Antitrust Law Daily Wrap Up, RICO—Ga. App.: Wells Fargo unable to foreclose homeowner’s racketeering claims, (Mar 23, 2016)

By Linda O’Brien, J.D., LL.M.

A homeowner sufficiently alleged at least two predicate acts that could constitute a pattern of racketeering to pursue wrongful foreclosure and Georgia racketeering claims against a mortgage lender over the foreclosure sale of his home, a Georgia appellate court has ruled. Thus, the trial court’s grant of the lender’s motion to dismiss was reversed (Mbigi v. Wells Fargo Home Mortgage, March 22, 2016, Ellington, J.).

In 2007, Lovemore Mbigi obtained a mortgage from Wells Fargo to fund the purchase of a home in Gwinnett County. The terms of the loan allowed Mbigi to choose a mortgage payment that was less than the amount needed to pay the accruing interest, resulting in negative amortization. After learning of the negative amortization, Mbigi inquired about a loan modification. Wells Fargo advised him to cease making payments while it was working on the loan modification. Mbigi continued to inquire about the loan modification status in 2011, 2012, and 2013.

In February 2014, Wells Fargo mailed a foreclosure notice to Mbigi’s previous address and sold the property in a foreclosure sale in June 2014. Mbigi sued Wells Fargo, alleging, in part, wrongful foreclosure and violations of the Georgia Racketeer Influenced and Corrupt Organizations Act (RICO). The trial court granted Wells Fargo’s motion to dismiss Mbigi’s complaint for failure to state a claim, and Mibi appealed.

The court found that the trial court erred in dismissing Mbigi’s Georgia RICO claim. To constitute a pattern of racketeering activity under the state RICO statute, the acts of racketeering must be taken in furtherance of one or more incidents, the court explained. Deception and residential mortgage fraud, if shown, would constitute RICO predicate acts. Mibigi identified seven different acts or omissions which he contended constituted residential mortgage fraud and were part of a fraudulent scheme to wrongfully foreclose on his home. One of the alleged acts was that Wells Fargo filed a deed under power after the foreclosure in the county records with at least one false statement. A deed under power was required to be filed following foreclosure to protect the validity of subsequent purchasers in good faith.

According to the court, a person commits residential mortgage fraud by filing, with intent to defraud, any document with the registrar of deeds that contains a deliberate misstatement, misrepresentation, or omission. The recording of the deed under power by Wells Fargo could have deprived Mbigi of a valuable interest, and therefore defrauded him. As Mbigi alleged that he was injured by at least two predicate acts which could constitute a pattern of racketeering activity, it could not be determined with certainty that Mbigi’s complaint would not be able to show that the recording of the deed was an act of residential mortgage fraud, the court concluded.

The case is No. A15A2067.

Attorneys: Lovemore Mbigi, pro se. Dylan Wilson Howard (Baker, Donelson, Bearman, Caldwell & Berkowitz, PC) for Wells Fargo Home Mortgage.

Companies: Wells Fargo Home Mortgage

Cases: RICO GeorgiaNews