KATHERINE POLK FAILLA, District Judge:
Like many Americans in the recent past, Plaintiff Chantal Sutton found herself unable to make her mortgage payments in 2012 and applied for a mortgage loan modification.
Defendant has moved to dismiss Plaintiff's First Amended Complaint (the "FAC") in its entirety. For the reasons set forth in the remainder of this Opinion, Plaintiff has failed to allege a viable claim under RESPA. Accordingly, the Court grants Defendant's motion to dismiss with respect to Plaintiff's RESPA claim, and declines to exercise jurisdiction over the pendent state-law claim.
A substantial portion of Plaintiff's pleading concerns events that predate Defendant's putative RESPA violations; the significance of these earlier events is a point of contention between the parties. Plaintiff explains that she and her husband took out a 30-year mortgage to purchase their home in 2001, and refinanced that mortgage to reduce its length to 15 years in 2004. (FAC ¶¶ 19-21). The latter mortgage was, in turn, securitized by the mortgage lender. (Id. at ¶ 21). Plaintiff's communications regarding the mortgage have been with the mortgage servicer, rather than the mortgage lender; since at least 2012, the mortgage has been serviced by Defendant. (Id. at ¶¶ 22, 25).
Mr. Sutton's business began to falter in 2010, and no later than June 2012, the Suttons were unable to make their monthly mortgage payments. (FAC ¶¶ 26-27).
Plaintiff observes that, at the time she entered into the permanent loan modification, there was no mechanism under HAMP or RESPA to appeal the terms of that modification. (See FAC ¶¶ 50-51). Having failed to obtain a term extension from Defendant before signing the modification paperwork — and experiencing a form of buyer's remorse over the balloon payment to which she had agreed — Plaintiff sought to obtain a term extension after the fact. Specifically, Plaintiff submitted at least three written letters seeking information concerning her account; the parties dispute whether these communications constitute "Qualified Written Requests" or other inquiries that would precipitate disclosure or correction obligations under RESPA.
A mere six months after agreeing to the loan modification, in February 2014, Plaintiff submitted a letter to Defendant in which she (i) advised Defendant of her belief that her account was in error because Defendant had rejected her requests for a term extension and (ii) requested the identity of the owner of the mortgage. (FAC ¶ 62). Defendant responded on February 28, 2014, that the mortgage owner was SASCO (short for Structured Asset Securities Corporation), and that SASCO's guidelines prohibited Defendant from extending the term of Plaintiff's loan. (Id. at ¶ 63 & Ltr. Ex. C (noting that "[p]er [SASCO's] guidelines we cannot extend the maturity date on your loan. Any balloon amount or deferred amounts are due at the original maturity date. This private investor voluntarily participates in HAMP, but per their own guidelines.")).
Plaintiff submitted a supplemental request for information in May 2014, seeking contact information for SASCO, as well as the specific language in the SASCO servicing agreement that governed the granting
Plaintiff's third request for information was sent by her counsel on August 1, 2014. (FAC ¶ 70 & Ex. A). Counsel began by asserting that the letter was a "qualified written request" under RESPA, and that Plaintiff's account was in error because Defendant had "failed to grant [a] term extension in connection with her HAMP modification and, instead, wrongly asserted that its Servicing Agreement bars it from changing the maturity date of the loan." (FAC Ex. A at 1). Counsel then briefly restated Plaintiff's prior two written requests, before arguing in several paragraphs why Plaintiff believed that SASCO's servicing agreement with Defendant did not prohibit term extensions. (Id. at 1-3). The letter ended with Plaintiff's request that Defendant offer a new permanent modification that included a term extension. (Id. at 3).
Defendant responded by letter dated August 27, 2014. (FAC ¶ 71 & Ex. B). With respect to Plaintiff's request for a new modification, Defendant responded that it was "unable to alter agreed upon terms to a loan modification already in place once it's past our discretionary period," and that if Plaintiff believed she was "unable to afford the ... balloon payment,... a new loan modification can be explored to determine if an alternative would be more suitable." (Id. Ex. B at 1). There is no indication in the FAC that Plaintiff took Defendant up on this offer.
Plaintiff filed her complaint in this matter on March 10, 2016. (Dkt. # 1). In broad summary, Plaintiff claimed that under RESPA, Defendant had obligations both to substantiate SASCO's refusal to extend the term of her mortgage and, ultimately, to extend that term. (FAC ¶¶ 76-86). Defendant's failures on both counts amounted to a RESPA violation for which Plaintiff suffered actual damages; separately, Plaintiff alleged that Defendant's conduct in responding to her 2014 submissions was part of a "pattern or practice of improper loan modification denials." (Id. at ¶¶ 87-90). Finally, Plaintiff alleged that Defendant's conduct amounted to a violation of N.Y. Gen. Bus. Law § 349, which prohibits consumer-oriented deceptive conduct. (Id. at ¶¶ 91-96).
In May 2016, Defendant announced its intention to file a motion to dismiss the complaint; Plaintiff responded to Defendant's pre-motion submission, and the Court held a conference on the matter on June 1, 2016. (Dkt. # 10, 13, 14; see also Dkt. # 20 (transcript of June 1, 2016 conference)). After the conference, Plaintiff filed a letter motion for leave to file an amended complaint on June 3, 2016; the Court endorsed the motion that day, and
When considering a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a court should "draw all reasonable inferences in [the plaintiff's] favor, assume all well-pleaded factual allegations to be true, and determine whether they plausibly give rise to an entitlement to relief." Faber v. Metro. Life Ins. Co., 648 F.3d 98, 104 (2d Cir. 2011) (internal quotation marks and citation omitted). Thus, "[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to `state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)).
"While Twombly does not require heightened fact pleading of specifics, it does require enough facts to `nudge [a plaintiff's] claims across the line from conceivable to plausible.'" In re Elevator Antitrust Litig., 502 F.3d 47, 50 (2d Cir. 2007) (per curiam) (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955). "Where a complaint pleads facts that are `merely consistent with' a defendant's liability, it `stops short of the line between possibility and plausibility of entitlement to relief.'" Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (internal quotation marks omitted) (quoting Twombly, 550 U.S. at 557, 127 S.Ct. 1955). Moreover, "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id.
RESPA was enacted "to insure that consumers throughout the Nation are provided with greater and more timely information on the nature and costs of the settlement process and are protected from unnecessarily high settlement charges caused by certain abusive practices that have developed in some areas of the country." 12 U.S.C. § 2601(a); see generally Kapsis v. Am. Home Mortg. Servicing Inc., 923 F.Supp.2d 430, 444-45 (E.D.N.Y. 2013). The statute applies to "federally related mortgage loan[s]," a term that includes loans secured by a lien on residential real estate "designated principally for the occupancy of from one to four families," for which the lender is federally regulated or has deposits or accounts insured by the federal government. 12 U.S.C. § 2602(1)(A), (B).
In 2010, RESPA was amended pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act" or the "Act"), Pub. L. No. 111-203, 124 Stat. 1376 (2010). Among other provisions, Section 1463 of the Dodd-Frank Act added certain sections to RESPA that, generally speaking, addressed the duties of servicers of federally related mortgage loans with regard to responding to borrower requests for information or assertions of error. In addition, the Act created the Consumer Financial Protection Bureau (the "CFPB"), which was tasked with prescribing rules and regulations, as well as interpretations, "as may be necessary to achieve" RESPA's purpose. 12
As a practical matter, the typical point of contact for a borrower is the servicer of the loan or mortgage. These servicers are required under Section 6 of RESPA, which is codified at 12 U.S.C. § 2605, to disclose pertinent information, or to evidence correction of pertinent errors, in writing to borrowers. See generally Roth v. CitiMortgage Inc., 756 F.3d 178, 181 (2d Cir. 2014) (per curiam); Friedman v. Maspeth Fed. Loan & Sav. Ass'n, 30 F.Supp.3d 183, 189 (E.D.N.Y. 2014) (citations omitted). Prior to Dodd-Frank, the principal method for a borrower to obtain information from a servicer was through a "qualified written request" ("QWR") for "information relating to [] servicing." 12 U.S.C. § 2605(e)(1)(A).
RESPA defines a QWR as:
12 U.S.C. § 2605(e)(1)(B). "Servicing," in turn, is defined as "receiving any scheduled periodic payments from a borrower pursuant to the terms of any loan, including amounts for escrow accounts described in section 2609 of this title, and making the payments of principal and interest and such other payments with respect to the amounts received from the borrower as may be required pursuant to the terms of the loan." Id. § 2605(i)(3).
"If a[] servicer of a federally related mortgage loan receives a" QWR for servicing information from a borrower or an agent of the borrower, it is required to "provide a written response acknowledging receipt of the correspondence within 5 days (excluding legal public holidays, Saturdays, and Sundays) unless the action requested is taken within such period." 12 U.S.C. § 2605(e)(1)(A). Within 30 days of receipt of that QWR, the servicer is obligated to:
Id. § 2605(e)(2).
Section 1463(a) of the Dodd-Frank Act, entitled "Servicer Prohibitions," added 12 U.S.C. § 2605(k) to RESPA. The section provides, in relevant part:
12 U.S.C. § 2605(k)(1). In her opposition papers, Plaintiff claims to be seeking liability under subsections (C) and (E) of this provision (Pl. Opp. 4); a review of the FAC, however, discloses no reference to § 2605(k)(1)(E) (see FAC).
In connection with the repromulgation of Regulation Z, the CFPB provided interpretative guidance and implementing regulations. Of note, the CFPB clarified that servicer obligations under Section 6 of RESPA had been expanded and classified into two types, information-providing and error-correcting:
Mortgage Servicing Rules, 78 Fed. Reg. at 10736; see generally Rizk v. Residential Credit Solutions, Inc., No. CV-14-09371-MWF-JC, 2016 WL 6211727, at *2 (C.D. Cal. Apr. 12, 2016) (discussing two categories). In keeping with this taxonomy, § 1024.35 was captioned "Error resolution procedures," while § 1024.36 was captioned "Requests for information,"
In its Regulation Z guidance, the CFPB made clear that § 1024.35 pertained to putative violations of 12 U.S.C. § 2605(k)(1)(C), while § 1024.36 pertained to putative violations of 12 U.S.C. § 2605(e), (k)(1)(b), and (k)(1)(D). Compare Mortgage Servicing Rules, 78 Fed. Reg. at 10741 ("The Bureau proposed § 1024.35(b)(4) to implement, in part, section 6(k)(1)(C) of RESPA with respect to borrower requests to correct errors relating to the allocation of payments for a borrower's account and other standard servicer duties."), with id. at 10753 ("Section 1024.36 implements section 6(k)(1)(D). of RESPA, and to the extent the requirements are also applicable to qualified written requests, sections 6(e) and 6(k)(1)(B) of RESPA.").
Plaintiff repeatedly cites to § 1024.35 in the FAC, but nowhere mentions § 1024.36, and so the Court narrows its focus accordingly. As Plaintiff notes, § 1024.35 covers a broader category of written inquiries from borrowers than the servicing QWRs addressed by 12 U.S.C. § 2605(e)(1): By its terms, the regulation covers "any written notice from the borrower that asserts an error and that includes the name of the borrower, information that enables the servicer to identify the borrower's mortgage loan account, and the error the borrower believes has occurred." 12 C.F.R. § 1024.35(a); cf. id. ("A qualified written request that asserts an error relating to the servicing of a mortgage loan is a notice of error for purposes of this section, and a servicer must comply with all requirements applicable to a notice of error with respect to such qualified written request.").
Id. § 1024.35(b). The regulation goes on to specify "[i]nvestigation and response requirements" — including time limitations and documentation obligations — for affected loan servicers. Id. § 1024.35(e).
A servicer who "fails to comply with any provision of" Section 6 is subject to actual damages, costs, and, "in the case of a pattern or practice of noncompliance with the requirements of [Section 2605]", statutory damages. 12 U.S.C. § 2605(f); see Gorbaty v. Wells Fargo Bank, N.A., 10 Civ. 3291 (NGG) (SMG), 2012 WL 1372260, at *5 (E.D.N.Y. Apr. 18, 2012). Significantly, "[a] plaintiff seeking actual damages under § 2605 must allege that the damages were proximately caused by the defendant's violation of RESPA." Gorbaty, 2012 WL 1372260, at *5. Conclusory assertions do not suffice. See, e.g., Gorbaty v. Wells Fargo Bank, N.A., No. 10 Civ. 3291 (NGG) (SMG), 2014 WL 4742509, at *5 (E.D.N.Y. Sept. 23, 2014) ("In order to recover actual damages, a plaintiff must allege injury and resulting damages that are proximately caused by the loan servicer's failure to adhere to its obligations under § 2605 — i.e., the timing and form of Wells Fargo's responses to Plaintiff's QWRs."); Corazzini v. Litton Loan Servicing LLP, No. 09 Civ. 199 (MAD) (ATB), 2010 WL 6787231, at *12 (N.D.N.Y. June 15, 2011) ("[T]he courts have consistently dismissed complaints under RESPA if they do not allege actual damages or state merely that in a conclusory fashion the defendant caused damages to the plaintiff[.]" (citation and internal quotation marks omitted)).
To obtain statutory damages, by contrast, a plaintiff must establish "a pattern or practice of noncompliance with the requirements" of § 2605 by the defendant.
At base, Plaintiff seeks to use RESPA and Regulation X to renegotiate her loan modification. That is, Plaintiff is not contending that Defendant acted in derogation of the modification agreement she executed in October 2013; instead, she contends that the modification was itself implemented in error because it lacked a term extension. Framing her claims in the language of RESPA, Plaintiff faults Defendant for not sufficiently responding to her requests for information concerning why a term extension was not included in her loan modification (i.e., not substantiating SASCO's refusal to include a term extension), and for not "correcting" the error of failing to include a term extension. (See FAC ¶¶ 76-84). Plaintiff has very carefully pled the FAC in an effort to circumvent various RESPA provisions that foreclose a private right of action for certain claims; ultimately, the Court concludes that Plaintiff's pleading gambit is unsuccessful, and grants Defendant's motion to dismiss.
The Court first considers Defendant's liability under 12 U.S.C. § 2605(e).
Both before and after the Dodd-Frank amendments, courts consistently distinguished loan servicing inquiries from loan modification inquiries, and have concluded that liability under § 2605(e)(1) does not inhere in the latter. See, e.g., Gorbaty, 2014 WL 4742509, at *7 ("[C]ourts routinely interpret section 2605 as requiring a QWR to relate to the servicing of a loan, rather than the creation or modification of a loan." (quoting Gates v. Wachovia Mortg., FSB, No. 09-CV-02464 (FCD), 2010 WL 2606511, at *3 (E.D. Cal. June 28, 2010))); Bravo v. MERSCORP, Inc., No. 12 Civ. 884 (ENV) (LV), 2013 WL 1652325, at *3 (E.D.N.Y. Apr. 16, 2013) (distinguishing "communication[s] challenging the validity of the loan" from "communication[s] relating to the servicing of the loan as defined by statute"); see also, e.g., Bracco v. PNC Mortg., No. 8:16-CV-1640-T-33TBM, 2016 WL 4507925, at *4 (M.D. Fla. Aug. 29, 2016) ("The distinction between `servicing' a loan and `modifying' a loan is an important one because `[c]ourts routinely interpret section 2605 as requiring a QWR to relate to the servicing of a loan, rather than the creation or modification of a loan.'" (citation omitted) (collecting cases)); Wolfbauer v. Ocwen Loan Servicing, LLC, No. 4:15CV3141, 2016 WL 1170982, at *3 (D. Neb. Mar. 24, 2016) ("An inquiry about the validity, ownership, transfer, assignment, or potential modification of a loan is not `related to the servicing' of the loan and does not constitute a QWR." (collecting cases)); see generally Smallwood v. Bank of Am., N.A., No. 1:15-CV-336, 2015 WL 7736876, at *6 (S.D. Ohio Dec. 1, 2015) ("The plain language of the statute supports Defendant's position that a request relating to loan modification does not relate to scheduled payments, principal and interest, or other payments received pursuant to the terms of the Smallwoods' loan with BOA. Rather, a loan modification is a request to alter the terms of a loan."), appeal dismissed (June 13, 2016).
Plaintiff fares no better under the statutory and regulatory amendments resulting from the Dodd-Frank Act. In this regard, Plaintiff claims that Defendant failed to correct certain errors in her account that were brought to Defendant's attention in Plaintiff's May and August 2014 submissions; though presented in various formulations, the proffered errors are variations on a theme that Defendant erred in not extending the term of Plaintiff's mortgage loan. (See, e.g., FAC ¶¶ 12 ("Citi did not properly investigate Ms. Sutton's mortgage account for errors, even though Ms. Sutton demonstrated that Citi's professed reason for refusing to extend the term of her loan was entirely unfounded."), 72 ("No rule or regulation relieves Citi of its duty to correct the error it made when it permanently modified Ms. Sutton's loan. The excuse Citi offered — that it could not alter the terms of accepted loan modifications — is not recognized under the Handbook, which governs HAMP, or Regulation X, which implements RESPA."), 82 ("Citi did not correct Ms. Sutton's account by extending the maturity date of her loan, even though HAMP requires that Citi extend the term of Ms. Sutton's loan and Citi faced no prohibition on doing so."), 83 ("Upon information and belief, Citi did not conduct a reasonable investigation into the error alleged in Ms. Sutton's August 1, 2014 QWR.")). As set forth herein, Plaintiff has not alleged a viable claim under either 12 U.S.C. § 2605(k)(1)(C) or 12 C.F.R. § 1024.35.
Despite the Court's request at the pre-motion conference (see June 1 Tr. 41), Defendant elected not to corroborate its February 28 written response to Plaintiff that SASCO's "guidelines" foreclosed a term extension (Ltr. Ex. C).
Plaintiff claims liability under Section 2605(k)(1)(C), under which servicers of federally related mortgages are proscribed from "fail[ing] to take timely action to respond to a borrower's requests to correct errors relating to allocation of payments, final balances for purposes of paying off the loan, or avoiding foreclosure, or other standard servicer's duties." 12 U.S.C. § 2605(k)(1)(C). Defendant correctly notes that Plaintiff's submissions cannot be said to fall within the first three categories. (See Def. Br. 7). Accordingly, resolution of this contention requires the Court to determine whether Plaintiff's requests for substantiation of SASCO's loss mitigation guideline or her claims of error requiring correction relate to "standard servicer's duties."
Plaintiff argues that "standard servicer's duties" are not limited (as Defendant suggests, see Def. Br. 7-8) to errors actionable under other sections of RESPA, but rather encompass duties "typically undertaken by servicers in the ordinary course of business," including "`loss mitigation activities.'" (Pl. Opp. 5-6 (quoting Mortgage Servicing Rules, 78 Fed. Reg. at 10699, 10739)). Because of the recency of Dodd-Frank, there is scant case law on this issue. Indeed, while the Court has found cases addressing § 2605(k)(1)(C), see, e.g., Boardley v. Household Fin. Corp. III, 39 F.Supp.3d 689, 703-04 (D. Md. 2014), it has found only one case that gave more than a passing nod to "standard servicer's duties," see Todd v. ShoreBank, No. 12 Civ. 6575 (JBZ), 2013 WL 3790966, at *4 (N.D. Ill. July 19, 2013). Even there, the district court did not consider the scope of the term, but rather used it in concluding that "[i]ssues of the validity of a loan or mortgage documents do not relate to loan servicing," and thus that an inquiry concerning same "is not a valid QWR." Id.
In consequence, the Court considers the CFBP's statements at the time of the repromulgation of Regulation X. The Second Circuit has not discussed the deference to be accorded to the CFBP's (as opposed to HUD's) interpretation of RESPA and Regulation X, but the Ninth Circuit has in language that comports with pre-Dodd-Frank Second Circuit decisions concerning HUD interpretations of RESPA:
Edwards v. First Am. Corp., 798 F.3d 1172, 1179 (9th Cir. 2015), cert. dismissed sub nom. First Am. Fin. Corp. v. Edwards, ___ U.S. ___, 136 S.Ct. 1533, 194 L.Ed.2d 600 (2016); see Nat. Res. Def. Council v. U.S. E.P.A., 808 F.3d 556, 569 (2d Cir. 2015) (discussing agency deference generally); Cohen v. JP Morgan Chase & Co., 498 F.3d 111, 113 (2d Cir. 2007) (according Chevron deference to HUD's interpretation of 12 U.S.C. § 2607(b));
The CFPB offered the following guidance concerning the scope of 12 U.S.C. § 2605(k)(1)(C):
Mortgage Servicing Rules, 78 Fed. Reg. at 10739 (emphasis added) (footnote omitted); see also id. at 10699 (including within servicer duties "defining loss mitigation activities (including foreclosures and loan modifications) with respect to delinquent borrowers."); cf. 12 C.F.R. § 1024.39 (establishing servicer obligation to engage in early intervention efforts with delinquent borrowers). Plaintiff's FAC and opposition papers confirm that she never defaulted on her mortgage payments and was never delinquent in her payments. There is, therefore, nothing to suggest that "standard servicer's duties" included fielding Plaintiff's requests for loan modifications.
Plaintiff further contends in her opposition papers that liability exists under Section 2605(k)(1)(E), which proscribes "fail[ing] to comply with any other obligation found by the Bureau of Consumer Financial Protection, by regulation, to be appropriate to carry out the consumer protection purposes of this chapter." 12 U.S.C. § 2605(k)(1)(E). (See Pl. Opp. 4). As noted previously, the FAC makes no reference to § 2605(k)(1)(E). It does, however, make numerous references to 12 C.F.R. § 1024.35, the provision of Regulation Z that sets forth error resolution procedures for various "covered errors." In her opposition papers, Plaintiff reiterates that errors in evaluation of loss mitigation options are included within the list of "covered errors." (See, e.g., Pl. Opp. 7-8). The Court will therefore consider whether Plaintiff has alleged a claim under § 1024.35.
On this issue, the dispute between the parties distills to whether communications by a non-defaulting party (such as Plaintiff here) identifying and seeking correction of putative loss mitigation errors are covered by this provision. In arguing the negative, Defendant cites to the CFPB's explicit
Significantly for purposes of the Court's analysis, Plaintiff has specifically disclaimed (see Pl. Opp. 11) any argument under 12 C.F.R. § 1024.41, which sets forth a detailed system of loss mitigation procedures. See 12 C.F.R. § 1024.41; see generally Lage v. Ocwen Loan Servicing LLC, 145 F.Supp.3d 1172, 1182 (S.D. Fla. 2015), aff'd, 839 F.3d 1003 (11th Cir. 2016) (per curiam). At first blush, this section would seem to be the most relevant to Plaintiff's claims, but the Court understands Plaintiff's decision to disclaim to be a strategic one in light of the limitations on a borrower's private right of action:
12 C.F.R. § 1024.41(a) (emphasis added).
Having identified Plaintiff's arguments, the Court next considers whether a private right of action exists under 12 C.F.R. § 1024.35. Plaintiff acknowledges that two courts in this Circuit have declined to so find. (See Pl. Opp. 6 n.3 (citing Miller v. HSBC Bank U.S.A., N.A., No. 13 Civ. 7500 (RWS), 2015 WL 585589 (S.D.N.Y. Feb. 11, 2015), and Kilgore v. Ocwen Loan Servicing, LLC, 89 F.Supp.3d 526 (E.D.N.Y. 2015))). However, Plaintiff argues that those decisions were largely the product of poor pleading by the plaintiffs' counsel (who was the same in both cases), and should not be considered persuasive. (Id.).
The analysis in Miller is not as cursory as Plaintiff's briefing suggests: Judge Sweet concluded, after reviewing the regulation, that "[b]ecause Section 1024.35 includes the remedies available, and because a private right of action for alleged damages is not among them, Miller's notice of error claim is rejected." 2015 WL 585589, at *11 (citing Nat'l R.R. Passenger Corp. v. Nat'l Ass'n of R.R. Passengers, 414 U.S. 453, 458, 94 S.Ct. 690, 38 L.Ed.2d 646 (1974) ("[W]hen legislation expressly provides a particular remedy or remedies, courts should not expand the coverage of the statute to subsume other remedies")); cf. Brown v. Bank of N.Y. Mellon, No. 1:16-CV-194(LMB/IDD), 2016 WL 2726645, at *2 (E.D. Va. May 9, 2016) ("With respect to plaintiff's Regulation X claims in Counts II-V, defendants correctly argue that 12 C.F.R. §§ 1024.35, 1024.39, and 1024.40 do not explicitly provide a cause of action to private individuals."). That said, the Court's own review of the case law discloses a split among courts. See, e.g., Lage v. Ocwen Loan Servicing
For its part, the CFBP has stated that "regulations established pursuant to section 6 of RESPA are subject to section 6(f) of RESPA, which provides borrowers a private right of action to enforce such regulations." Mortgage Servicing Rules, 78 Fed. Reg. at 10714 n.64. The Court will assume, for purposes of this motion, that such a private right of action exists, given the CFPB's statements, the remedial purposes of RESPA and Regulation X, and the provision of a private right of action in 12 U.S.C. § 2605(k)(1)(E) (through § 2605(f)), for "fail[ures] to comply with any other obligation found by the Bureau of Consumer Financial Protection, by regulation, to be appropriate to carry out the consumer protection purposes of this chapter").
But though Plaintiff has the ability to bring a claim under this Dodd-Frank amendment, the claim she has alleged is not a viable one. Considering Plaintiff's allegations in this regard, the Court finds that, while stated in slightly different ways in the FAC and in Plaintiff's opposition papers, the putative errors are of one type — Defendant's failure to recognize and correct the fundamental error in the loan it was then servicing, i.e., its erroneous perception that Plaintiff could not have obtained a loan modification with a term extension.
In light of (i) the recency of the Dodd-Frank amendments, (ii) the unusual facts alleged here, and (iii) the statutes and regulations under which Plaintiff does (and does not) proceed, the Court finds little guidance in the existing case law. The court in Rizk v. Residential Credit Solutions, Inc., No. CV-14-09371-MWF-JC, 2016 WL 6211727 (C.D. Cal. Apr. 12, 2016), granted summary judgment in favor of the defendant mortgage servicer on various bases, including its determination that "QWRs may not be used to request loan modification or information related to loan modification." Id. at *3. However, though the plaintiff's written inquiries post-dated January 10, 2014, the district court relied exclusively on pre-Dodd-Frank case law. The plaintiffs in Smallwood v. Bank of America, N.A. had submitted inquiries to their mortgage servicer concerning, among other things, a possible loan modification (and their concurrent belief that their account was in error because of the failure to implement such a modification) both before and after January 10, 2014; the plaintiffs (like Plaintiff here) alleged violations of 12 U.S.C. § 2605(e)(2) and 12 C.F.R. § 1024.35, among others. 2015 WL 7736876, at *1-4. Again, however, the district court focused on pre-Dodd-Frank case law in concluding that the defendant servicer was not required to respond to inquiries relating to loan modification under RESPA, because they did not pertain to servicing, and, further, rejected the argument that "sections of Regulation X that reference loss mitigation were intended to expand the definition of `servicing' under RESPA." Id. at *7; see also id. n.13.
By contrast, the district court in Cole v. JPMorgan Chase Bank, N.A., No. 2:15-CV-2634, 2016 WL 4491731 (S.D. Ohio Aug. 25, 2016), denied the defendant servicer's motion to dismiss, finding that pre-Dodd-Frank cases were no longer persuasive authority. Id. at *6-7, *13. However, the court there noted that the plaintiff was claiming errors during the process of seeking a loan modification, and concluded that "a borrower may enforce the provisions of 12 C.F.R. § 1024.41 (loss mitigation procedures) pursuant to section 6(f) of RESPA (12 U.S.C. § 2605(f))." Id. at *7; see also id. at *9 (addressing plaintiff's arguments regarding § 1024.41). Similarly, in Bracco v. PNC Mortgage, No. 8:16-CV-1640-T-33TBM, 2016 WL 4507925, at *4 (M.D. Fla. Aug. 29, 2016), the court dismissed a complaint that sought to predicate violations of § 2605(k) of RESPA and § 1024.36 of Regulation X on the servicer's untimely acknowledgement of receipt of the plaintiff's request for information. Id. at *2-6. In so doing, the court distinguished two cases that had sustained claims under Regulation X, noting that "each included a claim under the loss mitigation provision of Regulation X at 12 C.F.R. § 1024.41, rather than a sole claim under 12 C.F.R. § 1024.36." Id. at *4 (citing Bennett v. Bank of Am., N.A., 126 F.Supp.3d 871 (E.D. Ky. 2015), and Paz v. Seterus, Inc., No. 14-62513-CIV, 2015 WL 4389521 (S.D. Fla. July 16, 2015)). Ultimately, the Bracco court concluded that "[a]lthough [the plaintiff] may be correct that `there is no one else but a servicer to direct inquiries about how badly botched an attempted loan modification was,' Regulation X's requirements governing a servicer's response to loss mitigation applications are found in § 1024.41, not in § 1024.36(c)." Id. (citation omitted). In the instant case, of course, Plaintiff has disclaimed any reliance on § 1024.41. In short, existing case law suggests that Plaintiff has failed to state a claim under the Dodd-Frank amendments. Seeking additional clarity, however, the Court will also consider the CFPB's pronouncements on this issue.
Both parties are correct with their opening premises: the CFPB did decline to include incorrect evaluations of loss mitigation options as a covered category, and it did decide to include a catch-all provision for "error[s] relating to the servicing of a borrower's mortgage loan" in 12 C.F.R. § 1024.35(b)(11). It is the CFPB's description of the process it went through to arrive at these two decisions that persuades the Court that errors in evaluation of loss mitigation options are not subsumed by this catch-all provision:
Mortgage Servicing Rules, 78 Fed. Reg. at 10743-44; see also id. at 10739-40 (emphasizing that the list of covered errors is a "limited list").
The CFPB's discussion of § 1024.41 confirms the Court's conclusion:
Mortgage Servicing Rules, 78 Fed. Reg. at 10817-18 (emphasis added); see also id. at 10823 (confirming that private right of action exists under 12 C.F.R. § 1024.41 for violation of loss mitigation procedures, but not for failure "to offer any particular loan mitigation option").
There are additional policy reasons for the Court to decline to read "covered errors" as broadly as Plaintiff suggests. For one thing, recognizing a cause of action under RESPA on the allegations in the FAC would undermine the settled principle that there is no private right of action for HAMP violations. See Jordan v. Chase Manhattan Bank, 91 F.Supp.3d 491, 501-02 (S.D.N.Y. 2015) (collecting cases); Wheeler v. Citigroup, 938 F.Supp.2d 466, 471 (S.D.N.Y. 2013) (same). Indeed, recognizing a cause of action on these facts would undermine RESPA itself, which sets forth a carefully-calibrated set of protocols addressing loss mitigation issues, one under which Plaintiff's allegations fail to
In short, the Court agrees with Defendant that RESPA (through Regulation X) regulates many aspects of loss mitigation practices, but does not regulate the correctness of a loss mitigation decision, and certainly does not encompass errors in loss mitigation decisions within the catch-all provision in the definition of "covered errors." (See Def. Reply 2). For all of these reasons, the Court finds that Plaintiff has failed to allege an actionable claim under RESPA.
Even had Plaintiff alleged a violation of RESPA, she has failed to identify damages that were proximately caused by that violation, and her claims would fail on this independent basis. To review, the purported RESPA violations generally concern Defendant's failure to provide substantiation for its refusal to extend the term of Plaintiff's mortgage and to "correct" its error in not extending the mortgage. In the FAC, Plaintiff alleges four categories of damages:
(FAC ¶ 87).
As noted, "[a] plaintiff seeking actual damages under § 2605 must allege that the damages were proximately caused by the defendant's violation of RESPA." Gorbaty, 2012 WL 1372260, at *5. With this in mind, and taking her claims out of order, the Court dismisses Plaintiff's fourth category of damages out of hand. To permit a cause of action based on incidental costs would transform virtually all unsatisfactory borrower inquiries into RESPA lawsuits, and, in so doing, would
Plaintiff's second category of damages can also be rejected. For starters, Plaintiff's claim to have paid more in mortgage payments than in rent is speculative, inasmuch as there is no allegation in the FAC of any rental opportunity that Plaintiff forwent in favor of continued mortgage payments. To counter speculation with speculation, the Court observes that Plaintiff's argument further depends on her abandoning any equity she may have in the home at the time the balloon payment becomes due in March 2019, rather than attempting to obtain a second modification, or selling the home, in the 26 months preceding that date. More fundamentally, Plaintiff has failed to allege a causal connection. Plaintiff's decision to choose home ownership over home rental was made in 2001 and reaffirmed in October 2013, months before the communications that are at the heart of this lawsuit. Indeed, Plaintiff made mortgage payments for months with full knowledge of the March 2019 balloon payment she now seeks to avoid; thus, even were the Court to conclude that Defendant was required to substantiate its reason for refusing to extend the term of the loan or to extend the term, Plaintiff cannot allege that either error affected her decision to own and not rent.
Turning to the issue of emotional distress damages, courts have split as to whether such damages count as actual damages under RESPA. See, e.g., In re Residential Capital, LLC, 513 B.R. 446, 465 (Bankr. S.D.N.Y. 2014) (collecting cases on both sides, and concluding that emotional distress damages can constitute "actual damages" under RESPA). A review of the facts found by Judge Glenn in Residential Capital, however, underscores the difference between that case and this one: the former case involved foreclosure proceedings undertaken by the servicer in response to a request for a loan modification and in the absence of the borrowers' default; the retention of a scurrilous (and later disbarred) attorney to commence the proceedings in the name of the trustee of the securitization trust that owned the loan; repeated refusals by the servicer to explain who the trustee was and why foreclosure proceedings had been commenced; and, most disturbingly, the overdose (and consequent death) of one of the homeowners caused by the stress of the proceedings. Here, by contrast, the FAC makes plain that Plaintiff's distress has existed "since signing the permanent modification agreement" in October 2013 (FAC ¶ 75) — again, several months before any of Plaintiff's 2014 inquiries was submitted. Plaintiff cannot disentangle the distress that was occasioned by the loan modification into which she voluntarily entered from that which may have been occasioned by Defendant's failure to respond fully to any of her requests for information or to modify the term of the mortgage, and for this reason has not alleged actionable emotional distress damages. See Roth v. Citi-Mortgage Inc., 2013 WL 5205775, at *8 (E.D.N.Y. 2013) ("Even if plaintiff and her husband suffered emotional distress from the possible loss of their home, plaintiff has not alleged that this injury was proximately caused by defendant's failure to comply with RESPA, i.e., the form and timing of its response to plaintiff's letters."), aff'd on other grounds, 756 F.3d 178 (2d Cir. 2014).
The Court has found resolution of Plaintiff's first claim for damages — the fact that
Finally, Plaintiff has failed to allege "a pattern or practice of noncompliance with the requirements" of § 2605 by Defendant. See 12 U.S.C. § 2605(f)(1); Gorbaty, 2012 WL 1372260, at *5 ("Pattern or practice means a standard or routine way of operating." (citation and internal quotation marks omitted)). Plaintiff's allegations of widespread misconduct by Defendant are wholly conclusory, and inadequate to support a claim under RESPA. (See, e.g., FAC ¶¶ 9 ("Additionally, Citi routinely flouts the laws that govern the mortgage servicing industry, namely the Real Estate Settlement Procedures Act, 12 U.S.C. §§ 2601-2617 (`RESPA')."), 45 ("Citi's failure to abide by the Handbook in the Sutton's case was not an isolated occurrence."), 88 ("Upon information and belief, Citi's repeated refusal to comply with RESPA in response to Ms. Sutton's three QWRs is part of a pattern and practice of noncompliance with this Act."), 89 ("Upon information and belief, Citi's failure to maintain accurate information about investor restrictions fosters a pattern and practice of improper loan modification denials under 12 C.F.R. § 1024.41(d) (2016).")).
In sum, Plaintiff's failure to plead damages in accordance with RESPA's requirements is a second basis for dismissing her complaint.
Plaintiff separately claims that Defendant's conduct in responding to her 2014 inquiries amounts to a violation of Section 349 of New York's General Business Law, which proscribes "deceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in this state," where such conduct is consumer-oriented. That claim arises under New York State law, and the Court declines to exercise jurisdiction over it.
Under 28 U.S.C. § 1367(c)(3), a district court has discretion to "decline to exercise supplemental jurisdiction over" pendent state-law claims "if ... the district court has dismissed all claims over which it has original jurisdiction." United Mine Workers of America v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966), teaches that "[o]nce a district court's discretion is triggered under § 1367(c)(3), it balances the traditional `values of [i] judicial economy, [ii] convenience, [iii] fairness, and [iv] comity,' in deciding whether to exercise jurisdiction." Kolari v. N.Y.-Presbyterian Hosp., 455 F.3d 118, 122 (2d Cir. 2006) (quoting Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 350, 108 S.Ct. 614, 98 L.Ed.2d 720 (1988)); see Gibbs, 383 U.S. at 726-27, 86 S.Ct. 1130; cf. Benjamin v. N.Y. City Dep't of Health, 144 Fed.Appx. 140, 142 (2d Cir. 2005) (summary order) ("In assessing whether § 1367(c)(3) discretion has been
None of the Gibbs factors suggests that exercising pendent jurisdiction over Sutton's GBL claim is appropriate. Judicial economy counsels in favor of dismissal, given the thin record in this case. See Chenensky v. N.Y. Life Ins. Co., 942 F.Supp.2d 388, 392 (S.D.N.Y. 2013). For similar reasons, combined with the fact that the parties in this case are all in New York, the Court perceives nothing notably inconvenient about requiring Sutton to litigate this claim in state court. Finally, the comity interests here militate strongly in favor of dismissal. "When the balance of [the Gibbs] factors indicates that a case properly belongs in state court, ... the federal court should decline the exercise of jurisdiction by dismissing the case without prejudice." Cohill, 484 U.S. at 350, 108 S.Ct. 614.
For the reasons set forth above, Defendant's motion to dismiss is GRANTED as follows: Plaintiff's claim under RESPA is dismissed with prejudice, while her claim under N.Y. Gen. Bus. Law § 349 is dismissed without prejudice. The Clerk of Court is directed to terminate all pending motions, adjourn all remaining dates, and close this case.
SO ORDERED.
Plaintiff alleges that Defendant was a HAMP participant during the relevant time period. (FAC ¶ 32).
Mortgage Servicing Rules, 78 Fed. Reg. at 10703 (footnote omitted); see also, e.g., id. at 10714 (adopting § 1024.17(k)(5) pursuant to this authority); id. at 10724 ("Pursuant to the Bureau's authorities under RESPA sections 6(k)(1)(E), 6(j)(3), and 19(a), the Bureau proposed rules on error resolution (proposed § 1024.35), information management (proposed § 1024.38), early intervention (proposed § 1024.39), continuity of contact (proposed § 1024.40), and loss mitigation (proposed § 1024.41) that would have set forth servicer duties with respect to `Loss mitigation options.'"); id. at 10732 (adopting § 1024.33(c)(2), concerning treatment of borrower payments during transfers of servicing, pursuant to this authority); id. at 10736 (adopting § 1024.34(b)(2), concerning the crediting of funds to a new escrow account, pursuant to this authority); id. at 10768 (adopting disclosure obligations concerning force-placed insurance pursuant to this authority); id. at 10777-78 (adopting certain "[g]eneral [s]ervicing [p]olicies, [p]rocedures, and [r]equirements" pursuant to this authority).
