The U.S. District Court for the District of Maryland recently denied motions to dismiss a borrower’s complaint against a mortgage loan servicer and the loan owner that alleged that the servicer and owner:
A. Supposedly failed to notify the borrower of a transfer of ownership of the mortgage loan, and failed to answer inquiries concerning the owner of the loan, as required by the Truth in Lending Act, 15 U.S.C. § 1641(f)(2), (g) (“TILA”);
B. Supposedly failed to respond to purported qualified written requests, as required by the Real Estate Settlement Procedures Act, 12 U.S.C. § 2605(e) (“RESPA”); and
C. Supposedly threatened foreclosure despite supposedly knowing that no right to foreclose existed, as prohibited by Maryland’s Consumer Debt Collection Act, Md. Code Ann., Com. Law § 14-202(8) (“MCDCA”).
In denying the motion to dismiss the QWR allegations, the Court held that “[n]othing on the face of RESPA prevents a borrower from inundating his servicer with QWRs, even where the period to respond has not passed,” but also clarifying that “[i]n such a situation, presumably the servicer could satisfy the multiple requests in one response.”
A copy of the opinion is attached.
The plaintiff borrower (“Plaintiff”) allegedly obtained a mortgage refinance loan in 2009 (“2009 Loan”). The 2009 Loan was purportedly used to satisfy a prior 2008 loan (“2008 Loan”) extended by a different lender, and resulted in lower monthly payments than those due on the 2008 Loan. At the time of the 2009 Loan, the lender supposedly failed to provide Plaintiff with a copy of the note, or any other closing documents, purportedly indicating that the loan’s servicer (“Servicer”) would send Plaintiff copies of the note and closing documents. The Plaintiff also alleged that the lender of the 2009 Loan represented that it had no record of making the 2009 Loan.
According to Plaintiff, Servicer continued to request payments on the 2008 Loan, which Plaintiff continued to make for a year after the purported 2009 Loan. Plaintiff alleged that he contacted Servicer to request a copy of the note evidencing the 2009 Loan, and to inquire about why Servicer was still seeking payments on the 2008 Loan. Plaintiff contended that Servicer was unresponsive. At some point not included in the record, ownership of the 2008 Loan was transferred to the current loan owner (“Owner”).
In 2010, Plaintiff ceased making payments on the 2008 Loan, at which point Servicer began soliciting Plaintiff for a loan modification. Plaintiff applied for several loan modifications over the next two years, but was unsuccessful.
In May 2012, Plaintiff wrote to Servicer to request a payoff statement, a payment history, and a copy of the note. In June 2012, the substitute trustees (“Substitute Trustees”) for the deed of trust securing the 2008 Loan (“2008 Deed of Trust”) sent Plaintiff a letter threatening to foreclose if he failed to pay off or reinstate the loan. Servicer issued a Notice of Intent to Foreclose approximately three weeks later.
Plaintiff then allegedly sent a second letter to Servicer, purportedly complaining that he received no response to his earlier May 2012 letter, and demanding the documents requested within ten days. Plaintiff alleged that after not receiving any response to this second letter, he wrote a third letter in September 2012 requesting the identity of the owner of the 2008 Loan along with the documentation previously requested. According to Plaintiff, Servicer ignored these requests.
Plaintiff alleged that nearly a year later, in August 2013, he sent additional correspondence seeking the identity of the owner of the 2008 Loan, and also requesting a copy of the note. In response, Servicer sent a copy of the note and a loan payment history by separate letters approximately three weeks later.
On August 16, 2013, the Substitute Trustees allegedly sent Plaintiff a letter stating that a foreclosure sale of the property may occur at any time forty-five days from the date of the letter. Plaintiff was purportedly served with the foreclosure order to docket on August 28, 2013. The foreclosure order identified Owner as “the owner or secured creditor” of the loan, and included a copy of the note that was indorsed to Servicer.
Plaintiff filed an action against Owner and Servicer (collectively, “Defendants”), among others, alleging that (1) Owner and Servicer violated TILA by supposedly failing to notify Plaintiff of the transfer of ownership of the 2008 Loan to Owner, and of an assignment of the 2008 Deed of Trust to Servicer, as required by 15 U.S.C. §1641(g); (2) Servicer violated TILA by supposedly failing to provide Owner’s name, address, and telephone number to Plaintiff upon request, as required by 15 U.S.C. § 1641(f)(2); (3) Servicer violated RESPA by supposedly failing to respond to Plaintiff’s purported qualified written requests, as required by 12 U.S.C.§ 2605(e); and (4) Owner and Servicer were vicariously liable under the MCDCA for Substitute Trustee’s actions of allegedly attempting to collect a debt with knowledge that the right does not exist, as prohibited by Md. Code Ann., Com. Law § 14-202(8). The Defendants moved to dismiss Plaintiff’s claims.
As to the allegations that Servicer and/or Owner violated TILA by failing to notify Plaintiff of either the transfer of ownership of the loan to Owner, the Defendants argued that Plaintiff’s claim was time barred by TILA’s one year statute of limitations as to claims for money damages. The Defendants contended that although the date of the alleged transfer was not included in Plaintiff’s complaint, the Notice of Intent to Foreclose sent by Servicer in June 2012 listed Owner as the secured party and provided Owner’s telephone number, which put Plaintiff on notice of the transfer over a year before he filed his complaint at the very least.
The Court rejected the Defendants’ argument, holding that statute of limitations issues are an affirmative defense and not ordinarily grounds for dismissal. The Court stated that the Notice of Intent to Foreclose relied on by the Defendants to establish June 2012 as the date Plaintiff was put on notice of the transfer was not integral to Plaintiff’s complaint, and accordingly could not be considered in the context of a motion to dismiss.
As to the allegations relating to the assignment of the 2008 Deed of Trust to Servicer, the Defendants argued that the assignment was for administrative convenience to allow Servicer to service the loan. As you may recall, TILA explicitly states that “[a] servicer of a consumer obligation arising from a consumer credit transaction shall not be treated as the owner of the obligation for purposes of this section on the basis of an assignment of the obligation from the creditor or another assignee to the servicer solely for the administrative convenience of the servicer in servicing the obligation.” 15 U.S.C. § 1641(f)(2).
The Court rejected this argument as well, noting that “the Assignment of the Deed of Trust states that it assigns and transfers unto [Servicer] ‘all [lender’s] right, title and interest in and to a certain [2008 Deed of Trust]’.’” The Court found that “[t]his suggests that [Servicer] was the owner of the Deed of Trust.”
Plaintiff also alleged that Servicer violated TILA’s requirements that the name, address, and telephone number of the owner of a loan be provided upon written request. Plaintiff supposedly requested this information in letters allegedly sent to Servicer in September 2012 and August 2013. The Defendants argued that Plaintiff was already aware of the owner of the loan prior to sending both letters based on the Notice of Intent to Foreclose Servicer sent Plaintiff in June 2012. Concerning the alleged August 2013 letter, the Defendants further argued that Plaintiff’s complaint admitted to receiving the foreclosure order to docket, which specifically identified the Owner, at the end of August 2013.
The Court rejected both arguments. The Court noted again that the Notice of Intent to Foreclose could not properly be considered in the context of a motion to dismiss. It also found that the foreclosure order to docket provided only the name of the Owner, not the Owner’s address and phone number, as required. Accordingly, the Court held that Plaintiff sufficiently stated a claim for alleged TILA violations.
Plaintiff also alleged that Servicer violated RESPA by failing to respond to Plaintiff’s purported qualified written requests. Among other arguments, Servicer contended that some of Plaintiff’s alleged written requests could not have constituted qualified written requests under RESPA, because they were sent before the applicable response period expired.
The Court rejected Servicer’s position, stating that “[n]othing on the face of RESPA prevents a borrower from inundating his servicer with QWRs, even where the period to respond has not passed,” but also clarifying that “[i]n such a situation, presumably the servicer could satisfy the multiple requests in one response.” Ultimately, the Court determined that “while some of Plaintiff’s alleged communications do not constitute a QWR, some do and Plaintiff has pled sufficiently that [Servicer] failed to respond and that Plaintiff suffered damages as a result.”
Finally, Plaintiff alleged that Owner and Servicer were vicariously liable under the MCDCA for the Substitute Trustees’ actions of purportedly attempting to collect a debt with knowledge that the right to collect did not yet exist. Specifically, Plaintiff alleged that on August 16, 2013, the Substitute Trustees’ sent Plaintiff a Notice to Occupants stating that a foreclosure sale may occur at any time after forty-five days from the date of the notice, or September 30, 2013.
However, as you may recall, a foreclosure sale of residential property may not occur under Maryland law until at least forty-five days after service of process of the foreclosure order to docket. Here, Plaintiff alleged that the foreclosure order to docket was not served on Plaintiff until August 28, 2013, meaning that a foreclosure could not be commenced until October 14, 2013. Thus, according to Plaintiff, the Substitute Trustees were threatening foreclosure any time after September 30, 2013, when they in fact had no such right until October 14, 2013.
The Defendants argued, among other things, that their notice complied with Maryland law, pointing to statutory provisions requiring the specific language included in the notice, and outlining the timing with which the notices are to be given. Notably, the Court – examining Maryland law – held that the notice to occupants should be made simultaneously with when service of the foreclosure order to docket is made, rather than when the foreclosure order to docket is filed. Therefore, the Court held that Plaintiff’s allegations were sufficient to survive a motion to dismiss.
Accordingly, the district court denied the Defendants’ motions to dismiss Plaintiff’s claims under TILA, RESPA, and the MCDCA.
Ralph T. Wutscher
McGinnis Wutscher Beiramee LLP
The Loop Center Building
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