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Mortgage Debtors did not have a Cause of Action for Mortgage Fraud or the Home Affordability Modification Program

Maheu v. Bank of Am., N.A.
Civil Case No.: 12-cv-508 (D. Md. May 14, 2012)
by Gregory L. Arbogast, Associate
Semmes, Bowen & Semmes (www.semmes.com)

In Maheu v. Bank of America, N.A., Judge Hollander of the United States District Court for the District of Maryland dismissed Barkley and Renee Maheu’s (“Plaintiffs”) claims against Bank of America, N.A. (“Bank of America”) and Fannie Mae for failure to state a claim on which relief could be granted. Specifically, Plaintiffs alleged that Bank of America and Fannie Mae committed mortgage fraud in violation of the Maryland Mortgage Fraud Protection Act, MD. CODE ANN., REAL PROPERTY § 7-401, et seq. and that Bank of America and Fannie Mae violated that Home Affordability Modification Program (“HAMP”), 12 U.S.C. § 5219. Judge Hollander found that Plaintiffs failed to state a claim upon which relief can be granted for mortgage fraud and Judge Hollander also found that HAMP does not create a private cause of action.

On December 22, 2005, Plaintiffs entered into a “loan repayment and security agreement” with George Mason Mortgage, LLC (“George Mason”) for their home in Mount Airy, Maryland, which advanced Plaintiffs a $360,000 mortgage. Mortgage Electronic Registration Systems, Inc. (“MERS”) was a “nominee” for George Mason. On September 21, 2011, MERS assigned the Deed of Trust for the loan to Bank of America. Plaintiffs, however, defaulted on their loan. On November 12, 2011, Plaintiffs received a Notice of Intent to Foreclose from Fannie Mae and Bank of America.

Plaintiffs filed this action alleging that Bank of America and Fannie Mae committed mortgage fraud and violated HAMP. Plaintiffs alleged that Bank of America and Fannie Mae committed mortgage fraud because Fannie Mae never recorded its security interest in the land records, thereby failing to give Plaintiffs notice of its interest in their property. Plaintiffs sought a declaratory judgment under HAMP on the ground that Fannie Mae has never been vested with any right, title, or interest as a secured party.

Defendants argued that Plaintiffs failed to state a claim upon which relief can be granted. As to the allegations of mortgage fraud, Defendants argued that an individual only has a cause of action for mortgage fraud if the defendant:

“[W]ith the intent to defraud that involves . . . (6) Filing or causing to be filed in the land records in the county where a residential real property is located, any document relating to a mortgage loan that the person knows to contain a deliberate misstatement, misrepresentation, or omission.

MD. CODE ANN., REAL PROPERTY § 7-401(d) (emphasis added). A defendant can only be held liable for mortgage fraud if it actually files a security interest in the land records. It is axiomatic that a failure to file a security interest cannot, therefore, establish a cause of action for mortgage fraud. Defendants also argued that HAMP does not create a private cause of action for debtors.

Judge Hollander agreed with Defendants arguments in full. Therefore, Judge Hollander dismissed Plaintiffs’ claims with prejudice.