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Martins v. Federal Housing Finance Agency

United States District Court, D. Rhode Island

October 11, 2016

DELINDA M. MARTINS, Plaintiff,
v.
FEDERAL HOUSING FINANCE AGENCY, FEDERAL NATIONAL MORTGAGE ASSOCIATION, AND GREEN TREE SERVICING, LLC, Defendants.

          MEMORANDUM AND ORDER

          John J. McConnell, Jr. United States District Judge.

         This complaint arises out of Delinda M. Martins' assertion that Defendants, Federal Housing Finance Agency ("FHFA"), Federal National Mortgage Association ("Fannie Mae"), and Green Tree Servicing, LLC ("Green Tree")[1] (collectively "Defendants") violated a number of her rights by foreclosing upon her home, including her constitutional due process rights by failing to provide her adequate notice of their non-judicial foreclosure, and her contractual right to proper notice pursuant to her mortgage.

         This Court is now faced with Defendants' Motion to Dismiss Ms. Martins' complaint claiming it is moot because Fannie Mae rescinded the complained of nonjudicial foreclosure, and Cross-Motions for Summary Judgment on Fannie Mae's counterclaim for judicial foreclosure. Defendants' argument in this case is twofold. First, they argue that Ms. Martins' claims are moot and the Court should dismiss them because it rescinded the non-judicial foreclosure. Second, they argue that the Court should grant summary judgment on their counterclaim seeking a judicial foreclosure under Rhode Island General Laws § 34-27-1, because that section does not require compliance with the mortgage document.

         Ms. Martins argues that her claims are not moot because the Defendants voluntary ceased the unlawful conduct and there is a reasonable expectation that the alleged unlawful conduct will recur unless the Court grants relief. Furthermore, Ms. Martins asserts that the Court should dismiss the counterclaim for judicial foreclosure because compliance with Paragraph 22 of the Mortgage is required as a condition precedent even when seeking a judicial foreclosure, and Defendants' notice failed to (1) specify a date not less than thirty days by which default must be cured, (2) advise Ms. Martins of her right to reinstate the mortgage after acceleration, and (3) inform Ms. Martins of her right to bring a court action to assert the non-existence of default or any other defense to acceleration and foreclosure.

         I. Facts

         In 2007, Ms. Martins borrowed money from Shamrock Financial Corporation ("Shamrock") to finance the purchase of her home in Smithfield, Rhode Island (the "Property"). The Note was secured by a mortgage (the "Mortgage") in favor of Shamrock and Mortgage Electronic Registration Systems, Inc. ("MERS"), as nominee for Shamrock and its successors and assigns. MERS later assigned its interest to Fannie Mae, [2] which then assigned its interest to Bank of America, N.A. ("BOA"). In 2013, BOA transferred its interest in the Mortgage to Green Tree.

         Beginning in 2009, at the time of this country's devastating economic downturn and housing crisis, Ms. Martins failed to make her required payments. Under Paragraph 22 of her Mortgage, the lender has the right to accelerate the amount of the Mortgage; however, in doing so, the Mortgage requires notice of six required pieces of information prior to its acceleration. A notice must specify (1) that the mortgagor is in default; (2) the action required to cure default; (3) a date, not less than thirty days by which default must be cured; (4) that failure to cure default may result in acceleration and sale of the Property; (5) the right to reinstate after acceleration, " and (6) the right to bring a court action claiming the nonexistence of default or any other defense.

         Green Tree sent Ms. Martins a notice of default on February 11, 2014, [3]stating its intent to accelerate the Mortgage. The February 11, 2014 letter provided that (1) Ms. Martins was in default, (2) default could be corrected in thirty days from the date of the notice by paying $93, 240.41, and (4) failure to cure default could result in acceleration and sale of the Property. It further provided that Ms. Martins should check the Mortgage Agreement for any right to reinstate after acceleration, [4] and Ms. Martins' right to "assert in the foreclosure proceeding the non-existence of a default or any other defense available to [Ms. Martins]."

         Green Tree sent Ms. Martins' default mortgage account to Harmon Law Offices, P.C. ("Harmon"), which sent a notice to Ms. Martins dated April 22, 2014. The notice stated that Harmon had been retained by Green Tree to foreclose on the Property, Ms. Martins was "in breach of the conditions of the loan documents, " the Mortgage was "hereby accelerated, " Ms. Martins may still have the right to reinstate the loan, and the total due.

         Harmon then sent a notice of foreclosure sale to Ms. Martins, evidencing Green Tree's intent to initiate a non-judicial foreclosure via Rhode Island's power of-sale statute. R.I. Gen. LAWS § 34-11-22 (1956). Fannie Mae conducted a foreclosure sale of the Property, in which it entered the only bid of $280, 096.02. Fannie Mae signed a document, which it recorded in the land records for the Town of Smithfield.

         II. Procedure

         Ms. Martins filed suit seeking declaratory and injunctive relief and damages. She alleged that as a governmental entity Defendant Fannie Mae was required to afford Ms. Martins her federal constitutional due process rights before conducting a non-judicial foreclosure. Ms. Martins also alleged that all of the Defendants failed to give her proper notice pursuant to Paragraph 22 of the Mortgage before the foreclosure. Finally, she asserted that a mediation conference and certificate of compliance were required pre-foreclosure. R.I. GEN. LAWS § 34-27-3.2.

         Fannie Mae filed an assented-to-Motion to Set Aside the Non-Judicial Foreclosure (ECF No. 10), which the Court granted. Fannie Mae then filed a counterclaim against Ms. Martins (ECF No. 14), seeking a judicial foreclosure under Rhode Island's Complaint to Foreclose statute. R.I. GEN. LAWS § 34-27-1. Given its rescission of the non-judicial foreclosure, Fannie Mae filed its Motion to Dismiss Ms. Martins' complaint alleging the matter was now moot. (ECF No. 26).

         On the same day it filed its Motion to Dismiss, Fannie Mae also filed a Motion for Summary Judgment on its counterclaim for judicial foreclosure against Ms. Martins. (ECF No. 21). Ms. Martins then filed a Cross-Motion for Summary Judgment as to ...


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