An Indiana attorney and her ex-husband couldn’t convince the 7th Circuit Court of Appeals that a bank violated the Real Estate Settlement Procedures Act with regards to an errant insurance payment and that alleged error led to their divorce and caused $300,000 in damages.
Christine Jackson, an attorney who represents consumers fighting loan servicers according to the opinion, and Stephen Perron, a retired criminal investigator for the IRS, had a mortgage through Chase Bank. They neglected to tell Chase they had switched homeowners’ insurers, so Chase paid Allstate’s $1,422 premium. When it learned that Homesite was now the insurer, it paid its premium from the escrow account and sent a letter to the couple telling them to send a refund check from Allstate to replenish their escrow.
Instead of depositing the refund check into their account, the couple kept it, leading to a higher monthly mortgage payment. The couple refused to pay this, but did send a partial payment to Chase to make up the shortfall. The mortgage ended up going into default and the couple sent Chase two letters requesting information under RESPA and demanded the bank reimburse their escrow. Chase denied the request, leading Jackson and Perron to sue, claiming the bank’s response under RESPA was inadequate and led to the loss of their marriage. They also alleged the bank breached the implied covenant of good faith and fair dealing.
The district court ruled in favor of Chase. A bankruptcy trustee in the Southern District of Indiana is pursuing the suit in Jackson’s stead since she has filed for bankruptcy.
Chase didn’t breach any duty by holding their partial payment in suspense, Judge Diane Sykes wrote, noting the mortgage contract says the bank can accept a partial payment without waiving its rights to enforce the term of the loan.
The judges also affirmed the district court with regard to the couple’s RESPA claim.
“RESPA requires servicers to correct account errors and give requested information to borrowers. Perron and Jackson were not harmed by an uncorrected account error because there wasn’t an error in the first place,” Sykes wrote. “Nor were they harmed by an information blackout. They knew Chase had paid the $1,422 from the escrow account to Allstate and why. They also knew why the December 2010 payment was held in suspense. … Simply put, Perron and Jackson weren’t harmed by being in the dark because the lights were on the whole time.”
Sykes also noted that emotional-distress damages are recoverable under RESPA, but the breakdown of a marriage is far too attenuated from the alleged violation to cross the proximate-cause threshold.
The case is Stephen H. Perron and the United States Bankruptcy Trustee for the Southern District of Indiana on behalf of Christine M. Jackson v. J.P. Morgan Chase Bank N.A., 15-2206.