Friday, September 25, 2015

FYI: SD Fla Provides Mixed Ruling on RESPA RFI Responses, Property Inspection Fees Assessed Post-Default

The U.S. District Court for the Southern District of Florida recently dismissed with prejudice a borrowers' allegations that a loan servicer's response to their request for information regarding drive-by property inspections violated the federal Real Estate Settlement Procedures Act ("RESPA"), and dismissed the remaining state-law allegations that the drive-by inspections violated the Florida Consumer Collection Practices Act ("FCCPA") for lack of subject matter jurisdiction.


A copy of the opinion is attached.


The borrowers defaulted on their home mortgage loan.  The loan servicer began conducting drive-by inspections pursuant to the mortgage.


The borrowers sent a letter to the servicer requesting certain loan information and an explanation of the drive-by inspections. The servicer responded, but borrowers were dissatisfied with the response, and sued.


The complaint alleged that the response violated RESPA, and that the drive-by inspections violated the FCCPA.


The servicer moved to dismiss, arguing that its response complied with RESPA, plaintiffs sustained no damages to support their RESPA claim, and because the inspections were authorized by the mortgage, the FCCPA claim failed.


The Southern District of Florida first addressed the response to borrowers' request for information, finding that the servicer's 52-page response, which included the prior and current servicer's payment histories, invoices for all property inspections, a letter explaining why the inspections were ordered and the amount required to pay the loan in full, sufficed because it adequately responded to the borrowers' request.


The Court reasoned that the borrowers' inquiries as to why the servicer believed the property was unoccupied or in poor condition, whether the inspections were reasonable, and whether the owner of the loan specifically requested the inspections, were irrelevant because the mortgage provided for inspections once the loan was 45 days in default and every 30 days thereafter until the loan was current.


Although the servicer did not respond to every specific question presented in the borrowers' request, the Court held that RESPA does not require the servicer to provide an explanation that is satisfactory to the borrower, only a statement of its reasons.


The Southern District of Florida next addressed the borrowers' alleged damages, finding that although sending a second written request due to an inadequate response to the first request qualifies as actual damages under RESPA, the borrowers could not allege that they sustained damages relating to the second request because the servicer's response to the first request was sufficient.


Turning to the FCCPA claim, the Court concluded that the borrowers' allegations that the servicer knew the inspections were unnecessary and unreasonable were sufficient to assert a plausible claim under the FCCPA, reasoning that courts have allowed FCCPA claims to go forward, even when the mortgage specifically allowed the inspections, when:  (1) the borrower alleges that the loan owner did not request monthly inspections; and  (2) the borrower alleges the servicer knew the borrower continued occupying the property.  Under these circumstances, the Court noted, the inspections would be unlawful because their purpose was not to protect the lender's interest in the collateral, but to enrich the servicer.


However, even though the FCCPA claim survived the motion to dismiss, the dismissal of the RESPA claim meant there was no longer a federal question conferring subject matter jurisdiction, and the Court chose to exercise its discretion in favor of dismissing the remaining state-law FCCPA claim.


In addition, the Court reasoned that it did not have diversity jurisdiction because even though the complaint alleged that the parties were residents of different states, it was apparent from the face of the complaint that the amount in controversy was less than the $75,000 statutory minimum.


Accordingly, the Southern District of Florida dismissed the RESPA claim with prejudice, and dismissed the FCCPA claim for lack of subject matter jurisdiction.





Ralph T. Wutscher
Maurice Wutscher LLP
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Chicago, Illinois 60602
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