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Cocroft v. HSBC Bank USA, N.A.

United States Court of Appeals, Seventh Circuit

July 31, 2015


Argued December 1, 2014

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 10 C 3408 -- Matthew F. Kennelly, Judge.

For David Cocroft, Veynelcia Cocroft, Plaintiffs - Appellants: Sabrina Herrell, Attorney, Logik Legal LLC, Chicago, IL.

For HSBC BANK USA, N.A., as Trustee of the Deutsche ALT-A Mortgage Loan Trust Series 2007-OA3, Mortgage Electronic Registration Systems, Inc., BANK OF AMERICA, N.A., as successor by merger to BAC Home Loans Servicing, LP (incorrectly named under the non-corporate entity Bank of America Home Loans, Defendants - Appellees: Steven R. Smith, Attorney, James Leighton O'Connell-Miller, Attorney, Bryan Cave Llp, Chicago, IL.

Before BAUER, KANNE, and HAMILTON, Circuit Judges.


KANNE, Circuit Judge.

David and Veynelcia Cocroft, husband and wife, acquired a home in Country Club Hills, Illinois. In 2007, they refinanced their mortgage on the home. As part of the refinancing transaction, the Cocrofts' mortgage and loan were pooled into a mortgage loan trust. Approximately one year later, the Cocrofts permanently ceased making payments on the loan, and the trustee of the trust eventually initiated a foreclosure action against them. The Cocrofts raised a variety of claims against Appellees Mortgage Electronic Registration Systems, Inc. (" MERS" ), Bank of America, N.A. (" Bank of America" ), BAC Home Loans Servicing (" BACHLS" or the " loan servicer" ), and HSBC Bank USA, N.A. (" HSBC Bank" ). The district court granted summary judgment for Appellees on all claims. We affirm.

I. Background

A. Factual History

In March 2006, the Cocrofts acquired the subject property in Country Club Hills, Illinois. On April 17, 2007, the Cocrofts refinanced their mortgage on the home by obtaining a loan in the amount of $386,750.00 from Countrywide Bank, FSB (" Countrywide" ). As a part of this transaction, the Cocrofts granted a mortgage to MERS, which was acting solely as nominee for Countrywide. Ultimately, Bank of America became a successor in interest to Countrywide. BAC Home Loans Servicing, a Bank of America affiliate, took over servicing of the loan. The evidence suggests that it remained the servicer during the relevant period to this dispute.

The note and the mortgage were pooled into a trust, pursuant to a pooling and servicing agreement (" PSA" or " Agreement" ). The PSA established HSBC Bank as the trustee. In addition, the Agreement set May 1, 2007 as the cutoff date for accepting loans into the trust, and it set May 31, 2007 as the trust's closing date. The Mortgage Loan Purchase Agreement indicated that as of May 1, 2007, the note and mortgage were pooled into the trust. On October 8, 2009, MERS assigned its interest in the mortgage to HSBC Bank, as trustee.[1]

The Cocrofts apparently kept up with their loan payments until the summer of 2008. They made their last two payments by check in July and August (covering the months of May and June of 2008). Both of those payments were returned for insufficient funds. So, as far as we can tell, the final payment made by the Cocrofts occurred, at the latest, in April 2008. Countywide sent at least three letters to the Cocrofts notifying them of their delinquency, in May, June, and July of 2008.

By August 2008, Countrywide became aware that the Cocrofts' property was vacant and " a mess." Countrywide hired a contractor to change the locks, secure, and " winterize" the property. On August 29, David Cocroft attempted unsuccessfully to enter the home through the front door. He ultimately entered through the garage door instead.

The Cocrofts claim that in or about May 2009, they learned that Countrywide had made misrepresentations in connection with their loan. Between May and July 2009, the couple sent Bank of America,[2] MERS, and Cook County Sheriff Thomas Dart (through notary public Kathy Guinn) various documents that they termed " affidavits." These documents stated, in brief, that the Cocrofts were exercising their right to cancel the loan. They claimed to have the right to rescission because the lender committed various unspecified disclosure violations in contravention of several federal statutes. The Cocrofts did not offer to remit any of the loan funds.

Apparently in response to these " affidavits," on June 19, 2009, Bank of America sent a letter notifying the Cocrofts that their loan was valid and still in force. The letter also reminded the Cocrofts that their payments were severely delinquent. Nonetheless, the Cocrofts recorded their " rescission" documents with the Cook County Recorder of Deeds on July 2, 2009.

On September 2, 2009, the Cocrofts sent documents identified as " Settlement and Closure" and " Cease and Desist" letters to Bank of America and Countrywide. Those letters asserted that the Cocrofts had exercised their right to cancel the loan, and in doing so, had extinguished any financial liability to Bank of America and Countrywide. In addition, they alleged that the property had been lawfully conveyed to " The David Cocroft Living Trust." The letters demanded that the recipients cease and desist any further activities related to the mortgage and loan, or face legal action.

On September 25, 2009, Codilis, a law firm hired by HSBC Bank, sent a letter notifying the Cocrofts that a foreclosure proceeding would be initiated against them. That letter identified HSBC Bank as trustee of the mortgage loan trust and BACHLS as the loan servicer. Apparently in response to that letter, the Cocrofts sent cease-and-desist letters to Codilis on September 30 and October 28, 2009.

On November 2 and 3, 2009, the Cocrofts sent HSBC Bank, Codilis, and the loan servicer a document they entitled a " Debt Collector Disclosure Statement," which purported to be a " continuation of the Cease and Desist letters" that had been previously sent. The Disclosure Statement was an eight-page questionnaire that required the addressees to answer fifty-four questions regarding their transactions with the Cocrofts. It stated that:

[d]ebt collector's and/or Creditor's, failure/refusal, both intentional and otherwise, in completely, unambiguously answering points " 1" through " 54" above and returning this Debt Disclosure Statement, as well as providing Respondent with requisite verification validating he [ sic ] herein above reference [ sic ] alleged debt, constitutes the Debt Collector's and alleged Creditor's tacit acquiescence that Debt Collector and/or Creditor have no verifiable, lawful, bona fide claims against Respondent in above referred alleged account or any and all other alleged accounts not enumerated herein.

It also specified that failure to return a completed form with-in thirty days would result in the waiver of any claims against the Cocrofts, as well as the Cocrofts' full indemnification.

On November 23, 2009, HSBC Mortgage Services sent a letter in response, which stated that HSBC Bank was " not able to locate an account with the account number, your name, social security number, or address. Additionally, our search included our affiliates and accounts where we may be the trustee." The letter provided contact information, should the Cocrofts " require any additional information."

On December 17 and 18, 2009, both Bank of America and law firm Dilworth Paxson sent letters to the Cocrofts informing them that the loan had not been rescinded, was in full force, and that the Cocrofts' mortgage had been referred for foreclosure. On January 2, 2010, the Cocrofts sent the loan servicer copies ...

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