 CENLAR FEDERAL SAVINGS BANK (FSB),
                d/b/a Central Loan Administration and Reporting;
       ANTHONY L. MARCHETTA, in his official capacity as executive director,
                New Jersey Housing and Mortgage Finance Agency
                ____________________________________

                     On Appeal from the United States District Court
                              for the District of New Jersey
                         (D.C. Civil Action No. 1-17-cv-05369)
                       District Judge: Honorable Renée M. Bumb
                      ____________________________________

                    Submitted Pursuant to Third Circuit LAR 34.1(a)
                                    May 22, 2020

                 Before: KRAUSE, MATEY and ROTH, Circuit Judges

                            (Opinion filed: February 3, 2021)
                                     ___________

                                        OPINION*
                                       ___________

*
 This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not
constitute binding precedent.
PER CURIAM

         Carol Lloyd, proceeding pro se, appeals from an order of the United States District

Court for the District of New Jersey dismissing her complaint. For the following reasons,

we will affirm.

         In 1996, Lloyd obtained a Federal Housing Administration (FHA) loan, which was

evidenced by a promissory note and secured by a mortgage on property located in

Winslow Township, New Jersey. Defendant New Jersey Housing Mortgage and Finance

Agency (NJHMFA) holds the Note and Mortgage (N&M) as the lender, and defendant

Cenlar Federal Savings Bank (Cenlar) services the mortgage.1 In 2009, Lloyd was

delinquent in making payments due under the N&M. Cenlar filed a foreclosure

complaint in 2013 in the New Jersey Superior Court, Chancery Division.2 Lloyd

contested the matter arguing, in part, that NJHMFA had not complied with 24 C.F.R.

§ 203.604(b), a HUD regulation which required it to have a face-to-face meeting with

Lloyd prior to initiating a foreclosure proceeding.3 This regulatory mandate was

1
  The mortgage is insured by the Federal Housing Administration (FHA) pursuant to the
National Housing Act (NHA), 12 U.S.C. §§ 1701 et seq. Congress delegated authority to
the Secretary of the United States Department of Housing and Urban Development
(HUD) to promulgate rules and regulations to administer the FHA lending program. See
12 U.S.C. § 1715b.
2
    A prior foreclosure complaint, filed in July 2010, was dismissed.
3
  Pursuant to 24 C.F.R. 203.604, “[t]he mortgagee must have a face-to-face meeting with
the mortgagor, or make a reasonable effort to arrange such a meeting, before three full
monthly installments due on the mortgage are unpaid. If default occurs in a repayment
                                            2
incorporated into the N&M. The Chancery Court granted summary judgment to Cenlar

and transferred the matter to the Foreclosure Unit of the New Jersey Superior Court. The

matter was eventually dismissed for failure to prosecute. In May 2017, the Chancery

Court granted Cenlar’s motion to reinstate the foreclosure action.

       In 2017, while that foreclosure action was pending, Lloyd filed the underlying

complaint against the NJHMFA, its executive director, Anthony L. Marchetta, and

Cenlar. The suit raised seven claims stemming from the acceleration and foreclosure of

her mortgage. At a hearing on the complaint in 2018, the District Court converted the

Defendants’ motion to dismiss to a summary judgment motion pursuant to Fed. R. Civ. P.

56 and indicated its intention to dismiss the complaint without prejudice. The Court

explained that, to the extent Lloyd sought injunctive relief in the form of an order

directing the defendants to stop the foreclosure, the case was moot because the

foreclosure proceeding had since been dismissed. It also determined that the claims were

subject to dismissal on various grounds, including that they were barred by the Rooker-

plan arranged other than during a personal interview, the mortgagee must have a face-to-
face meeting with the mortgagor, or make a reasonable attempt to arrange such a meeting

within 30 days after such default and at least 30 days before foreclosure is commenced
. . .” The regulations make clear that “[i]t is the intent of [HUD] that no mortgagee shall
commence foreclosure or acquire title to a property until the requirements of this subpart
have been followed.” 24 C.F.R. § 203.500. In particular, “[b]efore initiating foreclosure,
the mortgagee must ensure that all servicing requirements of this subpart have been met.”
24 C.F.R. § 203.606(a).
                                               3
Feldman doctrine,4 issue/claim preclusion, or sovereign immunity. The Court entered an

order on November 29, 2018, dismissing the matter in its entirety without prejudice, and

permitting 30 days for plaintiff to file an amended complaint “as outlined in the Court’s

opinion on the record.” This appeal ensued.5

       Lloyd’s first five claims seek relief based on defendant NJHMFA’s or Marchetta’s

failure to comply with mortgage servicing requirements under 24 C.F.R. § 203.604 prior

to accelerating her loan and initiating foreclosure proceedings. Defendants argued that

under the National Housing Act, 12 U.S.C. § 1701, et seq., there is no private right of

action available to a mortgagor for a mortgagee's noncompliance. Lloyd acknowledged

that the regulation itself does not authorize an express right of action; however, she

maintained that the incorporation of the pre-foreclosure requirements of 24 C.F.R.

4
 See D.C. Court of Appeals v. Feldman, 460 U.S. 462 (1983); Rooker v. Fid. Tr. Co.,
263 U.S. 413 (1923).
5
  We directed a limited remand to the District Court for the purpose of entering a final
order dismissing the complaint with prejudice, as it had expressed its intent to do if the
complaint was not amended within the allotted time. The District Court’s October 14,
2020 dismissal order is final and appealable, and we have jurisdiction to review it
pursuant to 28 U.S.C. § 1291. See Cape May Greene, Inc. v. Warren, 698 F.2d 179, 184-
85 (3d Cir. 1983) (holding that a premature notice of appeal can ripen upon entry of a
final judgment). Our review of the dismissal of the amended complaint is plenary, see
Maiden Creek Assocs. v. U.S. Dep’t of Transp., 823 F.3d 184, 189 (3d Cir. 2016) (failure
to state a claim); Tobak v. Apfel, 195 F.3d 183, 185 (3d Cir. 1999) (lack of subject matter
jurisdiction), and we may affirm on any ground supported by the record, see Oss
Nokalva, Inc. v. European Space Agency, 617 F.3d 756, 761 (3d Cir. 2010).
                                             4
§ 203.604 into the N&M as “conditions precedent” to foreclosure created a private right

of action to enforce the regulations. Amend. Compl. p. 22 at ¶¶ 102, 103. According to

Lloyd, “because HUD requires this language to be incorporated into the [N&M] which

secure its federally insured loans, (24 C.F.R. § 201.17(a)), doing so makes these

regulations enforceable by borrowers . . . ” Id. at ¶ 117. We agree that these claims

were subject to dismissal because Lloyd does not have a private right to enforce the

regulation.

       Courts may recognize a private right of action, where not expressly provided by

Congress, in two ways: either implied in a statute or under 42 U.S.C. § 1983. Three

Rivers Ctr. for Indep. Living v. Hous. Auth. of Pittsburgh, 382 F.3d 412, 421 (3d Cir.

2004). The inquiries are “separate but overlapping” in one key respect – both require a

threshold finding that Congress intended to create a personal right. Id. (“Congress's

creation of a personal right is necessary to the existence of both an implied right of action

and a right of action under Section 1983.”). Lloyd argues that she has a personal right,

and thus a basis for a private suit, under 24 C.F.R. § 203.604 because it “grants an

unambiguously conferred right to FHA mortgagors to meet-face-to face with their lender

prior to the acceleration and foreclosure of their FHA loan.” Amend. Compl. at 20. She

is mistaken. The source of a personal right must come from the enabling statute, not

from the regulation, because “an agency's rulemaking power cannot exceed the authority

granted to it by Congress.” Three Rivers Ctr., 382 F.3d at 424; Alexander v. Sandoval,

                                              5
532 U.S. 275, 291 (2001) (“[T]he language of the statute and not the rules must

control.”).

       Pursuant to the National Housing Act, the FHA was created to promote affordable

home ownership by providing mortgage insurance to private lenders to encourage their

entry into the low and moderate-income housing market. See generally United States v.

Neustadt, 366 U.S. 696, 709 (1961) (noting that “the fundamental design” of the NHA is

to create a system of mortgage repayment insurance). The statutory scheme, as relevant

here, deals with the regulation and oversight of mortgagees, not the protection of

mortgagors. The statute includes a regulatory enforcement scheme to ensure mortgagees’

compliance with its provisions and regulations, including the establishment of a

Mortgagee Review Board authorized to take action against noncompliant mortgagees.

See 12 U.S.C. § 1708(c). The fact that Congress authorized the Board to hold

mortgagees accountable for failure to follow regulations suggests that it did not intend to

give mortgagors the power to do so. Sandoval, 532 U.S. at 289 (“statutes that focus on

the person regulated rather than the individuals protected create ‘no implication of an

intent to confer rights on a particular class of persons’”). There is simply no “rights

creating” language in the NHA which would give rise to an enforceable duty to the

mortgagor on the part of the lender. See Moses v. Banco Mortg. Co., 778 F.2d 267, 272

n.2 (5th Cir. 1985) (joining other circuit courts in holding that “the Housing Act and

regulations promulgated thereunder . . . [do not] create a right of action for private parties

                                              6
who wish to sue to enforce the statute or regulations”) (citing, inter alia, Falzarano v.

United States, 607 F.2d 506, 509 (1st Cir. 1979) (holding that the NHA does not grant

federally-insured housing project tenants the right to sue for impermissible charges);

Shivers v. Landrieu, 674 F.2d 906, 910-11 (D.C. Cir. 1981) (“mortgage insurance

provided under the [NHA] is an insufficient predicate for implication of a private cause

of action”)). Accordingly, Lloyd’s claims for violation of 24 C.F.R. § 204.603 (Counts

I -V) were properly dismissed.6

       Lloyd’s remaining two claims7 are against Cenlar for alleged violations of the Real

Estate Settlement Practices Act (RESPA) based on its failure to adequately evaluate and

respond to her loss mitigation applications as required by “Regulation X,” 12 C.F.R.

§ 1024.41. Congress has explicitly authorized a private right of action for a borrower to

enforce RESPA and its regulations, including Regulation X, against a loan servicer. See

id. § 1024.41(a); 12 U.S.C. § 2605(f). The District Court determined that the RESPA

claims were subject to dismissal because Lloyd failed to sufficiently plead damages.

Hearing Tr. at 39-40. We agree.

       Courts have recognized that “damages are an essential element in pleading a

RESPA claim.” Renfroe v. Nationstar Mortg., LLC, 822 F.3d 1241, 1246 (11th Cir.

2016) (citing cases). The statute provides for actual damages which stem “as a result of”

6
  To the extent that Lloyd sought to present a due process challenge to the state
foreclosure action, the claim was moot because the action is no longer pending.

                                              7
the servicer’s RESPA violation and “any additional damages . . . in the case of a pattern

or practice of noncompliance with the requirements of [the statute] not to exceed

$2,000.” 12 U.S.C. § 2605(f)(1). There must be a “causal link between the alleged

violation and the damages.” Renfroe, 822 F.3d at 1246.

         In Count VI of her complaint, Lloyd alleged that Cenlar failed to notify her that

information was missing from her loss mitigation application – as required by Regulation

X – before denying it as incomplete. We agree that this claim was subject to dismissal as

Lloyd did not allege any actual damage as a result of the alleged violation.

          In Count VII, Lloyd asserted that Cenlar has never responded to her second loss

mitigation application after acknowledging that it was complete, in violation of 12 C.F.R.

§ 1024.41(c)(1). As a result, she claims to have lost the right to a direct appeal under 12

C.F.R. § 1024.41(h). She then alleged generally that Cenlar “has an egregious history” of

failing to comply with servicing requirements as required by 12 U.S.C. § 2605. She

included a “summary” of “Qualified Written Requests (QWRs)” from 2010 to 2012

which Cenlar allegedly failed to “acknowledge, investigate or respond.” Amend. Compl.

at 39-41; see 12 U.S.C. § 2605(e)(1)(B). Lloyd maintained that this established a pattern

of “egregious servicer behavior and intentional failure to comply with the servicing

requirements” under § 2605, entitling her to “maximum damages.” She further alleged

that she “experienced considerable stress, depression, and migraine headaches over all

7
    Lloyd voluntarily withdrew her claim that was based on a federal criminal statute.
                                              8
the intentional deception from the servicer, and incurred expense in the applications for

loss mitigation.” Amend. Compl. at 41, ¶ 193.

         We agree with the District Court that, even construing Lloyd’s pro se amended

complaint liberally, see Dluhos v. Strasberg, 321 F.3d 365, 369 (3d Cir. 2003), it fails to

state a valid RESPA claim. As the defendants argued in their motion to dismiss, the

QWRs which are the basis for Lloyd’s “pattern or practice” damages claim were written

well outside of the three-year statute of limitations for RESPA claims.8 See 12 U.S.C. §

2614; see also Robinson v. Johnson, 313 F.3d 128, 135 (3d Cir. 2002) (noting that a

statute of limitations defense may be raised in a motion to dismiss where the defense is

apparent on the complaint’s face). In response, Lloyd insists that, because she is not

raising claims for compliance violations stemming from the QWRs, the timing of the

requests is irrelevant. But damages must be causally linked to the violations, and this

“pattern or practice” of noncompliance proffered by Lloyd occurred outside the

limitations period. Because Lloyd did not sufficiently link the remaining violation – the

failure to respond to her second loss mitigation application – to any actual compensable

damage,9 the claim was properly dismissed.10

8
 Lloyd drafted the pleadings pro se. She was represented by counsel only at the hearing
on the motion to dismiss.
9
  Lloyd’s costs in preparing the loss mitigation application do not accrue “as a result of
the failure” of Cenlar to comply with any provision of the Act. 12 U.S.C. § 2605(f).
10
     Notably, Lloyd was represented by counsel at the hearing for the motion to dismiss,
                                            9
      Based on the foregoing, we will affirm the District Court’s judgment.

where the Court advised that the complaint insufficiently pleaded damages for purposes
of the RESPA claims; Lloyd elected not to amend the complaint.
                                           10