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Respected Federal Jurist Rejects Borrower’s Claim that He is a “Tenant” in Foreclosure, Awards Fees to Foreclosing Bank

Litigation Blog

Respected Federal Jurist Rejects Borrower’s Claim that He is a “Tenant” in Foreclosure, Awards Fees to Foreclosing Bank

Nancy J. Townsend

As homeowners in foreclosure face the end of the legal proceedings, many make desperate arguments to forestall eviction. When senseless arguments meet sympathetic or uninformed judges, they can temporarily derail the foreclosure process, achieve the borrower’s objective to delay, and create unnecessary expense for both courts and lenders. But, in a decision on February 18, 2014, Judge Robert Miller of the Northern District of Indiana rapidly rejected one such argument and awarded attorney fees to the lender.

Michael and Tina Roberts’ lender filed a mortgage foreclosure suit against them in Cass County Circuit Court in 2010. The lender purchased the property at foreclosure sale in January 2013 and the state court issued a writ of assistance January 2014, requiring the Sheriff to deliver possession to the lender. Michael Roberts removed the case to Federal Court, claiming the right of a “tenant” to 90 days’ notice before eviction under the Protecting Tenants at Foreclosure Act of 2009 (“PFTA”) of 2009, 12 U.S.C. § 5201 et seq.

Ironically, Roberts was attempting to exploit a statute that is designed, in part, to protect tenants from unscrupulous homeowners in foreclosure. The PFTA protects tenants of federally-related mortgages[1] by requiring a minimum of 90 days’ notice and declaring that their leases survive foreclosure unless the foreclosure buyer intends to occupy the property. 12 U.S.C. § 5220 note.[2] It addresses problems arising from the lack of notice to renters whose landlords in foreclosure often fail to inform them of pending foreclosures and, in some cases, continue collecting rent after the bank has reclaimed the property. Without the protections of the PFTA, oblivious tenants who are faithfully paying rent might first discover the foreclosure when the bank gives them notice to vacate.

Siding with the Ninth Circuit Court of Appeals[3] and a district court in Illinois,[4] Judge Miller found that neither the text of the PTFA nor any expression of congressional intent supported a private right of action for violations.[5] He also found that Roberts, a mortgagor, was not a bona fide tenant protected by the PTFA.[6]

In considering a motion for fees, Judge Miller noted that “[a]s the mortgagor, Mr. Roberts likely couldn't have sincerely believed he was also a tenant, or renter of the property, protected by the Protecting Tenants at Foreclosure Act.” [7] He found that Roberts’ timing of the removal suggested it was a delay tactic. He tracked the available dates and progress of the foreclosure case, but could not find sufficient information in the record to conclude that Roberts “was clearly trying to delay the proceedings or increase the litigation costs.” Id. (Judge Miller’s emphasis). So, he did not make a finding of vexatious litigation. But, he did award fees based on the presumption in under § 1447(c) of awarding fees to parties who successfully defeat removal petitions.[8]

Judge Miller dispensed quick justice; his remand decision came less than one month after Roberts removed the case, reducing the delay and therefore the impact of Roberts’ improper removal. By including facts and analysis to shed light on Roberts’ motive, Judge Miller offers hints to identify vexatious litigation in future cases and to dissuade others from embarking on a similar course. The imposition of fees against the homeowner, while unpopular, serves the proper purpose “to reduce the attractiveness of removal as a method for delaying litigation and imposing costs on the plaintiff.”[9]

The arsenal of frivolous motions and delay tactics offer alluring short-term solutions for homeowners facing the loss of their homes. When a foreclosure is filed, a homeowner can expect to receive 30 to 80 pieces of "vulture" mail offering advice, often from foreclosure attorneys feeding on the homeowners’ natural resistance to relinquishing their homes. Homeowners might be better-advised to move forward as quickly as possible toward a long-term solution for stable, affordable replacement housing. Many would also be well-advised to save the expense of paying lawyers to make these arguments. 

Nancy J. Townsend is a 1985 graduate of Notre Dame Law School and focuses her practice on creditors’ rights, commercial litigation, collection, and foreclosure in Indiana and Illinois courts.


[1] The PFTA applies only to certain “federally-related” mortgages, defined in 12 U.S.C. § 2602.

[2] The Protecting Tenants at Foreclosure Act provides:

(a) In the case of any foreclosure on a federally-related mortgage loan or on any dwelling or residential real property after the date of enactment of this title, any immediate successor in interest in such property pursuant to the foreclosure shall assume such interest subject to—

(1) the provision, by such successor in interest of a notice to vacate to any bona fide tenant at least 90 days before the effective date of such notice; and

(2) the rights of any bona fide tenant, as of the date of such notice of foreclosure—

(A) under any bona fide lease entered into before the notice of foreclosure to occupy the premises until the end of the remaining term of the lease, except that a successor in interest may terminate a lease effective on the date of sale of the unit to a purchaser who will occupy the unit as a primary residence, subject to the receipt by the tenant of the 90 day notice under paragraph (1); or

(B) without a lease or with a lease terminable at will under state law, subject to the receipt by the tenant of the 90 day notice under subsection (1).

Pub. L. 111-22, 123 Stat. 1660, 12 U.S.C. § 5220 note.

[3] Logan v. U.S. Bank National Ass'n, 722 F.3d 1163, 1173 (9th Cir.2013).

[4] Falk v. Perez, 12 CV 1384, 2013 WL 5230632 (N.D.Ill. Sept. 12, 2013) (Castillo, J.) (“Importantly, nothing in the text of the PTFA explicitly creates a private cause of action, and courts addressing the issue have found that there is no evidence of any congressional intent to create a private right of action from the language of the PTFA.”).

[5] JPMorgan Chase Bank, Nat. Ass'n v. Roberts, 4:14-CV-5-RLM-PRC, 2014 WL 631523 (N.D.Ind. Feb. 18, 2014).

[6] Id.

[7] Id.

[8] Section 1447(c) provides that “[a]n order remanding the case may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal.” 28 U.S.C. § 1447.  Recognizing that improper removal “delays resolution of the case, imposes additional costs on both parties, and wastes judicial resources,” the United States Supreme Court has formulated a test for awarding fees under § 1447(c), “to reduce the attractiveness of removal as a method for delaying litigation and imposing costs on the plaintiff.” Martin v. Franklin Capital Corp., 546 U.S. 132, 140-41, 126 S.Ct. 704, 711, 163 L.Ed.2d 547 (2005). “Absent unusual circumstances, courts may award attorney's fees under § 1447(c) only where the removing party lacked an objectively reasonable basis for seeking removal. Conversely, when an objectively reasonable basis exists, fees should be denied.” Id.

[9] Martin v. Franklin Capital Corp., 546 U.S. 132, 140-41, 126 S.Ct. 704, 711, 163 L.Ed.2d 547 (2005).