ORDER DENYING DEFENDANT'S MOTION TO DISMISS AND DIRECTING PARTIES TO FILE STATEMENTS REGARDING THE COURT'S AUTHORITY TO ENTER FINAL JUDGMENT

ARTHUR B. FEDERMAN, Bankruptcy Judge.

Debtor Betty Jo Shelton filed this adversary proceeding against Wells Fargo Bank, N.A., asserting several causes of action against it relating to the foreclosure of her home. Wells Fargo filed a Motion to Dismiss, and Ms. Shelton voluntarily dismissed Counts I, II, and VI of the Complaint, without prejudice. The following causes of action remain after the voluntary dismissal of Counts I, II, and VI: Count III for breach of the duty of good faith and fair dealing; Count IV for violation of the Missouri Merchandising Practices Act; Count V for breach of contract; and Count VII for quiet title. For the reasons that follow, the Motion to Dismiss Counts III, IV, V, and VII is DENIED.

STANDARD FOR DISMISSAL

Federal Rule of Civil Procedure 12(b)(6) permits a court to dismiss a complaint for "failure to state a claim upon which relief can be granted."1 In ruling on a motion to dismiss, the Court must accept as true all of the complaint's factual allegations and view them in the light most favorable to the nonmoving party.2 Under Federal Rule of Civil Procedure 8(a)(2), a pleading must contain a "short and plain statement of the claim showing that the pleader is entitled to relief."3 The pleading standard under Rule 8 does not require "detailed factual allegations," but "demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation."4

THE DEBTOR'S ALLEGATIONS

Taking Ms. Shelton's recitation of the facts as true, and giving her all favorable inferences, on December 23, 1998, Ms. Shelton obtained a loan in the principal amount of $71,932 from PNC Mortgage Corporation of America to finance the purchase of her home. The loan was evidenced by a Promissory Note and Deed of Trust on the home, and was insured by the Federal Housing Administration, which is now part of the Department of Housing and Urban Development.

According to the Complaint, ¶ 9(d) of the Deed of Trust provides:

Ms. Shelton asserts that, pursuant to the National Housing Act,6 in the event of default or imminent default of any mortgage insured under the Act, the mortgagee is required to engage in loss mitigation for the purpose of providing an alternative to foreclosure.7 She also asserts that HUD has issued regulations and other guidance in regard to servicing and foreclosing on mortgages it insures which are designed to ensure that the mortgagee takes steps to avoid unnecessary foreclosures of FHA-insured loans and loss to the government.8 To obtain the loan through the FHA Insured Mortgage Program, Ms. Shelton was required to pay premiums for mortgage insurance, paying an upfront mortgage insurance premium of 1.5% of the loan amount, and a yearly fee of .5% of the unpaid balance of the loan.

Wells Fargo says that it has owned and serviced the loan since 2007.9 Ms. Shelton asserts that, as servicer of the Loan, Wells Fargo was required to comply with HUD regulations requiring that it engage in loss mitigation before commencing foreclosure proceedings.10

In 2007, Ms. Shelton was employed as a certified nurse's aide. However, her work hours were reduced, resulting in a loss of income so that at times she could not afford to pay her full mortgage payment. In 2009, Ms. Shelton was laid off from her job. At that point, she fell substantially behind in her mortgage payments to Wells Fargo. She says she attempted to find other employment and take other measures to increase her income, but without success.

Ms. Shelton says that, beginning in 2009, and through 2011, she contacted Wells Fargo on repeated occasions requesting loss mitigation relief pursuant to HUD regulations. She also sought the assistance of NACA, a housing counseling agency.

By July, 2010, Ms. Shelton says she again had a steady source of income from a social security retirement pension. She asserts that she should have qualified for an FHA loan modification based on her income and expenses at the time. However, she asserts, Wells Fargo refused her requests for loss mitigation, sending her form letter responses, which reflected a failure to genuinely consider her for the loss mitigation relief for which she was eligible. By way of example, Ms. Shelton alleges that Wells Fargo sent her a letter dated October 24, 2011 informing her that it needed income documentation, a hardship letter, and other documents to move forward on her request for mortgage assistance. The very next day, and without waiting for any such documents from Ms. Shelton per the first letter, the same Wells Fargo representative immediately followed the October 24, 2011 letter with one dated October 25, 2011 advising her that:

The letter then outlined other possible loss mitigation options, including a short sale and deed in lieu of foreclosure.

Without providing Ms. Shelton with the opportunity to take advantage of these other loss mitigation options or to learn why "the investor" had declined her request without providing her an opportunity to submit documentation, Wells Fargo sent a third letter dated October 27, 2011 advising her that it would not be able to help her find a mortgage assistance solution and, for that reason, the normal collections process would resume, "if appropriate."

Ms. Shelton alleges that Wells Fargo failed to give her the opportunity to pursue a short sale or deed in lieu of foreclosure, which might have provided her with some limited financial compensation or other benefits.

After being notified that her requests for loss mitigation were denied, Ms. Shelton says she continued to submit documents to Wells Fargo in the hope that it would reconsider its decision and grant her the loss mitigation relief to which she asserts she was entitled under the FHA program. Ms. Shelton asserts that HUD regulations required Wells Fargo to consider six different loss mitigation options, including a possible 12-month forbearance or loan modification, which they did not do.

Instead, Wells Fargo foreclosed on the home on January 11, 2012. Ms. Shelton says she did not receive any of the notices of the foreclosure sale. Wells Fargo purchased the home at the foreclosure sale for $105,820.49. Ms. Shelton asserts that this is the amount of the claim for mortgage insurance benefits which Wells Fargo has or will make to HUD under the FHA Insured Mortgage Program. However, she says the actual fair market value of the home is only about $76,995, according to the Jackson County Appraiser.

Ms. Shelton also says that Wells Fargo was obligated under HUD regulations to inform her of her right to request an "occupied conveyance" of her home, whereby she would be permitted to rent her home from HUD for a period of time,11 but that it did not inform her of that opportunity in a timely manner. Despite not being timely notified of the right to request an occupied conveyance, on February 23, 2012, Ms. Shelton did submit a Request for Occupied Conveyance to HUD's designated agent, and provided verification of her income to demonstrate her ability to pay fair market rent. She never received a response to that request.

On January 30, 2012, Wells Fargo filed an unlawful detainer action against Ms. Shelton in the Jackson County Associate Circuit Court, seeking to evict her from the premises. Ms. Shelton filed this voluntary Chapter 7 bankruptcy case on February 5, 2012, staying the unlawful detainer action. Wells Fargo filed a Motion for Relief from Stay to proceed with the eviction. Ms. Shelton opposed that motion, and filed this adversary proceeding, asserting that foreclosure was wrongful. The state court eviction action has been stayed pending resolution of this adversary proceeding.

DISCUSSION

As stated above, Ms. Shelton's remaining causes of action assert breach of the duty of good faith and fair dealing (Count III); violation of the Missouri Merchandising Practices Act (Count IV); breach of contract (Count V); and quiet title (Count VII).

Counts III and V — Breach of the Duty of Good Faith and Fair Dealing and Breach of Contract

In Missouri, to establish a breach of contract, the party claiming breach must show: (1) the existence of an enforceable contract; (2) the presence of mutual obligations under the contract; (3) the failure to perform an obligation specified in the contract; and (4) that the party seeking recovery was thereby damaged.12

"As a general statement, a covenant of good faith and fair dealing is present in every contract."13 "The implied covenant of good faith prohibits [a] contracting party from acting in such a manner as to evade the spirit of the transaction or ... to deny the other party the expected benefit of the contract."14

In Count V of the Complaint, Ms. Shelton asserts that Wells Fargo breached the terms of the Deed of Trust, specifically ¶ 9(d) quoted above, by foreclosing without pursuing loss mitigation options as required by the terms of the Deed of Trust and HUD regulations. In Count III, she asserts that Wells Fargo breached the implied duty of good faith and fair dealing by:

Wells Fargo asserts that both the breach of contract and breach of the duty of good faith and fair dealing claims, which are based on alleged violations of HUD regulations, must fail because the National Housing Act and the regulations promulgated thereunder pertain to relations between the mortgagee (i.e., Wells Fargo) and the government — they do not give the mortgagor (Ms. Shelton) a claim for duty owed or a remedy for the mortgagee's failure to follow those regulations.

Several courts have held that the National Housing Act and the HUD regulations do not create, either explicitly or impliedly, rights in a mortgagor.16 Rather, the statutory scheme includes a comprehensive enforcement mechanism to police mortgagees' compliance with the loss mitigation procedures and other provisions by imposing various penalties on the mortgagee.17 "[T]he statute and regulations focus on oversight by the Department of Housing and Urban Development, and a Mortgagee Review Board, which is vested with authority to take action against a noncompliant mortgagee."18 Thus, neither the National Housing Act nor its regulations create a private right of action for a mortgagor.19

However, as Ms. Shelton points out, ¶ 9(d) of the Deed of Trust on her home provides that the Deed of Trust "does not authorize acceleration or foreclosure if not permitted by regulations of the Secretary" and thus, she asserts, incorporates the regulations. Rather than asserting an independent cause of action based on the alleged HUD violations, Ms. Shelton asserts that alleged violations are a breach of the Deed of Trust and the duty of good faith and fair dealing in the contract between the parties.

Ms. Shelton relies on Mullins v. GMAC Mortgage, LLC.20 In that case, the borrowers filed a lawsuit against a foreclosing lender and asserted, among other things, that the lender breached the contract between them by proceeding with foreclosure without giving them the opportunity to modify as required by HUD regulations which, as here, were referenced in the deed of trust. The court in that case denied the lender's motion to dismiss because the borrowers had pointed to specific language in the deed of trust which conditioned the lender's right to accelerate payment or foreclosure on the lender's compliance with HUD regulations. Since the borrowers had pointed to at least one applicable HUD regulation which required the lender to do more before it foreclosed, the borrowers had pled their breach of contract claim with sufficient particularity. The court there distinguished the borrower's cause of action, which was based on breach of a contract between the parties, from a suit to enforce HUD regulations "under some vague and likely non-existent cause of action allowing a member of the public to take upon himself the role of regulatory enforcer."21 In addition, since the breach of contract claim survived, the breach of implied covenant to act in good faith likewise survived.22

Similarly, in Overholt v. Wells Fargo Bank, N.A.,23 the court denied Wells Fargo's motion to dismiss a similar lawsuit because the plaintiffs there were not asserting a private cause of action for HUD or FHA violations, but instead were asserting a breach of contract claim for violations of these regulations which the plaintiffs asserted were incorporated into the Note and Deed of Trust. Noting that an action for breach of contract compensates for one's failure to comply with mutually agreed upon terms, the court suggested that damages for such breach might be available.24

In Kersey v. PHH Mortgage Corp.,25 a homeowner brought an action seeking to stop a foreclosure on the ground that the lender had not complied with the HUD regulations. The court there held that the plaintiff had stated a valid breach of contract theory, since the Deed of Trust, which incorporated the HUD regulations, manifested the parties' mutual assent to a bargained-for exchange of promises, which included that the lender comply with the regulations, including the face-to-face meeting prior to commencing foreclosure.26

Wells Fargo cites Wells Fargo Home Mortgage v. Neal, in which the Maryland Supreme Court held that a breach of contract theory based on violations of HUD regulations could not be asserted by the borrower offensively as a basis for damages, but rather only as a defense to a foreclosure.27 In this case, however, there is the additional factor that, as alleged by Ms. Shelton, the property was foreclosed without her having been given proper notice. Therefore, if correct, saying that she should have asserted these rights prior to foreclosure is not a realistic solution. In any event, there is a split of authority on the question of whether a debtor can recover damages in a suit such as this one.28

However, for purposes of this Motion, I find the cases suggesting that a breach of contract action might lie on a contract term incorporating the regulations to be persuasive. At this juncture, I need only decide whether Ms. Shelton has sufficiently pled the elements for breach of contract and breach of good faith and fair dealing. I need not decide at this point what damages she may be entitled to if she is successful in proving those elements at a later stage in the proceedings. I find, based on the foregoing, that Ms. Shelton has sufficiently pled the existence of an enforceable contract; the presence of mutual obligations under the contract; that Wells Fargo failed to perform the obligation in ¶ 9 of the Deed of Trust; and that she was damaged as a result of the foreclosure. She has also sufficiently pled that Wells Fargo evaded the spirit of the transaction and denied her the expected benefit of the HUD regulations incorporated into the contract, thus stating a basis for a breach of good faith and fair dealing. While the Eighth Circuit has held that a different Housing Act does not create a private cause of action, that case did not involve a situation like here, where a separate contract incorporated regulations under the Act.29 Wells Fargo's Motion to Dismiss Counts III and V will, therefore, be denied.

Count IV — Violation of the Missouri Merchandising Practices Act

Section 407.020 of the Missouri Statutes, the Missouri Merchandising Practices Act ("MMPA") prohibits the use of "any deception, fraud, false pretense, false promise, misrepresentation, unfair practice or the concealment, suppression, or omission of any material fact in connection with the sale or advertisement of any merchandise in trade or commerce .... in or from the state of Missouri...."30 An act declared unlawful by § 407.020 violates that statute "whether committed before, during or after the sale, advertisement or solicitation."31

"A private right of action is bestowed upon any consumer who `suffers an ascertainable loss of money or property... as a result of the use or employment by another person of a method, act or practice declared unlawful by section 407.020.'"32 The MMPA is designed to preserve fundamental honesty, fair play and right dealings in public transactions, and serves as a supplement to the common law definition of fraud.33 Its provision setting forth what constitutes an unlawful practice is intentionally broad so as to prevent "evasion by overly meticulous definitions."34

In order to prevail on a suit for damages under § 407.025, Ms. Shelton must show that (1) she purchased "merchandise"; (2) for personal, family, or household purposes; (3) that she suffered an ascertainable loss of money or property; and (4) that such loss was a result of an act declared unlawful by § 407.020, committed by Wells Fargo before, during or after the sale.

"Merchandise" is defined broadly in the MMPA as "any objects, wares, goods, commodities, intangibles, real estate or services."35 Courts in Missouri have held that "services" under the MMPA include such items as financing a retail installment contract.36 Thus, Ms. Shelton has sufficiently pled that the financing of her home, and the sale of HUD insurance in connection with the loan, was a "sale" of "merchandise" under the MMPA. In addition, Ms. Shelton sufficiently pled that her loan was for personal, family or household purposes. In addition, the loss of her home to foreclosure could be an ascertainable loss of money or property.

As to the fourth element, Ms. Shelton asserts that Wells Fargo engaged in unfair and deceptive acts and practices in violation of the MMPA, including:

In essence, Wells Fargo asserts that the MMPA must fail because the alleged illegal acts lack sufficient connection with the original transaction. Wells Fargo cites State ex rel. Koster v. Professional Debt Management, LLC, which held that "actions occurring after the initial sales transaction, which do not relate to any claims or representations made before or at the time of the initial sales transaction, and which are taken by a person who is not a party to the initial sales transaction," are not made "in connection with" the sale or advertisement of merchandise as required by the MMPA.37 However, that case is distinguishable. There, the court held that abusive debt collection by a third-party debt collector, which the court found was entirely unrelated to the initial extension of credit by the originating lender, was too remote from the original sale of merchandise to fit under the MMPA.

That is not the situation here. The agreement at issue here involves a longterm relationship between the parties (and their successors) and expressly encompasses the possibility of such events as default and the exercise of rights on default. In addition, Ms. Shelton asserts that Wells Fargo foreclosed on her home in violation of a specific provision of the Deed of Trust incorporating regulations in the event of default, which she alleges was a bargained-for term of the agreement. Finally, in order to obtain the loan through the FHA Insured Mortgage Program, Ms. Shelton was paying annual premiums for mortgage insurance on the loan. While it is not entirely clear from the Complaint what those premium payments covered, she has sufficiently pled that she did not receive that benefit for which she was charged.

While I recognize the apparent disconnect between the initial transaction and later breaches of promises, the statute expressly includes acts occurring after the initial sale, and Ms. Shelton has adequately pled that the agreement between the parties in this case contemplated ongoing activities and benefits to her as part of the HUD program, and that Wells Fargo denied her those benefits. In addition, Ms. Shelton has alleged that Wells Fargo made ongoing representations to her regarding loss mitigation opportunities after the default, and then failed to follow through.

As a result, I find that, for purposes of this Motion to Dismiss, Ms. Shelton has sufficiently pled a cause of action under the MMPA. Wells Fargo's Motion to Dismiss Count IV will, therefore, be denied.

Count VII — Quiet Title

Missouri law provides that any person claiming title, estate, or interest in real property "may institute an action against any person or persons having or claiming to have any title, estate or interest in such property...."38 "To state a cause of action to quiet title, a plaintiff must allege: (1) ownership in the described real estate; (2) that the defendant claims some title, estate or interest to or in said premises; and (3) said claim is adverse and prejudicial to plaintiff."39 Ms. Shelton must plead facts showing that she has a superior title to the property at issue.40

Ms. Shelton asserts, in essence, that she should still be the owner of the property because it should not have been foreclosed without offering her loss mitigation opportunities. This meets the pleading requirements for a cause of action for quiet title. The Court need not decide at this early stage whether it can restore ownership to Ms. Shelton if the Court finds that the foreclosure breached the contract or violated the MMPA. Nevertheless, if the Court finds the foreclosure was wrongful, then it may well be necessary to determine the relative rights of the parties in the property. As a result, Wells Fargo's Motion to Dismiss Count VII will be denied.

THIS COURT'S AUTHORITY

Although neither party has expressly questioned this Court's authority to enter final judgment, I, like the Court in the Kersey case mentioned above,41 question whether this Court can enter final judgment, absent consent, particularly in light of Stern v. Marshall.42 Consequently, the parties are directed, within 14 days from the date of this Order, to file statements regarding whether this matter is core, or whether this Court should issue proposed Findings of Fact and Conclusions of Law pursuant to 28 U.S.C. § 157(c). The parties should also state whether, in the event that the Court determines that this is not a core proceeding, they consent to entry of final judgment by the Bankruptcy Court.

ACCORDINGLY, Wells Fargo Bank, N.A.'s Motion to Dismiss is DENIED. The parties are directed, within 14 days from the date of this Order, to file statements concerning this Court's entry of a final order, as discussed herein.

IT IS SO ORDERED.