In Russell v. Nationstar Mortgage, LLC, No. 14-61977-CIV, 2015 WL 5029346, at *5 (S.D. Fla. Aug. 26, 2015), United States District Court Judge Beth Bloom issued litigious borrowers their latest setback in a large scale litigation campaign being conducted by a South Florida consumer law firm. The case is one of many filed by Loan Lawyers, LCC, on behalf of their clients alleging violations of regulations promulgated pursuant to Real Estate Settlement Procedures Act (RESPA) known as Regulation X (Reg X). Many of the cases have the same facts: Loan Lawyers sends a letter requesting a laundry list of information from the servicer about a defaulted loan, allegedly pursuant to RESPA and Reg X. Upon receiving the servicer’s response, Loan Lawyers sends a follow up letter saying they are dissatisfied with the response. Loan Lawyer’s then sues the servicer alleging the response was not compliant with Reg X, actual damages in the amount of the postage for the follow up letter, and of course, attorney’s fees.
In Russel, the Court rejected the borrowers’ tenuous claims that the stress of mailing the letters and standing in “long lines” at the post office were compensable actual damages under RESPA. Id. at *7. The Court even when so far as to call such claims “audacious.” Id. While the defendant did not contest actual damages in the form of several dollars in postage, the Court dropped a helpful footnote that it was “not convinced that these costs flow proximately from Nationstar’s actions.” Id. at FN 1. The Court further held that the plaintiff had failed to show a pattern and practice of non-compliance with RESPA where the servicer in fact, responded to each of the requests.
The decision comes on the heels of a similar ruling by United States District Court Judge Robin Rosenberg in Donald A. O’Brien, v. Seterus, 9:15-CV-8030, 2015 WL 4514512 (S.D. Fla. June 24, 2015). In O’Brien, the borrower also alleged a RESPA violation caused by allegedly insufficient responses to a Loan Lawyers notice of error and request for information. Among the requests in Loan Lawyer’s letter were certain requests relating to property inspections, and an allegation of error that the property inspections were unnecessary or too frequent. The plaintiff also alleged that efforts to charge fees for the inspections violated the Florida Consumer Collection Practices Act (“FCCPA”) because, despite the fact the inspections are authorized by the mortgage to preserve the lenders security interest, the borrower claimed the inspections were ordered simply to make money on the fees associated with the inspections, and not to protect the security.
The servicer’s Motion to Dismiss alleged, amongst other things, that its response to Loan Lawyer’s letter complied with RESPA and that the FCCPA was not violated because the mortgage expressly permitted the conduct of property inspections. The Court agreed that the defendants response complied with RESPA. The Court noted that RESPA entitles the borrowers to a substantive response to their inquiry but does not create a cause of action merely where the borrowers are dissatisfied with the substance of the response.
The Court did not dismiss the FCCPA claims however, on the grounds that the facts, if plead would state a claim. This of course creates a high burden for the borrowers, who now face the tall task of proving the inspections were not conducted to protect the lenders security. Something that will likely be difficult to prove, given that in virtually all of the Loan Lawyers cases, the borrowers admit not having paid their mortgage in years.