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Reed v. Bank of America Home Loans

United States District Court, D. Maryland

June 10, 2016

DEVRON A. REED, et al. Plaintiffs,
v.
BANK OF AMERICA HOME LOANS, et al., Defendants.

          MEMORANDUM OPINION

          PETER J. MESSITTE UNITED STATES DISTRICT JUDGE.

         Plaintiffs Devron A. Reed and Marja L. Reed (“the Reeds”)[1] have sued Defendants Bank of America Home Loans and Bank of America, N.A. (hereinafter collectively “BANA”). They allege violations of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692, et seq., the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. § 2601, et seq., the Maryland Consumer Protection Act (MCPA), Md. Code Ann., Com. Law § 13-101, et seq., as well as common law breach of contract and fraud. BANA has filed a Motion to Dismiss the First Amended Complaint (ECF No. 28), which the Reeds oppose. The parties’ submissions have been reviewed, and the Court finds that no hearing is necessary. For the following reasons, BANA’s Motion to Dismiss the First Amended Complaint (ECF No. 28) is GRANTED IN PART and DENIED IN PART.

         I. FACTS[2]

         On November 29, 2007, the Reeds obtained a loan for $380, 000.00 from First Meridian Mortgage, wherein Mortgage Electronic Registration Systems, Inc. (MERS) was designated as nominee for the Lender (the “Loan”). The Loan was secured by a Deed of Trust relating to property located at 15005 Leeland Road, Upper Marlboro, Maryland 20774. Defs.’ Mot. Dismiss First Amended Complaint (Defs.’ Mot. Dismiss FAC), Ex. A, ECF No. 28-1.

         At some point in 2008, the Reeds experienced a major accounting problem with their original loan servicer, which they say was related to their escrow account. Am. Compl. ¶ 2. The problem, they aver, was never resolved. Id.

         On September 22, 2011, MERS assigned all interest in the Deed of Trust to BANA. Defs.’ Mot. Dismiss FAC, Ex. B, ECF No. 28-2. According to the Reeds, the accounting problem they experienced with their original loan survived the transfer. Am. Compl. ¶ 3. Supposedly due to this accounting problem, the Reeds began to receive notices of intent to foreclose from BANA. Id. In an effort to resolve the problems they were experiencing with the Loan, the Reeds applied for a loan modification, and BANA approved them for a permanent loan modification in August 2012. Id. ¶ 4. In compliance with the initial terms of the modification, the Reeds returned two signed copies of the modification agreement to BANA by August 21, 2012 and sent certified funds in the amount of $2, 111.48 to BANA before September 1, 2012. Id. ¶ 5.

         On August 24, 2012, at about the time of the loan modification approval, the Reeds also received a letter from BANA informing them that their mortgage payment was delinquent. Id. ¶ 7. The letter stated, “We recently received your payment in the amount of $2, 437.72. This was less than the total amount needed to bring your loan up to date. . . . The total amount due after we applied your payment is $34, 297.32.” Id. Shortly thereafter, on September 3, 2012, the Reeds received a letter from the Federal Home Loan Mortgage Corporation, or Freddie Mac, stating that BANA had sent notice that the Reeds’ “mortgage payment has recently been delinquent.” Id. ¶ 9. Since their Loan had just been modified, these letters made no sense to the Reeds. Id. ¶ 10. The Reeds called BANA to try to resolve the error. Id. They spoke to several BANA representatives, including David Everline on September 3, 2012 at 5:25 p.m., and Monique Whitley on September 4, 2012, at 1:15 p.m., attempting to fix the problem. Id. ¶ 10.

         Despite the Reeds’ efforts, the error was not resolved. On March 28, 2013, the Reeds received yet another letter from BANA advising them that they “were not approved for, and offered, a Freddie Mac Modification Trial Period Plan.” Id. ¶ 10. The letter also stated that the Loan was “no longer eligible” for loan modification because, after being offered a Trial Period Plan for modification, the Reeds had supposedly informed BANA that they did “not wish to accept the offer.” Id. Several months later, on September 5, 2013, the Reeds received twelve envelopes by certified mail containing twelve notices of intent to foreclose on the Property. Id. ¶ 12. When they called BANA to inquire about the foreclosure notices and to advise the lender that a valid loan modification was in place, they were told that there was no record of a loan modification with respect to the Property. Id.

         Between September 5, 2013 and September 20, 2013, the Reeds called BANA approximately fifteen times in an attempt to resolve the issue, begging the managers to reinstate the modification, but to no avail. On September 25, 2013, they received another letter from BANA, stating: “We have reviewed your escalation of our decision that your loan is not eligible for a loan modification. While we realize this decision comes at a difficult time in your life, we regret to inform you that your loan modification escalation has been denied.” Id. ¶ 11.

         Between September 1, 2012 to September 1, 2013, the Reeds made all payments required under the terms of the modified Loan. Id. ¶ 6.

         Since then the Reeds have made no payments toward the Loan. Even so, no foreclosure action has ever been filed.[3]

         On the basis of the above facts, the Reeds allege that BANA has: engaged in oppressive and abusive conduct in connection with their Loan, in violation of the FDCPA, 15 U.S.C. § 1692(d) (Count I); employed unfair and unconscionable means to collect on their Loan in violation of the FDCPA, 15 U.S.C. § 1692(f) (Count II); used unfair or deceptive trade practices in violation of the MCPA, Md. Code Ann., Com. Law § 13-301 (Counts III and IV); committed fraud[4] (Count VII); breached the loan modification agreement with the Reeds and breached the implied covenant of good faith and fair dealing (Count V); and failed to provide the Reeds with certain information when rejecting their loan modification application in violation of Regulation X, 12 C.F.R. § 1024.41(d), [5] one of the implementing regulations of RESPA (Count VI).

         As for damages, the Reeds allege that they have been harmed because BANA has initiated foreclosure proceedings. See Am. Compl. ¶¶ 13-15. This allegation, as will be addressed in Part III.A, infra, is patently at odds with facts in the public record.[6] Of more substance, the Reeds also claim that Plaintiff Marja Reed’s application for a personal loan was recently rejected when she made application to another bank. Id. ¶ 16. She was purportedly told the reason for the rejection was that her BANA loan was in default and delinquent by four months. Id. Finally, the Reeds say that they have experienced stress and worry over losing their home, which has taken a toll on the emotional, mental, and physical health of the family. Id. ¶ 17.

         BANA has moved to dismiss all counts, arguing pursuant to Federal Rule of Civil Procedure 12(b)(6) that the Reeds have failed to state a claim upon which relief may be granted.

         II. STANDARDS OF LAW

         Federal Rule of Civil Procedure 8(a) prescribes “liberal pleading standards, ” requiring only that a plaintiff submit a “short and plain statement of the claim showing that [he or she] is entitled to relief.” Erickson v. Pardus, 551 U.S. 89, 93-94 (2007) (citing Fed.R.Civ.P. 8(a)(2)). If pleadings allege fraud or mistake, “a party must state with particularity the circumstances constituting fraud or mistake.” Fed.R.Civ.P. 9(b). Under the heightened pleading standard of Rule 9(b), “[t]hese circumstances are ‘the time, place, and contents of the false representations, as well as the identity of the person making the misrepresentation and what he obtained thereby.’” Weidman v. Exxon Mobil Corp., 776 F.3d 214, 219 (4th Cir. 2015) (quoting Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 784 (4th Cir. 1999)).

         To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a plaintiff must plead facts sufficient to “state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 554, 570 (2007). This standard requires “more than a sheer possibility that a defendant has acted unlawfully.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Although a court will accept factual allegations as true, “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id.

         A district court has the discretion to grant a motion to dismiss with or without prejudice. Hinks v. Bd. of Educ. of Harford Cnty., CIV.A. WDQ-09-1672, 2010 WL 5087598, at *2 (D. Md. Dec. 7, 2010). Dismissal with prejudice is proper if there is no set of facts the plaintiff could present to support his or her claim. Id. (citing Cozzarelli v. Inspire Pharm., Inc., 549 F.3d 618, 630 (4th Cir. 2008)).

         III. ANALYSIS

         A. Damages

         As a preliminary matter, the Court considers whether and to what extent there may be cognizable damages in this action. While these issues have not been raised or emphasized by any party at this stage, they obviously will have a bearing on the future course of this proceeding.

         The Reeds suggest throughout the Amended Complaint that they have suffered because of BANA’s alleged initiation of a foreclosure suit with respect to the Property. Am. Compl. ¶¶ 14, 15, 32, 49, 56. They say that they have been traumatized by seeing their home listed for sale on the Internet and by observing persons outside their house taking photographs of the Property. Id. ¶¶ 15, 56. These claims, however, appear to be entirely without foundation. The Court can find no record whatsoever of a foreclosure action related to the Property.[7] As such, it will not entertain a claim for any damages arising out of a nonexistent foreclosure action, to the extent that they are raised in the Amended Complaint.

         The Reeds also claim mental and emotional damages stemming from BANA’s alleged refusal to recognize the existence of a valid modification agreement and as a result of repeated notifications of intent to foreclose. Am. Compl. ¶¶ 14, 17, 32, 40. These claims may be viable under the FDCPA[8] and MCPA. Dorris v. Accounts Receivable Mgmt., Inc., No. CIV.A. GLR-11-3453, 2013 WL 1209629, at *7 (D. Md. Mar. 22, 2013) (“Actual damages under the FDCPA include damages for emotional distress.”); Barry v. EMC Mortgage Corp., No. CIV.A. DKC 10-3120, 2012 WL 3595153, at *8 (D. Md. Aug. 17, 2012) (noting that emotional damages constitute an actual injury or loss compensable under the MCPA). Such harms, however, would generally not be recoverable, however, under RESPA, [9] nor would they be in connection with state law claims for breach of contract and fraud. Aghazu v. Severn Sav. Bank, No. PJM 15-1529, 2016 WL 808823, at *10 (D. Md. Mar. 2, 2016) (noting that damages under RESPA are usually limited to “pecuniary or economic damages that flow directly” from violation of the Act); Richter v. N. Am. Van Lines, Inc., 110 F.Supp.2d 406, 413 (D. Md. 2000) (citing Restatement (Second) of Contracts, § 353 (1981)) (“The general rule is that emotional disturbance is not a damage recognized for breach of contract.”); Hoffman v. Stamper, 867 A.2d 276, 298 (Md. 2005) (holding that a plaintiff in a fraud action seeking noneconomic damages for emotional injury must show some objectively ascertainable consequential physical injury).

         Finally, the Reeds assert that Plaintiff Marja Reed was denied a personal bank loan as a result of BANA’s actions. Am. Compl. ¶ 16. With respect to some Counts, the Reeds also appear to allege that they should be able to recover what they term collection costs and late fees. Id. ¶¶ 38, 42. While, as a general proposition, pecuniary or economic damages may be cognizable with respect to the causes of action alleged in the Amended Complaint, the Court observes that the Reeds’ allegations of economic harm are fairly nebulous at this stage. Indeed, the Court poses this question to all parties: Even if BANA has engaged in unlawful conduct vis-à-vis the Reeds, what actual economic harm have the Reeds suffered, given that they still apparently occupy the Property? As this case goes forward, the Reeds will have to demonstrate their entitlement to recover pecuniary damages with much greater precision during discovery.

         The Court now addresses BANA’s arguments to dismiss each of the Reeds’ claims.

         B. Fair Debt Collection Practices Act Claims (Counts I and II)

         In Count I, the Reeds claim that BANA violated the FDCPA, 15 U.S.C. § 1692d, by: (i) falsely advising them that they would qualify for a loan modification and that this modification would prevent foreclosure; and (ii) accepting payments from the Reeds under the guise that these payments were being applied pursuant to the modification agreement. Am. Compl. ¶ 25. In Count II, the Reeds allege that BANA violated the FDCPA, 15 U.S.C. § 1692f by (i) sending twelve notices of foreclosure; (ii) advising the Reeds that there was no record of a loan modification agreement; (iii) forcing the Reeds to repeatedly contact BANA with respect to the loan modification agreement; and (iv) failing to complete the loan modification in a timely fashion. Am. Compl. ¶ 30. In response to these allegations, BANA contends that Counts I and II fail to state a claim because BANA is not a “debt collector” under the FDCPA. Defs.’ Mot. Dismiss FAC 5-6, ECF No. 28. BANA argues, instead, that it is a “creditor, ” and thus exempt from liability under the FDCPA. Id.

         At this stage at least, the Court declines to dismiss the Reeds’ FDCPA claims on this ground.

         In general, the FDCPA prohibits abusive, deceptive, or unfair debt collection practices. See 15 U.S.C. § 1692. Fifteen U.S.C. § 1692d bars a debt collector from engaging in any conduct “to harass, oppress, or abuse any person in connection with the collection of a debt.” Fifteen U.S.C. § 1692f provides that a “debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt.” A consumer with debt may bring a private action to enforce these provisions under 15 U.S.C. § 1692k. To state a claim under the FDCPA, the consumer must allege that: (1) the defendant is a “debt collector” under the FDCPA, (2) the consumer is the “object of a collection activity arising from consumer debt, ” and (3) the defendant engaged in a “debt collection activity” prohibited by the FDCPA. Ademiluyi v. PennyMac Mortg. Inv. Trust Holdings I, LLC, 929 F.Supp.2d 502, 524 (D. Md. 2013) (quoting Stewart v. Bierman, 859 F.Supp.2d 754, 759 (D. Md. 2012)) (internal quotations omitted).

         With respect to the first prong, the FDCPA defines a “debt collector, ” in part, as a person who “regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.” 15 U.S.C. § 1692a(6). A “creditor, ” on the other hand, is “any person who offers or extends credit creating a debt or to whom a debt is owed, ” 15 U.S.C. § 1692a(4).[10] Debt collector and creditor are “mutually exclusive” categories under the FDCPA, Schlosser v. Fairbanks ...


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