Will the real borrower please stand up?

Jonathan Foxx, Ph.D., MBA
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A large servicing client called me about feeling she is a sitting duck when it comes to servicing litigation, most especially in the loss mitigation area. The caller, the company’s Chief Compliance Officer, referenced the “loss mitigation option” and felt that there is a tremendous burden placed on the servicer to implement the applicable guidelines.

The conversation went something like this.

Me: I feel for you, but this rule was not designed to assuage your inconvenience.

She: Maybe so, but I think there should be an Article III procedure to strengthen these litigation attacks, so that it is more of a two-way street.

Me: Well, under RESPA, only a borrower may bring a civil action and only a borrower would have Article III standing.

She: Wait, what?

Me. That’s correct. In fact, in this instance there has been litigation to determine who is entitled to the loss mitigation protections, and that is given Article III requirements being judicially applied.

[Long Pause.]

She: We are going to have to take yet another close, hard look at our procedures!

First, let’s get the “Article III” terminology out of the way. It is pretty much well settled now that there are constitutional requisites under Article III for the existence of standing; that is, the party seeking to sue must personally have suffered some actual or threatened injury that can fairly be traced to the challenged action of the defendant and that the injury is likely to be redressed by a favorable decision. For the most part, there must be a causal connection between the injury and the conduct complained.

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Jonathan Foxx, Ph.D., MBA
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