Reported / Citable
Background
Debra Mae Edwards refinanced her Texas home with Freedom Mortgage in 2021. After losing her job, she entered COVID-19 forbearance and sought assistance through the VA COVID-19 Partial Claim Payment Program and later the Homeowner Assistance Fund. She alleged that Freedom Mortgage improperly closed her loss-mitigation application, misapplied assistance funds, assessed unearned foreclosure and appraisal charges, and continued assessing late fees.
Edwards also alleged that Freedom Mortgage inadequately responded to her notices of error and requests for information, furnished false delinquency information to credit reporting agencies, and violated the deed of trust. She asserted RESPA and Regulation X claims, Texas Debt Collection Act claims, breach of contract, defamation, negligence, and gross negligence.
The Court’s Holding
Magistrate Judge Andrew M. Edison recommended granting Freedom Mortgage’s Rule 12(b)(6) motion only as to Edwards’s Regulation X claim under 12 C.F.R. § 1024.38 and her negligence and gross-negligence claims. The judge concluded that § 1024.38 carries no private right of action and that a mortgage servicer owes no independent common-law duty of care to a borrower under Texas law.
The recommendation would deny dismissal of the remaining claims. It concluded that RESPA permits private enforcement of Regulations X §§ 1024.35 and 1024.39; that Edwards adequately pleaded claims under §§ 1024.35 and 1024.36, actual and statutory RESPA damages, TDCA violations, breach of contract, and defamation. The court also rejected Freedom Mortgage’s limitations argument and held that the economic-loss rule does not bar TDCA claims.
Key Takeaways
- The recommendation recognizes private RESPA claims for alleged violations of Regulation X §§ 1024.35 and 1024.39, but not § 1024.38.
- Allegations that a servicer charged unincurred foreclosure or appraisal fees and misapplied assistance funds plausibly supported TDCA and contract claims.
- Texas mortgage servicing does not itself create an independent duty supporting negligence or gross-negligence claims.
Why It Matters
The recommendation takes a borrower-favorable position on private enforcement of two disputed Regulation X provisions and permits the servicing-related claims to proceed at the pleading stage. It is not a final ruling: the parties had 14 days to object, and the district judge must resolve the recommendation.