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Moss v. Ditech Financial, LLC

United States District Court, D. Maryland, Southern Division

August 1, 2016

DARLA MOSS, Plaintiff,
v.
DITECH FINANCIAL, LLC, et al., Defendants.

          MEMORANDUM OPINION AND ORDER

          Paul W. Grimm United States District Judge.

         Plaintiff Darla Moss fell behind on the payments on her mortgage loan from Defendant Federal National Mortgage Association (“Fannie Mae”), which Defendant Ditech Financial, LLC (“Ditech”), f/k/a Green Tree Servicing, LLC serviced. Am. Compl. ¶¶ 17-18, 34, 39, ECF No. 18. Defendants’ agent BWW Law Group, LLC (“BWW”) instituted a foreclosure action and informed Moss, in “a quote good through October 17, 2014” (“Reinstatement Quote”), that she could bring her loan current and avoid foreclosure by paying a “Reinstatement Amount” of $22, 471.29, which would cure the default and cover attorney’s fees and expenses up until October 17, 2014. Id. ¶¶ 19, 34-35, 40-41. Moss verified the amount and then paid $22, 471.29 on October 10, 2014. Id. ¶¶ 42-43. Thereafter, Defendants dismissed the foreclosure action but increased her monthly payments by $290.32 to cover “corporate advance[s], ”[1] such as legal fees and expenses BWW charged, all but $165.00 of which had been incurred before October 17, 2014.[2] Id. ¶¶ 46-48 & Ex. I, ECF No. 21-8. Unable to afford this additional monthly expense and believing that Defendants had waived the uncharged corporate advances through the Reinstatement Quote, Moss filed suit against Defendants. Compl., ECF No. 2.

         She claims that Ditech and Fannie Mae violated various state and federal statutes, breached the agreements the parties entered into in the Deed of Trust and Reinstatement Quote, and acted negligently in representing the Reinstatement Amount to be sufficient to bring her loan current and then increasing her monthly payments to cover expenses incurred before she paid the Reinstatement Amount. Am. Compl. ¶¶ 2-6.[3] Defendants have moved to dismiss, and the parties fully briefed the motion. ECF Nos. 22, 22-1, 26, 26-1, 29. A hearing is unnecessary. See Loc. R. 105.6.

         Moss has not stated a claim against Fannie Mae under the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. §§ 1692 et seq. (Count II), or against either Defendant under the Real Estate Settlement and Procedures Act (“RESPA”), 12 U.S.C. §§ 2601 et seq. (Count I), or in negligence (Count VIII), and those claims are subject to dismissal. Yet, Defendants have not shown that Moss failed to state a claim against Ditech under the FDCPA (Count II), or against either Defendant for breach of contract (Counts III-IV) or a declaratory judgment (Count IX). Nor have they demonstrated that she failed to state a claim for violations of the Maryland Consumer Protection Act (“MCPA”), Md. Code Ann., Com. Law §§ 13-101 et seq.; the Maryland Mortgage Fraud Protection Act (“MMFPA”), Md. Code Ann., Real Prop. §§ 7-401 et seq.; or the Maryland Consumer Debt Collection Act (“MCDCA”), Md. Code Ann., Com. Law §§ 14-201 et seq. (Counts V-VII). Accordingly, I will grant the motion in part and deny it in part, and dismiss Counts I and VIII in their entirety and Count II as to Fannie Mae.

         Standard of Review

         Federal Rule of Civil Procedure 12(b)(6) provides for “the dismissal of a complaint if it fails to state a claim upon which relief can be granted.” Velencia v. Drezhlo, No. RDB-12-237, 2012 WL 6562764, at *4 (D. Md. Dec. 13, 2012). This rule’s purpose “‘is to test the sufficiency of a complaint and not to resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses.’” Id. (quoting Presley v. City of Charlottesville, 464 F.3d 480, 483 (4th Cir. 2006)). To that end, the Court bears in mind the requirements of Fed.R.Civ.P. 8, Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009), when considering a motion to dismiss pursuant to Rule 12(b)(6). Specifically, a complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief, ” Fed.R.Civ.P. 8(a)(2), and must state “a plausible claim for relief, ” as “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice, ” Iqbal, 556 U.S. at 678-79. See Velencia, 2012 WL 6562764, at *4 (discussing standard from Iqbal and Twombly). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678.

         Plaintiff’s allegations of deceptive trade practices in violation of the Maryland Mortgage Fraud Protection Act (“MMFPA”), Md. Code Ann., Real Prop. §§ 7-401 et seq., and the Maryland Consumer Protection Act (“MCPA”), Md. Code Ann., Com. Law §§ 13-101 et seq., are “subject to the heightened pleading standards of Federal Rule of Civil Procedure 9(b).” Williams v. Dee Miracle Auto Grp. LLC, No. ELH-15-2466, 2016 WL 3411640, at *4 (D. Md. June 22, 2016) (discussing MCPA) (quoting Combs v. Bank of Am., N.A., No. GJH-14-3372, 2015 WL 5008754, at *6 (D. Md. Aug. 20, 2015)); Crowley v. JPMorgan Chase Bank, Nat’l Ass’n, No. RDB-15-00607, 2015 WL 6872896, at *10 (D. Md. Nov. 9, 2015) (discussing MMFPA).

Rule 9(b) states that “in alleging a fraud or mistake, a party must state with particularity the circumstances constituting the fraud or mistake. . . .” Such allegations [of fraud] typically “include the ‘time, place and contents of the false representation, as well as the identity of the person making the misrepresentation and what [was] obtained thereby.’” In cases involving concealment or omissions of material facts, however, meeting Rule 9(b)’s particularity requirement will likely take a different form.

Piotrowski v. Wells Fargo Bank, N.A., No. DKC-11-3758, 2013 WL 247549, at *5 (D. Md. Jan. 22, 2013) (citations omitted); see Spaulding v. Wells Fargo Bank, N.A., No. 12-1973, 2013 WL 1694549, at *9 (4th Cir. Apr. 19, 2013).

         When reviewing a motion to dismiss, “[t]he court may consider documents attached to the complaint, as well as documents attached to the motion to dismiss, if they are integral to the complaint and their authenticity is not disputed.” Sposato v. First Mariner Bank, No. CCB-12-1569, 2013 WL 1308582, at *2 (D. Md. Mar. 28, 2013); see CACI Int’l v. St. Paul Fire & Marine Ins. Co., 566 F.3d 150, 154 (4th Cir. 2009); see also Fed. R. Civ. P. 10(c) (“A copy of a written instrument that is an exhibit to a pleading is a part of the pleading for all purposes.”). Moreover, where the allegations in the complaint conflict with an attached written instrument, “the exhibit prevails.” Fayetteville Investors v. Commercial Builders, Inc., 936 F.2d 1462, 1465 (4th Cir. 1991); see Azimirad v. HSBC Mortg. Corp., No. DKC-10-2853, 2011 WL 1375970, at *2-3 (D. Md. Apr. 12, 2011).

         Real Estate Settlement and Procedures Act (Count I)

         Congress enacted the Real Estate Settlement and Procedures Act (“RESPA”), 12 U.S.C. §§ 2601 et seq., in part “to insure that consumers throughout the Nation are provided with greater and more timely information on the nature and costs of the settlement process.” 12 U.S.C. § 2601(a). To this end, a loan servicer first must acknowledge receipt of a qualified written request (“QWR”) within five days of receiving it. 12 U.S.C. § 2605(e)(1). Then, within thirty days, the servicer must either (A) “make appropriate corrections in the account of the borrower, ” and “transmit to the borrower a written notification of such correction”; or (B) “after conducting an investigation, provide the borrower with a written explanation or clarification that includes . . . a statement of the reasons for which the servicer believes the account of the borrower is correct as determined by the servicer”; or (C) if the borrower requested information rather than a correction, investigate and provide the information or explain why it is unable to do so. See 12 U.S.C. § 2605(e)(2)(A)-(C). Significantly, the provision is disjunctive and therefore, a failure to “make appropriate corrections, ” as provided for in § 2605(e)(2)(A), is not necessarily a violation of § 2605(e)(2), as the servicer may have complied with subsection (B) or (C) instead. See id.

         Moss sent a QWR[4] by mail and by fax to Ditech on February 4, 2015. Am. Compl. ¶ 50 & Ex. E, ECF No. 21-4. Ditech received it by mail on February 9, 2015, acknowledged receipt three days later, on February 12, 2015, and sent a substantive response on March 3, 2015. Am. Compl. ¶ 54-55 & Exs. F-G, ECF Nos. 21-5 - 21-6. Moss claims that Defendants violated § 2605 when “Ditech, as the agent of FNMA, failed to timely respond to [her February 4, 2015] qualified written request and failed to make appropriate corrections to the account” and “failed to take timely action to correct errors relating to allocation of payments, final balances for purposes of reinstating and paying off the loan, or avoiding foreclosure, or other standard servicer’s duties.” Am. Compl. ¶¶ 72, 74.

         Defendants argue that their February 12, 2015 acknowledgment of Moss’s QWR was timely, as they require QWRs to be submitted by mail, such that it was the February 9, and not the February 4, date that triggered the five-day period for acknowledging receipt. Defs.’ Mem. 7-8. They also contend that their March 3, 2015 substantive response was timely and that, although they did not correct the purported error that Moss identified, they complied with § 2605(e)(2)(B) by “providing Plaintiff with an explanation as to why [Ditech] believed the account information was correct, ” such that they were not required to correct the purported error. Id. at 9.

         In Opposition, Moss does not challenge the timeliness of Defendants’ responses. See Pl.’s Opp’n 6. Rather, she insists that Defendants’ March 3, 2015 response “was false and materially misleading” and consequently fell “woefully short of meeting the[] requirements” of § 2605(e)(2).[5] Id. Thus, it is undisputed that Defendants sent Moss a response but did not correct her account as she requested. See 2d Am. Compl. ¶ 55; Defs.’ Mem. 9. Therefore, they did not comply with § 2605(e)(2)(A).

         Yet, as noted, § 2605(e)(2) provides the servicer with two alternative responses to a QWR, in lieu of making “appropriate corrections.” See 12 U.S.C. § 2605(e)(2)(A)-(C). The March 3, 2015 letter states: “Records indicate that additional fees and costs were assessed after the reinstatement quote was provided to you. These are due and payable. We have enclosed a payment history of the account for your review.” Am. Compl. Ex. G. Thus, it shows that Defendants reviewed their records, and the letter provides “a written explanation or clarification that includes . . . a statement of the reasons for which the servicer believes the account of the borrower is correct.” See 12 U.S.C. § 2605(e)(2)(B). On the face of the letter, Defendants complied with § 2605(e)(2)(B). Insofar as Moss challenges the veracity of their response, RESPA is not the proper vehicle for recovering from damages from false or misleading statements. See Yacoubou v. Wells Fargo Bank, N.A., 901 F.Supp.2d 623, 630 (D. Md. 2012) (“Unlike the defamation tort, which depends in part on the truth or falsity of communications, RESPA governs the timing of communications.” (emphasis added)), aff’d sub nom. Adam v. Wells Fargo Bank, 521 F. App’x 177 (4th Cir. 2013). Consequently, Moss fails to state a claim for a violation of RESPA.

         Fair Debt Collection Practices Act (Count II)

         The Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. §§ 1692 et seq., “‘protects consumers from abusive and deceptive practices by debt collectors, and protects non-abusive debt collectors from competitive disadvantage.’” Stewart v. Bierman, 859 F.Supp.2d 754, 759 (D. Md. 2012) (quoting United States v. Nat’l Fin. Servs., Inc., 98 F.3d 131, 135 (4th Cir. 1996) (quotation omitted)). To state a claim for relief under the FDCPA, Plaintiff must allege that “(1) [she] has been the object of collection activity arising from consumer debt, (2) the defendant is a debt [ ] collector as defined by the FDCPA, and (3) the defendant has engaged in an act or omission prohibited by the FDCPA.” Id. at 759-60 (citation omitted); see Ademiluyi v. PennyMac Mortg. Inv. Trust Holdings I, LLC, 929 F.Supp.2d 502, 524 (D. Md. 2013) (citing 15 U.S.C. § 1692). Moss claims that Defendants violated the FDCPA by “engaging in . . . conduct the natural consequences of which is to harass, oppress, or abuse any person in connection with the collection of a debt, ” in violation of 15 U.S.C. §1692(d), “using false, deceptive, or misleading representations or means in connection with the collection of a debt, ” in violation of 15 U.S.C. §1692(e), and “using unfair or unconscionable means to collect or attempt a debt, ” in violation of 15 U.S.C. §1692(f).” Am. Compl. ¶¶ 79-81.

         Defendants contend that Moss cannot state an FDCPA claim against them because neither is a debt collector for purposes of the FDCPA. Defs.’ Mem. 10. It is undisputed that Ditech is a mortgage loan servicer and Fannie Mae is a creditor. See Am. Compl. ¶ 28; Defs.’ Mem. 10. Defendants argue that servicers and creditors do not qualify as “debt collectors” unless the loan was in default when Ditech began servicing it and when Fannie Mae acquired the Note. Id. Moss counters that “Ditech became the servicer of Ms. Moss’s loan when she was already in default, ” such that “Ditech constitutes a debt collect[or] under the FDCPA.” Pl.’s Opp’n 8-9 (emphasis added).

         Notably, in her Opposition, Moss does not assert that Fannie Mae qualifies as a debt collector. Indeed, in Henson v. Santander Consumer USA, Inc., the Fourth Circuit recently concluded that “the default status of a debt has no bearing on whether a person qualifies as a debt collector” or a creditor. 817 F.3d 131, 135 (4th Cir. 2016). Observing that 15 U.S.C. § 1692a “excludes from the definition of creditor ‘any person to the extent that he receives an assignment or transfer of a debt in default solely for the purposes of facilitating collection of such debt for another, ” the Fourth Circuit further concluded that the exclusion does not apply when a person acquires debt “for its own account, ” instead of “on behalf of others.” Id. Thus, it is immaterial whether the debt was in default when Fannie Mae acquired it, as Fannie Mae acquired it “for its own account, ” as a creditor. See Id. Therefore, Moss cannot state an FDCPA claim against Fannie Mae, and this claim is subject to dismissal with regard to Fannie Mae. See id.

         With regard to Ditech, as a loan servicer, the company indeed would qualify as a debt collector if the loan were in default when Ditech began servicing it. See id.; 15 U.S.C. § 1692a. Moss does not allege explicitly that Ditech is a debt collector or that the loan was in default when Ditech began servicing it. But she does allege that (1) Ditech began servicing the loan on September 1, 2013; (2) her monthly payment was $787.94 (which is equivalent to $9, 455.28 per year); (3) she was sent a Notice of Intent to Foreclose on October 28, 2013; and (4) as of October 17, 2014, the amount to cure her default, including attorney’s fees and expenses, was $22, 471.29 (which is more than twice what Moss’s monthly payments would have totaled for the period that Ditech serviced her loan). Am. Compl. ¶¶ 31-34, 39-41. Additionally, the April 3, 2015 response to Moss’s second QWR (dated March 17, 2015) lists “corporate advances, ” that is, amounts due for legal fees and costs, as far back as August 21, 2013. Am. Compl. Ex. I, ECF No. 21-8. Thus, while inartfully pleaded, it is clear that, drawing all reasonable inferences in Moss’s favor, as I must, she was in default when Ditech began servicing her loan on September 1, 2013, and her FDCPA claim against Ditech is not subject to dismissal on this ground. See Henson, 817 F.3d at 135; 15 U.S.C. § 1692a; Stewart, 859 F.Supp.2d at 759-60.

         Maryland Mortgage Fraud Protection Act (Count V) and Maryland Consumer ...


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