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Farber v. Brock & Scott, LLC

United States District Court, D. Maryland

October 6, 2016



          THEODORE D. CHUANG United States District Judge

         Plaintiffs Todd and Ivey Farber ("the Farbers") have filed this civil action against Defendant Brock & Scott, LLC d/b/a Brock & Scott, PLLC ("Brock & Scott"), alleging violations of the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. 992601-2617 (2012), and the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. 99 1692-1692p (2012). Pending before the Court is Brock & Scott's Motion to Dismiss for failure to state a claim. The Court has reviewed the Complaint and briefs and held a hearing on September 20, 2016. For the reasons set forth below, the Motion is GRANTED IN PART and DENIED IN PART.


         The following facts are set forth as alleged in the Complaint and are taken as true for the purposes of resolving the Motion. The Farbers are the owners of a residence located in Gaithersburg, Maryland ("the Property"). On or about May 10, 2007, the Farbers refinanced their mortgage on the Property by securing a loan from Mason Dixon Funding, Inc. The loan was subsequently securitized into a mortgage-backed security currently held by U.S. Bank, National Association ("U.S. Bank"). SunTrust Mortgage, Inc. ("SunTrust") acts as the mortgage servicer on behalf of U.S. Bank. SunTrust appointed Brock & Scott to serve as substitute trustee and authorized Brock & Scott to act as its agent in connection with foreclosure proceeding.

         On May 18, 2015, Brock & Scott commenced a foreclosure action against the Farbers and the Property in the Circuit Court of Maryland for Montgomery County. On June 5, 2015, the Farbers requested foreclosure mediation. See Md. Code Ann., Real Prop. 7-105.1(j)(1)(ii) (2012). On June 9, 2015, the Maryland Office of Administrative Hearings scheduled the mediation for July2,, 2015 and notified SunTrust and Brock & Scott. Despite their knowledge that the mediation had been timely requested and scheduled, SunTrust and Brock & Scott scheduled a foreclosure sale of the Property to occur on July 7, 2015. Brock & Scott notified the Farbers of the impending sale and advertised the sale in The Washington Post. However, the sale did not occur as scheduled. The Farbers and SunTrust then proceeded to mediation on July 20, but they were unable to reach an agreement.

         After receiving notice of the July 2015 foreclosure sale but before participating In foreclosure mediation, the Farbers submitted an application to SunTrust for a loan modification or other loss mitigation. According to the Farbers, Brock & Scott was aware of their application. On August 12, 2015, at the request of SunTrust, the Farbers provided additional documentation to supplement their pending application. On August 14, 2015, SunTrust acknowledged receipt of the materials by letter and informed the Farbers that it would not proceed with any foreclosure sale until after it evaluated the application and, if denied, after the Farbers' appeal rights expired. When Sun Trust then requested additional documents to complete the application, the Farbers timely provided the requested materials on September 15, 2015.

         SunTrust never acknowledged whether the Farbers' loss mitigation application was complete or informed the Farbers whether their application had been approved or denied. Instead, on January 8, 2016, Brock & Scott placed an advertisement in The Washington Post announcing a scheduled foreclosure sale of the Property to occur on January 26, 2016.

         The Farbers filed this lawsuit against Sun Trust and Brock & Scott on January 11, 206.. In the Complaint, the Farbers allege that (1) Defendants violated RESPA by scheduling the January 2016 foreclosure sale while the Farbers' loan modification application was pending; (2) Brock & Scott violated the FDCPA by noticing and advertising the foreclosure sale scheduled for June 2015 because it had no right, pursuant to Md. Code Ann., Real Prop. § 7-105.1(m,, to conduct the sale before the foreclosure mediation took place; (3) Brock & Scott violated the FDCPA by noticing and scheduling the foreclosure sale for January 2016 because it had no right, pursuant to RESPA, to conduct the sale before the loan modification application was approved or denied; and (4) they are entitled to a declaratory judgment that the provisions of RESPA preempt Maryland state law foreclosure provisions.

         Brock & Scott filed its Motion to Dismiss on March 4, 2016. On March 25, 2016, the Farbers filed an Opposition to the Motion. On April 6, 2016, the parties filed a Notice of Dismissal of all claims against Sun Trust. Brock & Scott filed its Reply memorandum on April 8, 2016. At the hearing on the Motion on September 20, 2016, the Farbers' counsel withdrew the cause of action seeking a declaratory judgment on the grounds that it is now moot. On September 27, 2016, Brock & Scott, with leave of the Court, filed a Notice of Correction purportedly to correct a misstatement at the hearing. Because the filing went well beyond such a correction and offered additional argument, the Court construes it as a sur-reply brief filed without leave of the Court and strikes it on that basis. See D. Md. Local R. 105.2(a).


         In its Motion to Dismiss, Brock & Scott seeks dismissal for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). Specifically, it asserts that (1) the Farbers have not stated a valid RESPA claim because the RESPA provision allegedly violated applies only to the conduct of a "servicer, " and Brock & Scott is not a "servicer" within the meaning of the statute; and (2) the Farbers have not stated a valid FDCPA claim, in part because Brock & Scott lacked any knowledge of the filing of the loan modification application underlying the alleged RESPA violation. Brock & Scott also argues that there are no RESPA or FDCPA violations because the Farbers had filed for bankruptcy in 2014, and as a result (1) they waived any RESPA claim when they failed to object to a motion to lift the automatic stay; (2) the bankruptcy court's order lifting the automatic stay authorized Brock & Scott to proceed to foreclosure; and (3) as a result of the bankruptcy court's orders discharging any personal liability for the mortgage, the Farbers were no longer entitled to the protections of RESPA or the FDCPA.

         I. Legal Standard

         To defeat a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the complaint must allege enough facts to state a plausible claim for relief. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A claim is plausible when the facts pleaded allow "the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. Legal conclusions or conclusory statements do not suffice. Id. The Court must examine the complaint as a whole, consider the factual allegations in the complaint as true, and construe the factual allegations in the light most favorable to the plaintiff. Albright v. Oliver, 510 U.S. 266, 268 (1994); Lambeth v. Bd. of Comm 'rs of Davidson Cty., 407 F.3d 266, 268 (4th Cir. 2005).

         II. Real Estate Settlement Procedures Act

         RESPA is a broad remedial statute intended to provide American consumers with more information about the real estate settlement process and protection from "unnecessarily high settlement charges caused by certain abusive practices." 12 U.S.C. § 2601. Section 2605, which governs the "[servicing of mortgage loans" provides that "[a] servicer of a federally related mortgage shall not. . . fail to comply with any . . . obligation found by the Bureau of Consumer Financial Protection, by regulation, to be appropriate to carry out the consumer protection purposes of this chapter." § 2605(k)(I)(E). Section 2605 further provides that "[w]hoever fails to comply with any provision of this section shall be liable to the borrower, " including potentially for actual and statutory damages. § 2605(f)(1).

         RESPA's implementing regulations, also known as "Regulation X, " are codified at 12 C.F.R. §§ 1024.1-1024.41. Section 1024.41, regulating loan servicers' loss mitigation procedures, is found in Subpart C, entitled "Mortgage Servicing." Under this section, a servicer that receives a borrower's "complete loss mitigation application more than 37 days before a foreclosure sale" must evaluate the borrower for all loss mitigation options, provide the borrower with written notice of its options, if any, and notify the borrower in writing if its application has been rejected. 12 C.F.R. ยง 1024.41(c)-(d) (2016). "[A] servicer shall not move for foreclosure judgment or order of sale, or conduct a foreclosure sale" ...

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