Neff v. Flagstar Bank

Case No. 14-3837 (6th Cir. 2015)
Borrower precluded from contesting foreclosure based on estoppel or misrepresentation based on lender's alleged statements that borrower did not need to defend foreclosure or that lender would modify loan, where borrower could not prove that but for alleged misrepresentation the borrower would have had the financial ability to save property from foreclosure.
Procedural context:
After lender sold property at foreclosure sale, borrower brought action for damages for estoppel and misrepresentation. The United States District Court entered summary judgment in favor of lender holding that action was barred by state court judgment of foreclosure. On appeal, Sixth Circuit affirmed on separate grounds.
Lender held the mortgage on borrower's home. Borrower fell behind on the mortgage payments and then suffered an injury at work. Borrower's sole source of income was temporary disability which was substantially less than his income while working and left borrower unable to make mortgage payments. Lender began foreclosure proceedings and borrower claimed that lender promised to modify the mortgage but did not do so, and that lender repeatedly advised borrower that borrower did not need to hire an attorney or defend the foreclosure. After the lender completed the foreclosure process, borrower brought action against lender arguing that lender was estopped from denying loan modification and that lender made numerous misrepresentations on which borrower relied in not hiring attorney or contesting foreclosure. The Circuit Court concluded that even assuming lender made statements that borrower alleged, those statements were not the cause of loss to borrower where evidence was that borrower lacked any defenses to foreclosure suit, lacked financial ability to cure payment defaults, and lacked ability to make ongoing mortgage payments. Given borrower's inability to make payments, there was no evidence that even if borrower had hired attorney, the attorney would not have been able to stop foreclosure process. Borrower's statements about what he "might have been able to do" to stop the foreclosure were insufficient where there was no evidence that borrower had the actual ability to make the payments or stave off the foreclosure process.
Moore, Cook and Cohn (District Judge)

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