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Sixth Circuit Rejects Fraud and Predatory Lending Lawsuit Over Foreclosure - Coyer v. HSBC Mortgage Services

December 7, 2012

Vincent Howard and our Riverside predatory lending attorneys frequently talk to clients who feel they were misled when they first took out their home loans. The mortgage process can be difficult to understand even when everyone's behavior is aboveboard. When lenders deliberately take steps to mislead or confuse clients, however, they are intentionally creating confusion, usually in order to increase their profits. In Coyle v. HSBC Mortgage Services et al., a Michigan couple alleged that their mortgage company conspired to entrap them in a predatory loan. Their lawsuit, in which they represented themselves, alleged common-law causes of action including fraud, as well as violations of the Truth in Lending Act. The district court granted HSBC judgment on the pleadings, finding most of their claims time-barred or inapposite. The Sixth U.S. Circuit Court of Appeals affirmed.

The Coyers bought their home in 2005, taking out a loan from Option One Mortgage Corp., which is not a party to this lawsuit. The mortgage was assigned to MERS and then sold to HSBC, which was the mortgage holder when the Coyers fell behind on payments and went into foreclosure. The foreclosure sale was scheduled for December of 2010, but the COyers filed a federal lawsuit in October of 2010, alleging breach of fiduciary duty, negligence, common-law fraud, TILA violations, breach of implied covenant of good faith and fair dealing, and intentional infliction of emotional distress. They also asked for an injunction and restraining order against the sale of the home. The district court denied the injunction and restraining order, then denied a motion to reconsider as untimely. HSBC then moved to dismiss, which the district court interpreted as a motion for judgment on the pleadings, then granted.

The Coyers appealed everything but the intentional infliction of emotional distress allegation, and the Sixth Circuit affirmed it all. There is no fiduciary relationship between lender and borrower in Michigan, the court said; thus, there was no breach of fiduciary duty. Similarly, Michigan does not recognize a cause of action for breach of implied covenant of good faith and fair dealing at all. The negligence, fraud and TILA arguments failed because both are supported by arguments related to Option One's actions when the Coyers first took out their loan; furthermore, they missed the deadline to file suit for negligence or under TILA. Finally, the appeals court rejected their appeals about various actions of the trial court, including allegations that the magistrate was biased and unqualified; that they should have been permitted to put a lien on their own property; and that the district court failed to fully consider the evidence.

Vincent Howard and our Santa Ana predatory lending lawyers would have been interested to see a fuller evaluation of the facts behind this couple's lawsuit. The Sixth Circuit didn't consider the merits of their claim (nor does it look like the district court did), simply because it didn't have to; all of the Coyers' claims were rejected for other reasons. Thus, it's not clear whether they would have had a case if they had filed suit against the right lender and at the right time. It's possible that their case was created to delay their foreclosure; that may explain why they represented themselves, which is inexpensive but rarely leads to success. But at Howard Law, P.C., our Chino predatory lending attorneys have seen plenty of legitimate predatory lending cases as well--and when they're argued properly, they sometimes win.

If you believe you were misled and deceived when you took out a home loan and you'd like to talk to an experienced attorney about your case, call Vincent Howard and the team at Howard Law, P.C. You can reach us through our website or call 1-800-872-5925.

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