Diversity Jurisdiction Limit Met Where The Value Of The Property And The Loan Amount Exceeded $75,000; Mortgagor Had No Standing To Complain Of The Servicer’s Failure To Comply With The National Mortgage Servicing Settlement

In _Rehbein v. CitiMortgage, Inc._, 2:13CV65 (E.D. Va. Apr. 4, 2013) a Virginia District Court recently rejected a borrower’s attempt to assert that she had a private right of action under the National Mortgage Servicing settlement and Consent Judgment. The borrower commenced proceedings by bringing a preliminary injunction action in the Circuit Court for the City of Virginia Beach to enjoin the mortgagee and its law firm (who she wrongly believed was the substitute trustee) from instituting forfeiture proceedings prior to making a proper loan modification review. The mortgagee removed the case to federal court and then moved to dismiss. The borrower replied with a motion to remand the proceedings to state court which the court denied. It found that there was diversity jurisdiction, even though the amount of damages plead was only $29,000 and there was a non-diverse defendant. The court said the jurisdictional threshold was met because it would cost the mortgagee more than $75,000 to defend the case, the property’s value exceeded that amount, as did the subject mortgage loan. It also found that it could disregard the citizenship of the law firm under the doctrine of fraudulent joinder. The law firm was improperly named as a defendant and there are no facts directed at this defendant. After dispatching the jurisdictional challenge, the court then dismissed the complaint finding that borrower had no standing to complain of the servicer’s failure to follow the mortgage servicing standards set forth in the Consent Judgment. The Consent Judgment was essentially a contract between the parties. As a non-party to the contract, the borrower may only claim a benefit thereunder if the contracting parties so intended. The borrower alleged no facts to show that individual borrowers were the intended beneficiaries under the Consent Judgment, however. The court also found that language in the Consent Judgment expressly indicated that the parties thereto did not intend individual borrowers to be able to sue to protect the benefits it conferred. Specifically, the provision”[a]ny enforcement action under this Consent Judgment may be brought by any Party to this Consent Judgment . . . ” showed just the opposite.

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