Wendy Adelson v. Ocwen Loan Servicing, LLC

Case Type:
Case Status:
22-2204 & 21-2972 (6th Circuit, Jan 31,2023) Not Published
The U.S. Court of Appeals for the Sixth Circuit (Circuit) affirmed the decision of the U.S. District Court for the Eastern District of Michigan (DC) that affirmed the dismissal of the claims of Wendy Adelson (Adelson), who had defaulted on her mortgage fifteen years earlier, that effectively aimed to reverse the foreclosure and the sheriff's sale of her mortgaged property to HSBC Bank USA, NA (HSBC), in 2019 (Sale), pled against HSBC, the mortgagee due to a MERS assignment; Ocwen Loan Servicing, LLC (Ocwen), its agent; and Trott Law P.C. (TL) and two of its attorneys, Ocwen's counsel.
Procedural context:
In June 2007, Adelson filed a complaint in state court to fight against the upcoming foreclosure proceeding. In 2015, after an MDL suit with which her case had been consolidated in 2010 had netted a settlement (and her attempts to vacate it and appeal the order denying this request had proved fruitless), Adelson's individual case was sent back to the DC. In that first case, Adelson challenged HSBC’s legal authority to foreclose on her property and Ocwen’s servicing and debt-collection practices. The DC dismissed the complaint, and the Circuit affirmed, finding not only that many of her claims were barred by res judicata but that the assignment between MERS and HSBC had been valid. Following the resolution, Ocwen again initiated foreclosure proceedings via Trott. Four days before the scheduled foreclosure sale, Adelson filed for bankruptcy; forty-one days later, her petition was dismissed due to her failure to file the required documents. Post-bankruptcy, the Sale was held. Nearly six months later, Adelson filed a complaint against HSBC, Ocwen, Trott, and two of Trott’s attorneys challenging the validity of the Sale.
It began innocently enough. In September 2006, Adelson accepted a $178,500 loan from Sebring Capital Partners, LP (Sebring), secured by a mortgage, to help finance her purchase of a home in Lake Orion, Michigan. The original contract named the Mortgage Electronic Registration System, Inc. (MERS), as nominee for Sebring, as the mortgagee. Subsequently, MERS assigned the mortgage to HSBC. Between 2006 and 2007 things changes. In December of 2006, Ocwen informed Adelson, by letter, that Sebring had transferred its right to collect payments to Ocwen and that any future payments should be sent to Ocwen. Sometime around then, Sebring shut down. While Adelson made several monthly mortgage payments to Ocwen, she stopped making her monthly mortgage payments in April 2007. She did so, she would claim, because she had come to question the amount she allegedly owed and Ocwen's authority. Escalation followed. To seemingly underscore her good faith, Adelson would later claim to have deposited every monthly payment into an escrow account that she established. Because Adelson had stopped making her payments, however, Ocwen first sent Adelson a notice of default and referred the loan to foreclosure. Accordingly, HSBC published a foreclosure notice and scheduled a sheriff’s sale. Adelson eventually contacted Ocwen’s attorneys, informed them that she was not in default, faxed copies of her payment receipts and escrow account, and “demanded” that her property be removed from the foreclosure sale. Ocwen, however, did not terminate the planned sale. Litigation now began. In June 2007, Adelson filed a complaint in state court to fight against the upcoming foreclosure proceedings. Ultimately consolidated with a pending multi-district litigation in the U.S. District Court for the Northern District of Illinois (district court), the MDL settled in 2010, with Adelson as a member of the class. The settlement agreement released Ocwen from certain forms of liability, including future claims related to Ocwen’s “mortgage servicing activities” and “debt collection activities, but not “statutory or common law rights against foreclosure." Adelson then moved to vacate the MDL judgment in 2014, but the district court denied that motion, and the Seventh Circuit dismissed her appeal for lack of appellate jurisdiction.
John B. Nalbandian; Karen N. Moore; and Eric L. Clay

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