Wenegieme v. Bayview Loan Servicing, No. 14 CIV. 9137 RWS, 2015 WL 2151822, at *1 (S.D.N.Y. May 7, 2015).
In Wenegieme v. Bayview Loan Servicing, the U.S. District Court for the Southern District of New York held that the plaintiffs’ dual-tracking claim was not ripe pending resolution of the foreclosure proceedings. The Wenegiemes defaulted on their mortgage and Bayview Loan Servicing (“BLS”) contacted the Wenegiemes to inform them that unless they agreed to a loan modification, it would bring foreclosure proceedings on their property. Although the Wenegiemes sent in paperwork seeking modification, BLS nevertheless brought an action seeking foreclosure. The Wenegiemes claimed the foreclosure action was barred by Dodd- Frank Act’s ban on “dual tracking” pursuant to 12 C.F.R. §1024.41.
According to the CFPB, dual tracking is where a servicer moves forward with foreclosure proceedings while simultaneously working with the borrower to avoid foreclosure. The Wenegiemes argued that § 1024.41’s dual-tracking provision prohibits a servicer from beginning a foreclosure proceeding if a borrower has submitted a complete loss mitigation application within 120 days of delinquency. Here, the record included a letter from BLS acknowledging receipt of the loss mitigation application, albeit silent as to completeness. BLS argued that there is no federal cause of against a servicer for dual- tracking under § 1024.41. Although technically correct, the court recognized that a borrower can seek enforcement of such a claim pursuant to section 6(f) of RESPA, which includes a private right of action for damages.
Regardless, the court concluded that such a claim was not yet ripe because foreclosure proceedings were still pending. Simply put, the Wenegiemes’ claim for damages was contingent on a negative outcome in the foreclosure proceeding, which was still ongoing. Furthermore, the district court noted that the Wenegiemes were incorrectly seeking an injunction to prevent a sale of the property because the RESPA statute at issue only authorizes a claim for money damages. See 12 U.S.C. §2605(f) (1). Accordingly, the district court dismissed the Wenegiemes’ dual tracking claim, without prejudice, stating they could re-file in Maryland in the event that they lose the property.
Guccione v. JPMorgan Chase Bank, N.A., No. 3:14- CV-04587 LB, 2015 WL 1968114, at *1 (N.D. Cal. May 1, 2015).
In Guccione v. JPMorgan Chase Bank, the plaintiffs sued Chase Bank, N.A. (“Chase”) alleging, inter alia, that Chase violated 12 C.F.R. § 1024.35(e), which governs responses to a notice of error. Chase sought dismissal of the plaintiffs’ complaint. The plaintiffs refinanced their property with Washington Mutual Bank. Chase eventually assumed certain liabilities
of Washington Mutual Bank and became the servicer of plaintiffs’ loan. In April 2011, Chase created an escrow account and started to pay the plaintiffs’ property taxes and insurance on their behalf and said plaintiffs owed over $11,000 in escrow payments stemming from past tax and insurance payments as well as a new escrow payment to be paid henceforth in order to cover future property taxes and insurance. Plaintiffs alleged this was impossible since Chase had never requested or collected monthly escrow payments in the past, and all property taxes and insurance payments had been paid by the plaintiffs. Plaintiffs sent two qualified written requests (“QWRs”) to Chase, and Chase sent the plaintiffs three responses which contained conflicting amounts that were allegedly owed escrow advances. In January and April of 2014, the plaintiffs’ sent Chase two notices of error. The first notice inquired as to charges assessed to the plaintiff’s escrow account. The second notice stated that Chase erroneously force-placed insurance and requested Chase fix the errors. In response, Chase stated that it had conducted a thorough investigation into the claimed errors and concluded that all account information was correct and no error had occurred.
In support of its motion to dismiss, Chase first argued that the plaintiffs’ January 2014 notice was overbroad and that it could not reasonably determine from the notice of error the specific error that the borrowers claimed had occurred. Rather, the plaintiffs’ notice of error was more in line with a complaint. The district court dismissed this argument, however, explaining that the plaintiffs’ January notice specifically cited the incorrect amount that they were being charged and requested Chase credit them a specific amount. Furthermore, § 1024.35 does not require plaintiffs to provide any factual support for these assertions; it merely requires a plaintiff to identify errors.
Next, Chase argued that even if the notices of error were not overbroad, it conducted a reasonable investigation. The district court disagreed, however, because Chase never explained why the escrow charges were valid. This was especially
true considering Chase sent the plaintiffs three documents in April 2013 that stated conflicting amounts due. Finally, Chase argued that the plaintiffs had not alleged that they were damaged by its alleged violation of § 1024.35(e), but the district court also dismissed this argument. Since Chase failed to conduct a reasonable investigation, the plaintiffs were forced to continue paying their attorney fees in an attempt to resolve the problems and, according to the court, “continue dealing with this headache.” Thus, the plaintiffs adequately demonstrated damages for purposes of § 1024.35(e). Therefore, the district court found that the plaintiffs sufficiently alleged a claim against Chase for violating 12 C.F.R. § 1024.35(e) (1)(i)(B).
Schmidt v. PennyMac Loan Servs., LLC, No. 14-CV- 14728, 2015 WL 2405571, at *6 (E.D. Mich. May 20, 2015)
In May 2010, plaintiff Schmidt obtained a mortgage on her residence, which was eventually assigned to PennyMac following Schmidt’s delinquency. Schmidt began working with their loss mitigation department, but PennyMac eventually foreclosed on her property. Schmidt sued Bank of America and PennyMac claiming, inter alia, PennyMac violated 12 C.F.R. § 1024.40, which requires servicers to establish policies and procedures that will make personnel available by telephone to assist delinquent borrowers. During her attempts to discuss options with PennyMac, she alleged that she was unable to speak to the same person twice. Instead, PennyMac transferred her from department to department to people who were supposed to help her, but she was never given answers to her very simple questions. PennyMac also never returned calls despite promises that someone would contact her with answers. Schmidt offered two specific examples. First, PennyMac shuffled her between different personnel when she called, none of whom answered her “very simple questions.” Second, despite promising to contact her with a person who could answer her questions and help her with loss mitigation efforts, she never received a return phone call.
The Court noted that this regulation took effect on January 10, 2014, in the middle of the period PennyMac was supposedly violating it. Thus, at least some of the alleged conduct could have come under its strictures. The district court explained that the regulation imposes on servicers, such as PennyMac, a duty to implement policies and procedures for communications with delinquent borrowers. Schmidt did not claim that PennyMac failed to enact such policies or that its actions breached those policies. Rather, Schmidt’s claim attacked the substantive quality of such policies and procedures. The district court held that this regulation does not “effectuate a privately enforceable statutory right, and consequently” Schmidt cannot rely on it to bring this claim. Therefore, the district court granted PennyMac’s motion to dismiss.
In Kaymark v. Bank of America, et al., the U.S. Court of Appeals for the Third Circuit extended its holding in McLaughlin v. Phelan Hallinan & Schmieg, LLP, 756 F. 3d 240 (3d Cir. 2014) to foreclosure complaints and held that the plaintiff had sufficiently alleged a potential FDCPA violation arising from itemized costs contained in a foreclosure complaint that had not yet been incurred by the foreclosure firm. In 2006, Kaymark refinanced his home, executing a note and granting Bank of America (“BOA”) a mortgage. The mortgage stated, in pertinent part, that the lender could charge Kaymark fees for “services performed” in connection with the borrower’s default and for the purpose of protecting the lender’s interest in the property. These fees included attorneys’ fees, property inspection fees, and valuation fees. Kaymark eventually defaulted and a foreclosure complaint was filed by the Udren law firm (“Udren”), which included an itemized list of the total debt including attorneys’ fees, title report fees, and property inspection fees.
Kaymark contested the foreclosure and argued that because these fees were not actually incurred as of the date they were calculated (two months prior to the filing of the foreclosure complaint), it was a violation of §§ 1692e and 1692f of the FDCPA. The district court dismissed Kaymark’s complaint on the basis that his FDCPA claim was “hyper-technical.”
The Third Circuit referenced McLaughlin v. Phelan Hallinan & Schmieg, LLP, where it held that nearly- indistinguishable conduct in a debt collection demand letter, rather than foreclosure complaint, violated the FDCPA. The Third Circuit relied on its analysis in McLaughlin and cited the fact that the itemized list of fees did not state that it was an estimate of the amount owed on the debt or in any way suggest that it was not a precise amount. Rather, Kaymark simply agreed to the collection of certain fee categories, such as “attorneys’ fees, property inspection fees, and valuation fees.” The contract specified that BOA could only charge for “services performed in connection with” the default and collect “all expenses incurred” in pursuing authorized remedies. The Third Circuit rejected Udren’s attempts to distinguish foreclosure complaints from debt collection letters subject to the FDCPA. Given the court’s holding in McLaughlin, which was based on nearly indistinguishable facts, the Third Circuit held that because the debt collection activity at issue here involved a foreclosure complaint, rather than a debt collection letter, it did not remove it from the purview of the FDCPA. Therefore, the Third Circuit reversed the district court’s order dismissing Kaymark’s FDCPA claim against Udren.
The U.S. District Court for the Southern District Davies v. Green Tree Servicing, LLC, 2015 WL 3795621, at *2 (M.D. Pa. June 18, 2015)
In 2001, the Davies obtained a home loan secured by their property, and Green Tree Servicing, LLC (“Green Tree”) serviced the Davies’ loan. After failing to maintain adequate insurance coverage on the property, Green Tree obtained lender-placed insurance (“LPI”). The Davies brought this action against defendant Green Tree
alleging, inter alia, that Green Tree’s imposition of LPS was a violation of the FDCPA. Pursuant to an arbitration clause contained in the loan’s promissory note, Green Tree sought to compel the plaintiffs’ claims to arbitration
Green Tree argued that the Davies’ claims were subject to mandatory arbitration, since the Davies’ promissory note provided that all disputes between the parties were subject to arbitration under the FAA. However, the Davies raised a defense to enforce the arbitration agreement, contending that Dodd-Frank’s prohibition on arbitration clauses in home loan agreements renders the clause unenforceable. Specifically, Dodd-Frank states:
[n]o residential mortgage loan and no extension of credit under an open end consumer credit plan secured by the principal dwelling of the consumer may include terms which require arbitration or any other nonjudicial procedure as the method for resolving any controversy or settling any claims arising out of the transaction.
15 U.S.C. § 1639c(e)(1). Although the arbitration provision in this case was clearly part of a residential mortgage loan, Green Tree argued that Dodd-Frank does not apply retroactively to the Davies’ residential mortgage loan, and because the Davies’ entered into this residential mortgage loan in 2001, several years before Dodd-Frank was effective, this prohibition did not apply. Therefore, the district court addressed the issue of whether the anti-arbitration provision of Dodd-Frank invalidates preexisting agreements requiring arbitration. Recognizing that the Third Circuit had not yet addressed this issue, the district court concurred with the Southern District of Mississippi and held that § 1639c(e) became effective June 1, 2013. Therefore, the anti-arbitration provision would not be applied retroactively to home loan agreements, like the Davies’, executed prior to Dodd-Frank’s effective date. For a similar recent holding, see also Beckwith v. Caliber Home Loans, Inc., 2015 WL 3767187, at *3 (N.D. Ala. June 17, 2015) (holding § 1639c(e)(1) and (e)(3) do not apply retroactively).