Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—7th Cir.: Homeowners failed to show any injury from lender’s business practice, (Aug 5, 2015)

By Linda O’Brien, J.D., LL.M.

In an action by homeowners against a lender and mortgage loan servicer for deceptive business practices in connection with the foreclosure of their mortgage on their home, the U.S. Court of Appeals in Chicago has affirmed a district court’s grant of summary judgment in favor of the defendants, finding that the homeowners failed to show any injury from the defendants’ conduct (Cocroft v. HSBC Bank USA, N.A., July 31, 2015, Kanne, M.).

Background. In April 2007, David and Veynelcia Cocroft refinanced the mortgage on their home by obtaining a loan from Countrywide Bank. The note and mortgage were later pooled into a trust that established HSBC Bank as trustee, and Bank of America took over servicing the loan. The Cocrofts kept up with their loan payments until April 2008 and were subsequently notified by Countrywide that the loan was delinquent. In May 2009, the Cocrofts sent various documents to Bank of America and Countrywide, claiming to exercise their right to cancel the loan because Countrywide made misrepresentations in connection with their loan. Bank of American responded that the loan was valid and still in force.

In September 2009, the Cocrofts sent Bank of America and Countrywide “cease and desist” letters, demanding that the lenders cease any further activities regarding the mortgage. Neither entity took action based on the rescission demand. However, HSBC Bank notified the Cocrofts that foreclosure proceedings would be initiated. In November 2009, the Cocrofts sent HSBC Bank a “cease and desist” letter. In response, HSBC Bank notified the Cocrofts that the bank was unable to locate an account in their name. At the same time, Bank of America notified the Cocrofts that the loan had not been rescinded, was in full force, and their loan was referred for foreclosure. In January 2010, HSBC Bank instituted foreclosure proceedings in state court.

The Cocrofts filed suit against the lenders, alleging, in part, violations of the Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA). In February 2014, the district court granted the defendants’ motion for summary judgment. The Cocrofts appealed.

ICFA. The Cocrofts contended that HSBC Bank’s letter indicating that it was unable to locate an account for the Cocrofts constituted a deceptive business practice. To prevail on an ICFA claim, a plaintiff must prove that (1) the defendant committed a deceptive act or practice; (2) the defendant intended for the plaintiff to rely on the deception; (3) the deception happened in the course of trade or commerce; and (4) the deception proximately caused the plaintiff’s injury.

According to the appellate court, the Cocrofts failed to identify what injury they suffered as a result of HSBC Bank’s letter. HSBC Bank held the mortgage as trustee but did not service the loan. Although the Cocrofts spent time and resources attempting to communicate with the proper parties regarding the loan, by November 2009, the Cocrofts were well aware that HSBC Bank had instituted foreclosure proceeding against them. If HSBC Bank had denied any interest in the loan, then the Cocrofts would have a defense against HSBC Bank in its foreclosure suit. Moreover, any misrepresentation by HSBC Bank in the letter would have benefitted the Cocrofts, not injured them. Without a cognizable injury, the Cocrofts could not succeed on their ICFA claim and the district court’s grant of summary judgment should be affirmed, the court concluded.

The case is No. 14-1640.

Attorneys: Sabrina Herrell (Logik Legal LLC) for David Cocroft. Steven R. Smith (Bryan Cave LLP) for HSBC Bank USA, N.A., Mortgage Electronic Registration Systems, Inc., and Bank of America, N.A.

Companies: HSBC Bank USA, N.A.; Mortgage Electronic Registration Systems, Inc.; Bank of America, N.A.

Cases: StateUnfairTradePractices IllinoisNews IndianaNews WisconsinNews