McHugh v. Bank of New York Mellon

Background

Robert Korf obtained a mortgage on real property in Forest Lake, Minnesota, in April 2007. Bank of America, N.A., serviced that mortgage, and it was assigned to Bank of New York Mellon as trustee. In August 2007, Thomas M. McHugh lent Korf $150,000, secured by a second mortgage on the same property. The public record identified Korf as the borrower and McHugh as the lender.

Korf later sought to modify the Bank of America loan. McHugh alleged that Bank of America published and provided notices of a foreclosure sale before the loan-modification process was finalized. Bank of America foreclosed on and sold the property on December 19, 2019.

McHugh filed suit in Minnesota state court in 2021. He alleged that the foreclosure violated Regulation X, a federal regulation implementing the Real Estate Settlement Procedures Act of 1974 (RESPA). He sought a declaration that the foreclosure was void and requested relief that would eliminate or subordinate the defendants’ mortgage relative to his mortgage. The defendants removed the case to federal court and moved to dismiss. McHugh was representing himself.

Analysis

The court treated McHugh’s claim as a RESPA claim because RESPA was the only legal basis identified in the complaint for challenging the foreclosure. RESPA imposes certain duties on loan servicers and allows borrowers to enforce those duties. Regulation X includes limits on when servicers may first provide foreclosure notices or file foreclosures.

The court concluded that RESPA’s private right of action—the ability to sue under a statute—belongs to borrowers, not lenders. McHugh’s complaint and attached documents showed that he was Korf’s lender, and McHugh did not allege that he was obligated on Korf’s loan or mortgage. The court therefore held that McHugh could not enforce RESPA against the defendants.

The court characterized this issue as the absence of a statutory cause of action, sometimes called statutory standing, rather than a lack of constitutional subject-matter jurisdiction. It therefore analyzed the defendants’ argument under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal for failure to state a legally sufficient claim. Because McHugh was not a plaintiff authorized to sue under RESPA, the court dismissed the claim. It also declined to consider his requests for declaratory and equitable relief because he identified no independent cause of action supporting those requests.

Disposition

The court granted the defendants’ motion to dismiss and dismissed this action with prejudice. The court expressly stated that it was not deciding whether the foreclosure or sale was void. It also stated that the order did not affect possible non-RESPA claims or claims McHugh might bring on behalf of Korf’s estate if he were appointed its administrator. The order was signed by Chief Judge John R. Tunheim.