Second Circuit Affirms Dismissal of FDCPA and FCRA Claims Finding Collection Efforts Proper Despite Plaintiff’s Dismissal from Foreclosure Action; No Obligation to Report Frivolous Dispute

In Macris v. Specialized Loan Servicing, LLC, 2022 WL 16727611 (2d Cir. Nov. 7, 2022), the Second Circuit upheld summary judgment for a mortgage servicer, holding that the plaintiff could not pursue claims under the Fair Credit Reporting Act (FCRA) or the Fair Debt Collection Practices Act (FDCPA) for the reporting and collection efforts of his mortgage note.

The plaintiff had previously jointly owned a mortgaged property with his then-wife, but upon their divorce, his ex-wife assumed sole possession of the property and removed the plaintiff from the deed. Years later, the mortgage servicer filed a foreclosure action against both the plaintiff and his ex-wife due to default on the mortgage payments. Once the plaintiff established that he no longer owned or possessed the property, the court entered an order of reference releasing the plaintiff from the foreclosure action. Notably, this release did not release the plaintiff from his underlying obligation on the note. The mortgage servicer thus continued to try to collect on the debt and reported the mortgage and its foreclosure on the plaintiff’s credit report.

The plaintiff filed suit against the mortgage servicer under the FCRA and the FDCPA. He relied on New York law that prohibits a lender from pursuing a foreclosure action and a deficiency action simultaneously, arguing this meant his dismissal from the foreclosure action released him from liability under the mortgage note. The United States District Court for the Western District of New York rejected these arguments and granted summary judgment for the servicer on all claims.

On appeal, the Second Circuit affirmed the summary judgment, finding the plaintiff was never affirmatively released from the mortgage note and the reporting and collection efforts were therefore proper. Although the servicer could not succeed in a deficiency action against the plaintiff due to the pending foreclosure action, the court stated this was “beside the point” and did not operate to release the plaintiff from his obligation. Further, the servicer was not obligated to report the plaintiff’s dispute of the mortgage on his credit report, because the plaintiff’s dispute was “frivolous.”

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