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Lindsay v. Rushmore Loan Management Services, LLC

United States District Court, D. Maryland, Southern Division

April 4, 2017

STERLING LINDSAY, et al., Plaintiffs,



         After Plaintiffs Sterling Lindsay and Rachel Lindsay (collectively, the “Lindsays”) stopped making payments on their mortgage loan, Defendant Rushmore Loan Management Services, LLC (“Rushmore”) tried, without success, to collect on the debt. Rushmore ultimately initiated proceedings in state court[1] to foreclose on 2507 Monroe Court, Waldorf, Maryland 20603 (the “Property”), the Lindsays' real property purchased with the proceeds of the loan. In this action, the Lindsays allege that, in its debt collection efforts, Rushmore violated the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2601 et seq.; the Fair Debt Collection Practice Act (“FDCPA”), 15 U.S.C. § 1692a; and the Maryland Consumer Debt Collection Act (“MCDCA”), Md. Code § 14-201 et seq. ECF No. 10.[2] Rushmore moved to dismiss for failure to state a claim and based on the Younger abstention doctrine, see Younger v. Harris, 401 U.S. 37 (1971), but I denied both motions. ECF Nos. 18, 53.

         Now pending is Rushmore's Motion for Summary Judgment, ECF No. 46, which the parties fully briefed, ECF Nos. 46-4, 47, 47-3, 48. The parties also filed executive summaries, ECF Nos. 46-1, 47-1, and a Joint Statement of Facts, ECF No. 46-3, as well as voluminous exhibits, ECF No. 47-5. A hearing is unnecessary. See Loc. R. 105.6.

         There is no genuine dispute that the Lindsays submitted a complete loan modification application by May 2014. Therefore, Rushmore did not violate RESPA with regard to the Lindsays' later loss mitigation applications, because it was not required to comply with the loss mitigation procedures for any of Plaintiffs' loss mitigation applications submitted after the May, 2014 complete application. Additionally, a statute of limitations bars Plaintiffs' FDCPA claims. Also, the Lindsays cannot succeed on their MCDCA claim because, in part, they challenge the validity of the debt, which is not permissible under the statute, and to the extent that they challenge the amount rather than the validity, they cannot show that the amount in excess of what they believed they owed was an unauthorized type of charge, as a MCDCA claim requires. Finally, the Lindsays cannot succeed on their RESPA claim regarding Rushmore's allegedly delayed response to their inquiry about their debt because Plaintiffs have not provided any evidence that Rushmore's failure to provide a timely response caused damages. Accordingly, I will grant Rushmore's Motion as to all counts.

         Standard of Review

         Summary judgment is proper when the moving party demonstrates, through “particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations . . ., admissions, interrogatory answers, or other materials, ” that “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a), (c)(1)(A); see Baldwin v. City of Greensboro, 714 F.3d 828, 833 (4th Cir. 2013). If the party seeking summary judgment demonstrates that there is no evidence to support the nonmoving party's case, the burden shifts to the nonmoving party to identify evidence that shows that a genuine dispute exists as to material facts. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585-87 & n.10 (1986). The existence of only a “scintilla of evidence” is not enough to defeat a motion for summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986). Instead, the evidentiary materials submitted must show facts from which the finder of fact reasonably could find for the party opposing summary judgment. Id.

         Count I: Violations of RESPA

         The Lindsays stopped making mortgage payments in 2009 due to “Mr. Lindsay's loss of income.”[3] Jt. Stmt. of Facts ¶ 5. Although they claim that they brought their loan current in April 2012, Am. Compl. ¶¶ 51-53, 58, they concede that they again stopped making payments in 2013 or 2014, Jt. Stmt. of Facts ¶ 10. Thus, in December 2013, they found themselves in default and unable to pay the amount necessary to cure the default, which the parties agree was at least $57, 000. Jt. Stmt. of Facts ¶¶ 7-9. They submitted two “Home Retention Packages” in late 2013 and early 2014, but Rushmore informed them that both were incomplete. Id. ¶¶ 12, 14.

         A few months later, in April 2014, the Lindsays submitted another incomplete loan modification application; Rushmore notified them that it, too, was incomplete, and they submitted the missing documents, such that, by May 29, 2014, they had “submitted a complete and full package to Rushmore for review.” Jt. Stmt. of Facts ¶¶ 16-19. Rushmore denied the application on May 29, 2014. Id. ¶ 20. Despite agreeing to the Joint Statement of Facts and that they had submitted what they believed to be a complete loan application, the Lindsays now “dispute that Rushmore ever deemed this application complete, ” given that Rushmore never notified them that it was complete, and because it was then denied (in Plaintiffs' view) for failure to submit a sufficient down payment. Pls.' Opp'n 2.

         The Lindsays submitted yet another loan modification application to Rushmore later that year, and Rushmore acknowledged receipt in a letter dated December 3, 2014. Jt. Stmt. of Facts ¶ 21. Rushmore denied this loan modification application on January 15, 2015, “because a complete package was not received more than 37 days before the Foreclosure Sale.” Id. ¶ 22. Finally, the Lindsays “submitted a package for short sale review on February 19, 2015, ” on which Rushmore failed to render a decision within thirty days. Am. Compl. ¶¶ 97-98; see Def.'s Mem. 7.

         In Count I, the Lindsays claim that Rushmore violated RESPA's dual-tracking provision, 12 C.F.R. § 1024.41(g), by scheduling a foreclosure sale for February 5, 2017, even though Plaintiffs contend that they had submitted a complete loan modification application on December 17, 2014. Am. Compl. ¶¶ 83, 86-88. The Lindsays assert that, if the application were incomplete, “Rushmore failed to send the notice of incomplete application within five (5) days of receipt of Plaintiffs' application, as required by 12 C.F. R. § 1024.41(b)(2)(i)(B).” Id. ¶ 93. Plaintiffs also allege that “Rushmore further violated RESPA Regulation X by referring Plaintiff's loan to foreclosure after loss mitigation had begun and the modification review was in Process.” Id. ¶ 96. Additionally, they allege that, pursuant to 12 C.F.R. § 1024.41(c), “Rushmore was required to render a decision on the short sale application within thirty (30) days, ” but Rushmore failed to do so. Id. ¶¶ 97-98.

         Rushmore argues that it is entitled to summary judgment on Count I because it is undisputed that the Lindsays submitted, and Rushmore reviewed, a complete loan modification application in May 2014, and therefore their later applications for loan modification and short sale “are not subject to RESPA under RESPA's duplicative requests provision.” Def.'s Mem. 5- 6. Rushmore asserts, and the Lindsays do not dispute, that Plaintiffs' loan modification applications, as well as their February 19, 2015 short sale request, constituted loss mitigation application for purposes of 12 C.F.R. § 1024.41. See Id. at 6, 7.

         The Lindsays counter that, although they submitted a complete application in May 2014, “it is unclear whether or not Rushmore deemed the application complete, as it does not appear that Rushmore ever sent Plaintiffs a notice that their application was considered complete or incomplete, as required under 12 C.F.R. § 1024.41(c)(3)(i), ” and therefore their May 2014 application was not “a ‘single complete loss mitigation application, so as to render the December 2014 application a ‘duplicative request' not subject to RESPA's dual tracking provision.” Pls.' Opp'n 6. Noting that Rushmore's reason for its May 29, 2014 denial was that “t[h]e amount of the good faith down payment is insufficient to offer a loan modification, ” the Lindsays insist that Rushmore had asked them for “‘documents' indicating ‘proof of funds for a good faith down payment, '” not for the good faith down payment itself. Id. at 7 (emphasis added). In their view, this creates a genuine dispute “as to whether Rushmore denied this application for being incomplete due to Plaintiffs' failure to submit a down payment.” Id.

         The parties agree about the relevant law, see Def.'s Mem. 5-6, Pls.' Opp'n 6, which is straightforward: “A servicer is only required to comply with the requirements of this section [pertaining to loss mitigation procedures] for a single complete loss mitigation application for a borrower's mortgage loan account.” 12 C.F.R. § 1024.41(i) (emphasis added). The regulation defines “loss mitigation application” as “an oral or written request for a loss mitigation option that is accompanied by any information required by a servicer for evaluation for a loss mitigation option, ” 12 C.F.R. § 1024.31, and “complete loss mitigation application” as “an application in connection with which a servicer has received all the information that the servicer requires from a borrower in evaluating applications for the loss mitigation options available to the borrower, ” 12 C.F.R. § 1024.41(b)(1). If a borrower submits an application that is not complete and fails to complete it “for a significant period of time, ” despite the servicer's “exercise[] [of] reasonable diligence in obtaining documents and information to complete [it], ” and the servicer exercises its discretion to “evaluate [the] incomplete loss mitigation application and offer [the] borrower a loss mitigation option, ” that “evaluation and offer . . . shall not constitute an evaluation of a single complete loss mitigation application for purposes of paragraph (i) of this section.” 12 C.F.R. § 1024.41(c)(2)(ii).[4] Thus, the issue is whether the undisputed facts show that Rushmore received a “complete loss mitigation application” in May 2014.

         With regard to Plaintiffs' assertion that Rushmore failed to comply with 12 C.F.R. § 1024.41(c)(3)(i)'s requirement that, “within 5 days . . . after receiving a borrower's complete loss mitigation application, a servicer shall provide the borrower a written notice that sets forth . . . [t]hat the loss mitigation application is complete, ” I note that § 1024.41(c)(3)(i) does not go into effect until October 19, 2017. Therefore, the regulation does not yet require notice that a loss mitigation application was complete, and Plaintiffs' contention that the five day notice of receipt of a complete loss mitigation application applied to their May 2014 application is without merit. See 12 C.F.R. § 1024.41.

         As for whether the May application was a complete loss mitigation application, the undisputed evidence shows that, after Plaintiffs submitted their April loan modification application, Rushmore requested additional documents including “[p]roof of funds for good faith down payment.” Apr. 8, 2014 Ltr. to Pls., Jt. Rec. 195. Rushmore once again requested additional documents on April 25, 2014; it appears that by that time, Rushmore had received “[p]roof of funds for the down payment, ” because that category was not checked on the list of outstanding items. Apr. 25, 2014 Ltr. to Pls., Jt. Rec. 200-01. On May 29, 2014, Rushmore informed the Lindsays that their “request was carefully considered, ” but Rushmore could not “offer [Plaintiffs] a loan modification at th[at] time” because, even though Rushmore had received “proof of the good faith down payment[, ] . . . [t]he amount of good faith down payment [was] insufficient to offer a loan modification.” May 29, 2014 Ltr. to Pls., Jt. Rec. 205-06.

         Contrary to the Lindsays' assertions, the undisputed evidence clearly shows that they submitted a complete loss mitigation application, including proof that they could make a good faith down payment, and Rushmore regarded their submission as complete when it denied the application. Despite the arguably misleading wording in the denial letter that referred to an “amount of good faith down payment” rather than the amount that Plaintiffs could provide as a good faith down payment, it is illogical to interpret Rushmore's denial to state that Plaintiffs were supposed to, but failed to, provide a good faith down payment, when Rushmore never requested an actual payment.[5] Rather, Rushmore received all of the information it requested and denied the application because Plaintiffs failed in their loan modification application to show that they could provide a sufficient good faith down payment if the application were approved. Thus, there is no genuine dispute that the Lindsays' May 2014 loan modification application was a complete loss mitigation application under 12 C.F.R. § 1024.41(b)(1). Therefore, Rushmore was not required to comply with the loss mitigation procedures of 12 C.F.R. § 1024.41 for any later loss mitigation applications that the Lindsays submitted, such as their later loan modification applications and their short sale request. See 12 C.F.R. § 1024.41(i). Consequently, Rushmore did not violate RESPA with regard to the Lindsays' later loss mitigation applications, and summary judgment in Rushmore's favor on Plaintiffs' RESPA claims in Count I is appropriate. See id.; Fed.R.Civ.P. 56(a).

         Count II: Liability under FDCPA

         On December 11, 2013, Rushmore issued a Notice of Intent to Foreclose (sometimes “Notice”), which stated that the amount required to cure the default was $100, 665.57, and that the creditor was RBS Financial Products, Inc. (“RBS”). Notice, Jt. Rec. 54; see Dec. 11, 2013 Ltr. to Pls., Jt. Rec. 65 (Notice cover letter stating that the “total amount due” was $102, 807.36, but it stated that the total was “less [an] unapplied balance [of] $2, 141.79, ” for an actual total of $100, 665.57). The Lindsays claim that the maximum amount necessary to cure their default at the time of the Notice should have been $57, 242.82 and the actual creditor was Random Properties Acquisition Corp. III (“Random Properties”). Am. Compl. ¶¶ 56-58, 66-68. Rushmore then filed an Order to Docket (sometimes “Order”) on October 7, 2014. Jt. Rec. 1-90. The Lindsays claim that the Order stated that the debt was $115, 081.68, [6] when, according to the Lindsays, it should have been $87, 370.62. Am. Compl. ¶¶ 60-61.

         The Lindsays claim that Rushmore violated the FDCPA by “[f]alsely representing the amount of the debt” in the Notice of Intent to Foreclose and the Order to Docket, in violation of 15 U.S.C. §1692e(2)(A). Am. Compl. ¶ 105(a), (e). They claim that Rushmore also violated the FDCPA by “[m]isleading [Lindsay Sterling] to believe that the amount he paid to Rushmore and the previous loan servicer was incorrect, in violation of 15 U.S.C. §1692e(A) and §1692e(10)”; “[f]alsely representing the creditor in the Notice of Intent to Foreclose, in violation of 15 U.S.C. §1692e(A), §1692e(10), and/or §1692e(14)”; and “[f]ailing to appropriately identify the name of the creditor to whom the debt is owed, in violation of 15 U.S.C. §1692g(a)(2) [in the Notice].” Id. ¶ 105(b)-(d); see Id. ¶¶ 66-68.

         Rushmore argues that the one-year statute of limitations for FDCPA claims bars all of these claims. Def.'s Mem. 8-9. The Lindsays do not dispute Rushmore's assertion that “the FDCPA violations in the December 11, 2013 N[otice] fall outside of the one year limitations period, as Plaintiffs filed their law suit with this Court on April 10, 2015, ” ...

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