DC: Defect in notice of foreclosure did not create substantial risk of misleading record owner

foreclosure (1) In Dennis T. Comer v. Wells Fargo Bank, NA, No. 13-CV-1025 (D.C. Jan. 29, 2015), the D.C. Court of Appeals was called upon to review whether the trial court had properly dismissed counts of an amended complaint in connection with a wrongful disclosure

In 2008, Mr. Comer was approved for a 203(k) Rehabilitation Mortgage Insurance Loan through Wells Fargo to purchase and renovate a home  under the National Housing Act. Mr. Comer executed a loan agreement that included approximately $337,000 for the purchase of the Property and $427,925 for renovations to the Property, with the latter amount held in escrow. On January 12, 2010, Wells Fargo foreclosed on the home.

In 2011, Mr. Comer filed a wrongful foreclosure suit, alleging that Wells Fargo failed to observe FHA underwriting guidelines when it approved his 203(k) loan. Specifically, Mr. Comer alleged Wells Fargo overstated his income, relied on high debt-to-income ratios, and failed to provide Mr. Comer with accurate information concerning the repayment timeline. Mr. Comer thereafter filed an amended complaint, alleging that Wells Fargo implemented a pattern and practice of targeting African-Americans for deceptive and unfair mortgage lending practices.

The trial court subsequently dismissed the additional counts of the amended complaint as time-barred because such new claims (based on racial discrimination) did not relate back to the original complaint. The trial court also dismissed Mr. Comer’s wrongful foreclosure claim because he failed to plead specific facts demonstrating he was harmed or prejudiced by the notice of foreclosure.

As to Mr. Comer’s amended complaint, the Court of Appeals affirmed the trial court’s dismissal of the FHA claim, but reversed the dismissal of the CPPA claims and negligent misrepresentation claims. Specifically, the Court noted that the CPPA claims and the negligent misrepresentation claims were new legal theories based on the same set of facts as in the original complaint, and properly related-back; while the FHA claim was a new legal theory based on an entirely new set of facts. The FHA claim, therefore, did not relate-back to any portion of the original complaint.

The Court of Appeals also affirmed the dismissal of the wrongful foreclosure claim, holding that Mr. Comer did not plead sufficient facts showing that the balance owed was inaccurate or that he suffered any harm from the alleged inaccuracy. The Court of Appeals stated that immaterial defects in a notice of foreclosure are insufficient to invalidate the foreclosure. The Court stated, “[t]o determine whether a defect in notice is material enough to invalidate the foreclosure sale, or merely technical or de minimis, we assess whether the deficiency affects the accuracy of the notice or creates a substantial risk of misleading the record owner about any of the information contained therein.” (Internal quotations omitted).