Pending Lawsuit May Affect Amount of Attorney's Fees Collectable from Borrower in Connection with Reinstatement

We wanted to bring a recent opinion issued out of the Eastern District of Michigan in Case No. 09-12543 to your attention, in which a number of borrowers are challenging the amount of attorney's fees that can be recovered in connection with a reinstatement. Based on the provisions in the mortgage contract itself, the current practice in Michigan is to include all reasonable attorney's fees in a reinstatement quote, however this recent opinion may limit the amount of the attorney's fee recoverable from the borrower. Due to the above referenced opinion, we wanted to update our recommendation that any recoverable attorney fee quoted to a borrower in connection with a reinstatement or proof of claim should be limited to $37.50 until further clarification from the court is obtained in the pending action. The language in the opinion is dicta, and provides the borrowers the opportunity to pursue their arguments that based upon MCL 600.2431 as opposed to the mortgage contract, should decide allowable attorney's fees in the case of a reinstatement. While the Court's Opinion is based on a Rule 12(b)(6) motion, and not a ruling of law, we believe it would be wise for servicers to, at least for the time being, limit recoverable attorney fees to $37.50 as included in a reinstatement quote or proof of claim.