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Smith v. Ocwen Loan Servicing, LLC

United States District Court, D. Maryland

November 16, 2016

STEVEN J. SMITH, et al., Plaintiffs,


          George L. Russell, III United States District Judge.

         THIS MATTER arises out of Plaintiffs Steven and Malisa Smith's unsuccessful attempt to modify their mortgage refinance through Defendant Ocwen Loan Servicing, LLC (“Ocwen”), the loan's servicer. The Smiths allege Ocwen violated federal and state law when it failed to comply with mandatory procedures and made misrepresentations regarding the Smiths' application for a loan modification. Currently pending before the Court is Ocwen's Motion to Dismiss (ECF No. 11). The Motion is fully briefed and ripe for disposition. No hearing is necessary. See Local Rule 105.6 (D.Md. 2016). For the reasons outlined below, the Court will grant the Motion.

         I. BACKGROUND

         A. Factual Background

         1. Loan Modification Attempts

         On March 30, 2007, the Smiths borrowed $329, 000 from American Home Mortgage as part of a refinance transaction (the “Loan”). (Compl. ¶ 60, ECF No. 2). The Smiths' promissory note was secured by a deed of trust on the residential property located at 929 Creek Park Road, Bel Air, Maryland (the “Property”). (Id. ¶ 59, 60). At some unspecified time, Ocwen became the Loan's servicer. (See Id. ¶ 10).

         The Smiths assert that they applied to modify their loan sometime after April 24, 2014, yet they do not specify the exact date on which they submitted their application to Ocwen. (Id. ¶ 62). Regardless, on May 28, 2014, Ocwen acknowledged receipt of the Smiths' application and indicated that it ordered a valuation report to assess the Smiths' eligibility for various loss mitigation options. (Id.).

         In a letter dated June 3, 2014, Ocwen stated that after evaluating the Loan “for all loss mitigation options available, including, but not limited to, the Home Affordable Modification Program (‘HAMP'), ” Ocwen was unable to offer any relief to the Smiths. (Id.). The letter explained that the financial records the Smiths provided indicated that they had the ability to pay their mortgage using income, cash reserves, or other assets. (Id.).

         Several weeks later, in a letter dated June 27, 2014, the Smiths appealed Ocwen's denial. (Id. ¶ 63). Ocwen responded by letter dated July 3, 2014, explaining that at the time of the initial review, the Smiths' loan was not yet in default and they did not qualify for a proprietary loan modification program “because guidelines established by the investor of [the] loan, Deutsche Bank National Trust Company, state that [the] loan must be in default, or foreseeable default in order to be eligible for a loan modification under any program.” (Id.). Ocwen further stated that due to the incongruity between the expenses considered during the Smiths' modification review and the expenses in the Smiths' HAMP Financial Form, Ocwen would use the “corrected expense calculation” to reevaluate the Loan and determine whether the Loan was eligible for Ocwen's alternative modification program. (Id. ¶ 66). Ocwen concluded by informing the Smiths that Ocwen would make a decision on eligibility within the next fourteen days. (Id.). But Ocwen never contacted the Smiths to communicate a decision. (Id.).

         The parties then exchanged another series of correspondences in July, August, and September 2014. On July 29, Ocwen contacted the Smiths to notify them that they were fifty-eight days delinquent on their mortgage. (Id. ¶ 67). On August 13, the Smiths sent an email to Ocwen, explaining that they had just recently received the July 3 letter and once again appealed Ocwen's denial of a loan modification. (Id. ¶ 68). In their email, the Smiths “provided numerical proof that [Ocwen's] calculations establishing any basis for denial involved incorrect figures and flawed accounting.” (Id.). The Smiths also disputed that they were two months late on their mortgage. (Id.).

         On August 14, Ocwen responded to the Smiths' August 13 email, stating that based on the Smiths' request, Ocwen would send the Smiths the “HAMP Escalated Case Dispute Resolution Letter” (“HAMP Letter”). (Id. ¶ 69). But Ocwen never sent the HAMP Letter. (Id.). Then, on September 10, 2014, Ocwen issued another letter, stating, “We are unable to offer you a proprietary modification because: You failed to make the initial trial payment within the required timeframe.” (Id. ¶ 70). The Smiths were “baffled” because they did not think they had entered into a loan modification arrangement with Ocwen.[1] (Id.)

         On September 27, the Smiths responded to the September 10 letter with a final request that Ocwen reconsider their application. (Id. ¶ 71). The Smiths urged Ocwen to “use correct and generally-accepted mathematical principles” and “to refer to [Consumer Financial Protection Bureau] guidelines and act accordingly thereto.” (Id.).

         Then, at some unspecified time, the Smiths sent Ocwen another loan modification application. (Id. ¶ 72). Ocwen responded on February 18, 2015 with a letter that was nearly identical to Ocwen's May 28, 2014 letter in response to the Smiths' initial loan modification application. (Id.). Ocwen also sent an April 24, 2015 correspondence stating, “We sent you an earlier letter outlining assistance options . . . . Since that time a foreclosure action has been initiated on [your property]. But even though the foreclosure process has begun, you may still have foreclosure prevention alternatives available - BUT YOU SHOULD ACT QUICKLY!” (Id. ¶ 73). The Smiths allege that Ocwen's February 18, 2015 letter was “some kind of generic form letter that did not deal specifically with [the Smiths'] situation.” (Id.).

         2. Debt Collection and Validation Communications

         On May 5, 2015, the law firm McCabe, Weisberg & Conway, LLC (the “Firm”) wrote the Smiths to advise that Ocwen retained the Firm in connection with the Smiths' debt. (Id. ¶ 74).[2] The Firm's letter stated that the Firm was attempting to collect a debt and that the debt was $454, 961.52 -- an amount the Smiths allege is “unverified and unsubstantiated.” (Id.). Shortly thereafter, on May 8, 2015, the Firm sent the Smiths a “Notice of Intent to Foreclose, ” stating that the Smiths' loan went into default on June 2, 2014 and the total amount required to cure the default was $36, 832.62. (Id. ¶ 75).[3]

         On June 4, 2015 the Smiths requested that the Firm validate and verify their debt and provide proof of ownership of the promissory note underlying the loan. (Id. ¶ 77). Ocwen responded on June 30, 2015 with a “Reinstatement Quote” reflecting that the total amount due to reinstate the loan was $39, 483.08. (Id. ¶ 76). Less than three weeks later, on July 17, 2015, Ocwen notified the Smiths that the foreclosure proceedings were on hold. (Id. ¶ 78). Then, on July 20, 2015, the Firm again contacted the Smiths, this time advising that it had verified the debt and providing a copy of the assignment of mortgage evidencing a transfer to Ocwen. (Id. ¶¶ 79, 94).

         On August 12, 2015, the Smiths responded to the Firm's July 20 letter with a correspondence captioned “NOTICE OF INSUFFICIENT VALIDATION/VERIFICATION OF DEBT, ” in which the Smiths asserted that neither the Firm nor Ocwen had properly validated or verified the debt. (Id. ¶ 80). The Smiths allege Ocwen did not properly verify the Smiths' debt because the “loan transaction history report” Ocwen prepared was “hastily and amateurishly assembled” and it “did not accurately or even chronologically reflect ledger values.” (Id.). On September 1, 2015, Ocwen responded with a letter stating, “The Validation of Debt remains unchanged and a copy of the closing documentation is enclosed.” (Id. ¶ 81). The Smiths do not allege whether the Firm ever finalized a foreclosure.

         B. Procedural Background

         On January 11, 2016, the Smiths commenced this action in the Circuit Court for Harford County, Maryland. (Compl.). Ocwen removed the case to this Court on February 22, 2016. (ECF No. 1). The Smiths assert Ocwen violated the following regulations and statutes: (1) 12 C.F.R. § 1024.41, a federal regulation under the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. §§ 2601, et seq. (Count I); (2) the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. §§ 1692, et seq. (Count II); (3) the Consumer Financial Protection Act of 2010 (“CFPA”), 12 U.S.C. §§ 5481, 5564 (Count III);[4] and (4) the Maryland Consumer Protection Act (“MCPA”), Md. Code Ann., Com. Law §§ 13-301 et seq. (West 2016) (Count IV). (Compl. ¶¶ 96- 124). The Smiths seek injunctive relief, monetary damages, and attorneys' fees and costs.

         Ocwen moved to dismiss on March 25, 2016. (ECF No. 11). The Smiths responded in opposition on May 19, 2016 (ECF No. 18), and ...

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