A lender’s oral promise to postpone a foreclosure sale of a borrower’s home is a “credit agreement” that must be in writing to be enforceable under the Minnesota Credit Agreement Statute (MCA), the U.S. Court of Appeals for the Eighth Circuit has ruled.
The May 21, 2012, decision in Brisbin v. Aurora Loan Services, LLC, should deter attempts by borrowers to unwind foreclosure sales based on alleged oral promises by lenders or servicers. The MCA prohibits a debtor from suing on a “credit agreement” unless it is in writing and defines a “credit agreement” to mean “an agreement to lend or forbear repayment of money … to otherwise extend credit, or to make any other financial accommodation.”
Asserting the MCA did not bar her claim for promissory estoppel, the borrower argued that the lender’s promise to postpone the sale while it reviewed her request for a loan modification was not a forbearance agreement under the MCA because the lender retained its contractual right to foreclose after completing the review process. The Eighth Circuit disagreed, observing that a forbearance agreement “does not necessarily negate the underlying contractual obligation for eventual payment.”
The Eighth Circuit also rejected the plaintiff’s attempt to invalidate the foreclosure sale based on the lender’s alleged failure to comply with Minnesota’s foreclosure-by-advertisement statute that allows a mortgagee to postpone a scheduled foreclosure but requires notice of the postponement to be published by “the party requesting the postponement.” The Eighth Circuit found that, even if the postponement had been requested by the lender rather than the plaintiff, the statute’s notice requirement was not triggered because the foreclosure sale was not actually postponed.
The plaintiff had also asserted claims for negligent and intentional misrepresentation, which the Eighth Circuit rejected based on “the overwhelming evidence that reinstatement of the mortgage was impracticable” and the plaintiff’s failure to provide “a more concrete statement” of how she would have raised the large sum necessary to reinstate the loan. Finally, the plaintiff also failed in her attempt—raised for the first time on appeal—to claim detrimental reliance. The Eighth Circuit found that the plaintiff had not identified any evidence in the record that she had considered filing for bankruptcy or invoking her statutory right to a five-month postponement of the foreclosure sale, or that the lender’s promise specifically induced her to forgo those options.
Ballard Spahr’s Consumer Financial Services Group has substantial experience in defending financial institutions against the kinds of claims advanced by the borrower in this case. The group is nationally recognized for its skill in litigation defense, its guidance in structuring and documenting new consumer financial services products, and its experience with the full range of federal and state consumer credit laws throughout the country.
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