United States District Court, D. Maryland, Southern Division
J. HAZEL UNITED STATES DISTRICT JUDGE.
Alfonzo and Sandra Gillis brought this civil action alleging
that Defendants improperly managed Plaintiffs' mortgage
loan over several years including by imposing and collecting
invalid loan charges and failing to respond to or conduct
reasonable investigations related to Plaintiffs' written
inquiries. Pending before the Court are Defendants Caliber
Home Loans, Inc. (Caliber), Household Finance Corporation III
(Household Finance), and Select Portfolio Servicing, Inc.
(SPS)'s Motions to Dismiss. ECF Nos. 15, 16, & 17.
No. hearing is necessary. See Loc. R. 105.6 (D. Md.
2016). For the following reasons, Defendants' Motions to
Dismiss will be granted in part and denied in part.
are owners of 9729 Green Apple Turn, Upper Marlboro, MD 20772
(the Property). ECF No. 1-2 ¶ 8. They have resided in
the Property since March 11, 1988 and continue to reside
there. Id. ¶ 17. In March 2007, Plaintiffs
refinanced their home mortgage loan, which at the time was
serviced by Defendant Household Finance. Id. ¶
18. At the time of the refinance and continuing thereafter,
Plaintiffs paid their property taxes and homeowners'
insurance separately from their mortgage loan except for the
taxes and insurance owed in 2014, which Household Finance
paid on Plaintiffs' behalf, but which Plaintiffs repaid
to Household Finance. Id. ¶ 19.
2010, Mr. Gillis experienced congestive heart failure, which
forced him to retire early. Id. ¶ 20. Early
retirement reduced Plaintiffs' income by 60%, and they
began to struggle to make their loan payments. Id.
To mitigate their situation, Plaintiffs made several attempts
to modify their mortgage. Id. ¶¶ 20-21.
Despite Plaintiffs efforts, Household Finance offered only
short-term forbearance plans, which temporarily alleviated
Plaintiffs' financial pressures. Id.
long-term economic stress continued, and in December 2014,
Mrs. Gillis again spoke to an Household Finance
representative about obtaining a loan modification.
Id. ¶ 22. On March 13, 2015, Plaintiffs learned
that they had apparently been approved for a loan
modification, but a Household Finance representative informed
Plaintiffs that to accept the modification they needed to pay
a sum of $976.26 as well as a $15 processing fee.
Id. Mrs. Gillis responded that she would contact the
representative in a few days once she had discussed the
agreement with her husband. Id.
March 17, 2015, Plaintiffs attempted to call the Household
Finance representative to accept the modification and to make
the first payment. Id. ¶ 23. However, the
representative did not answer and did not return any messages
left by the Plaintiffs that day or over the next several
days. Id. Despite not receiving any written
confirmation from Plaintiffs, Household Finance drafted
$991.26 from Plaintiffs' bank account on March 20, 2015.
eventually contacted a different Household Finance
representative on March 24, 2015. Id. ¶ 24. The
representative told them that there were “no notes in
the system” regarding their prior conversations or the
modification. Id. Later that day, the original
Household Finance representative told Plaintiffs that she had
made an error, that Plaintiffs were not approved for a
modification after all, and that their “modification
payment” would be applied to their account.
Id. The representative suggested that Plaintiffs
restart the process of applying for a modification.
Id. Plaintiffs did so, submitting a new modification
application two days later. Id. ¶ 26.
April 21, 2015 and April 23, 2015, Plaintiffs received
conflicting letters from Household Finance. Id.
¶ 27. One letter was a written denial of their loss
mitigation application while another acknowledged a
“repayment agreement and loss mitigation.”
Id. ¶ 27. Plaintiffs relied on the repayment
plan by making all the required payments, including a $1,
676.56 payment on April 24, 2015, a $2, 668 payment on May
11, 2015, and a $2, 960.34 payment on June 8, 2015.
also contacted a Household Finance representative to seek
clarification on the proposed repayment plan. Id.
¶ 28. The representative described to Plaintiffs how
Household Finance anticipated applying the repayments and
indicated that a portion of the purported past due balance in
the amount of $3, 656.49 on Plaintiffs' loan consisted of
“uncollected fees.” Id. ¶ 28. When
Plaintiffs asked what these fees consisted of, the
representative initially said they were arrearage tax
payments fronted by Household Finance. However, after
Plaintiffs explained that they had paid the Property's
taxes, the representative indicated that the
“uncollected fees” were past due late charges,
which had accrued prior to the Plaintiffs' 2007
refinance. Yet Plaintiffs' pre-2007 loan had been fully
paid and discharged in the refinance. Id. ¶ 29
(citing the land records for Prince George's County at
Book 27974, Page 459). Plaintiffs therefore contacted
Household Finance to verify that the representations
regarding the purported “uncollected fees” were
accurate. Id. ¶ 29. On May 18, 2015, an
authorized Household Finance representative, the manager of
customer disputes, responded to Plaintiffs by confirming what
they had previously learned with the following:
You established this mortgage with Household Finance on March
19, 2007. We have enclosed a copy of the Loan Repayment and
Security Agreement for your review. We have confirmed that
you were not informed that the current fee balances were on
record when Household Finance acquired the loan. Please be
advised that there are two types of fee balances on the
account. The first is for late fees, which has a current
balance of $3, 611.50. The second is for corporate advances,
which represents funds Household Finance has advanced your
behalf for delinquent property taxes, which has a current
balance of $6, 892.67.
understood this response to be an admission by Household
Finance that the purported late fees were from their
pre-2007-refiance loan, that Plaintiffs had not been informed
that these costs would be added to the refinanced loan, and
that Household Finance would fix its admitted error.
Id. ¶ 31. Plaintiffs continued to make payments
on their loan and repayment plan and confirmed that their
account was paid and current through September 2015.
Id. Plaintiffs continued making their timely
payments for each month thereafter, believing that these
payments were being applied to their loan principal.
Id. ¶¶ 31, 34.
November 19, 2015, Household Finance notified Plaintiffs that
it intended to transfer their loan servicing to Defendant
Caliber effective December 8, 2015. Id. ¶ 32.
Having finally succeeded in bringing their loan up to date,
Plaintiffs contacted Caliber immediately upon receiving this
notice to make sure that they understood where to make their
payments and to ensure a smooth transition. Id.
Although Plaintiffs believed that any uncollected-fee issues
leftover from before their 2007 refinance had been resolved
by Household Finance, Household Finance represented to
Caliber that at the time of the servicing transfer,
Plaintiffs had an “uncollected late charge” in
the amount of $3, 656.49. Id. ¶ 33. Therefore,
unbeknownst to Plaintiffs, the loan continued to be
inappropriately infected by sums from a prior loan even
though that loan had been completely satisfied more than
three years prior. Id.
the servicing transfer to Caliber, Plaintiffs continued to
make timely payments. Id. ¶ 35. However, they
noticed that Caliber was applying portions of their payments
to purported uncollected late charges. Id. To seek
clarification, Mrs. Gillis contacted Caliber on April 7, 2016
and spoke with an authorized representative to (i) learn why
Caliber was assessing a fee its predecessor had admitted it
had no right to collect; and (ii) to obtain a payment
history. Caliber's authorized representative was unable
to answer Mrs. Gillis's questions, and only responded by
stating that Household Finance had modified the loan on May
17, 2010 even though Household Finance had not modified
Plaintiffs' loan in 2010. Id. ¶ 36. Mrs.
Gillis requested that Caliber send her a copy of the
purported modification agreement and an accounting of her
payment history; however, Caliber never sent her either
November 9, 2016, Caliber informed Plaintiffs that it would
be transferring the loan servicing to Defendant SPS effective
December 1, 2016. Id. Caliber relayed to SPS that
Plaintiffs owed $2, 892.51 in “uncollected late
charges.” Id. Caliber also told SPS that it
had expended $4, 884.79 in lender-paid advances even though
Plaintiffs did not have an escrow account set up with Caliber
and had instead paid their property taxes and insurance
separate from their mortgage. Id. In light of these
representations, SPS believed the loan to be in default at
the time the servicing transferred to it from Caliber.
December 27, 2016, Plaintiffs received their first monthly
statement from SPS. Id. ¶ 41. Plaintiffs
learned SPS was continuing to charge the fees associated with
the pre-2007 loan. Id. Further, SPS had added $27,
362.37 to the Plaintiffs' loan, which it labeled
“deferred principal.” Id. None of
Plaintiffs' statements from Caliber or Household Finance
indicated that there were any deferred sums owed on the loan,
so Mrs. Gillis contacted SPS on December 27, 2016 to clarify
the monthly statement and was told that SPS would research
the matter and send her a response. Id. After not
receiving a response, Mrs. Gillis followed up with SPS for a
complete accounting of the loan; however, on March 6, 2017,
SPS responded that it was “unable to fulfill”
Plaintiffs “inquiry for documentation.”
Gillis contacted SPS several more times for clarification
regarding what SPS claimed Plaintiffs owed, and why it
arrived at that conclusion. Id. at 43. On January
13, 2017, Mrs. Gillis spoke with Jeannie Ford who represented
that $27, 000 had been added to the loan in 2010 as
“deferred principal resulting from a
modification” even though Plaintiffs had not received a
modification. Id. On January 21, 2017, Mrs. Gillis
spoke with Kevin who could not provide Plaintiffs with an
explanation for the fees being charged by SPS and informed
Plaintiffs that there was a 16-day grace period for them to
make payments on the loan. Id.
February 9, 2017, SPS sent Plaintiffs a notice of interest
rate change for the upcoming year. Id. ¶ 45.
The notice indicated that the interest rate would remain the
same, and, as had been the case with prior servicers, there
would not be any escrowed funds for taxes or insurance.
Id. Plaintiffs therefore continued to pay the
property taxes and homeowners' insurance owed on the loan
separately from the mortgage. Id. But on April 28,
2017, SPS sent Plaintiffs a notice of delinquent property
taxes. Id. ¶ 46. Fearful that their home could
be auctioned at a tax sale without their knowledge,
Plaintiffs relied upon SPS's representations and
immediately contacted the Prince George's County Office
of Finance to determine their status; no tax payment was due
because Plaintiffs had already paid the tax assessment, and
there were no past-due or delinquent taxes owed on their
account. Id. ¶ 47. Plaintiffs further inquired
from the Office of Finance whether the prior servicer,
Caliber, had ever made a payment towards the property taxes
and were informed that it had not. Id. In further
reliance upon SPS's representations, on May 5, 2017,
Plaintiffs contacted SPS to clarify that no tax payment was
due. Id. ¶ 48.
3, 2017, SPS sent another notice to Plaintiffs informing them
that it intended to begin collecting escrow for taxes and
insurance on the Property even though Plaintiffs were paying
for taxes and insurance separate from their mortgage and were
current on these payments. Id. SPS also wrote that
Plaintiffs' loan had a negative escrow advance balance of
$4, 733.82 from prior servicers, which it intended to
collect. Id. Confused by this accounting and not
wanting to pay sums not owed, Plaintiffs contacted SPS on May
8, 2017 to request an itemization of how and when the $4,
733.82 had purportedly accrued. Id. ¶ 50.
SPS's authorized representative told Plaintiffs that
Caliber had submitted that sum to the Prince George's
County Treasurer. Id. In light of her prior
conversation with the Finance Office, Mrs. Gillis further
requested to know the date that purported payment had been
made, but SPS's representative responded that she was
“unable to disclose that information” and that
she could not find any records related to the payment.
Id. Mrs. Gillis requested that SPS research and send
her a copy of the purported payment. Id.
2, 2017, SPS sent Plaintiffs a letter informing them that it
needed an additional 30-45 days to complete its research into
her request. Id. ¶ 51. Days earlier though, on
May 30, 2017, SPS had sent Plaintiffs a second notice of
delinquent property taxes. Id. ¶ 52. In
reliance on this correspondence, on June 5, 2017, Mrs. Gillis
called SPS and verified once again to an SPS representative
that the property taxes were current. Id. ¶ 53.
The representative acknowledged that the March 31, 2017
property tax payment was verified and told Mrs. Gillis that
she did not need to take any further actions. Id.
Since she had not heard any further from SPS regarding her
research request, Mrs. Gillis further inquired about the
purported $4, 733.82 negative escrow balance. Id.
The representative responded that the sum might be related to
property insurance rather than taxes, and that she should
speak to the insurance department. Id. Mrs. Gillis
called SPS's insurance department that same day and a
representative informed her that there were no issues
regarding Plaintiffs' insurance policy. Id.
¶ 54. She was transferred to a service representative
who informed her that SPS was still researching the purported
negative escrow balance, and that Plaintiffs should pay the
higher monthly payment while SPS continued to research.
that SPS continued to ignore her inquiries while
simultaneously adding unexplained fees and charges to her
mortgage account, Mrs. Gillis wrote to SPS on June 5, 2017,
using the address designated for qualified written requests
(QWRs) reiterating what she had explained to SPS's
representatives on multiple occasions: (i) that
Plaintiffs' loan had never included an escrow account;
(ii) that the property taxes and homeowners' insurance
were current; (iii) that her loan had not been modified in
2010; and (iv) she did not owe an escrow balance or late
fees. Id. ¶ 55. Mrs. Gillis sent a copy of the
SPS QWR to the Consumer Financial Protection Bureau on June
26, 2017, and Plaintiffs filed a complaint with the CFPB
against Caliber on the same date. Id. ¶ 56.
21, 2017, SPS sent Plaintiffs a notice that it intended to
impose retroactive insurance on the Property from May 2, 2017
through May 30, 2017 and requested that Plaintiffs sign and
return a document to establish an escrow account going
forward. Id. ¶ 57. Plaintiffs elected not to
entrust SPS with even more funds, instead deciding they would
continue to pay their taxes and insurance separately.
5, 2017, SPS responded to Plaintiffs' inquiries regarding
their account by claiming Caliber believed that Household
Finance had paid property taxes in 2013, 2014, and part of
2015, that Plaintiffs owed a late fee balance of $2, 892.51
at the time the servicing transferred to SPS, and that SPS
determined that this balance was valid. Id. ¶
58. SPS further included an inaccurate transaction history
from Caliber, which included purported loan transactions
dating back to 2007, before Caliber had begun servicing the
loan. Id. The transaction history included a
purported payoff statement concerning the amount needed to
satisfy the loan as well as a purported escrow disbursement
history, which contained just one transaction. Id.
Despite Plaintiffs' prior communications with SPS
regarding inaccuracies, the payoff statement included the
“deferred interest” that SPS had added when it
began servicing Plaintiffs' loan as well as the
unexplained negative escrow balance. Id. The payoff
statement also included interest on the purposed escrow
advances even though Plaintiffs had explained several times
that they had no escrow account associated with their loan.
Id. The payoff statement also claimed that
Plaintiffs owed $2, 711 in “late charges
outstanding”-the fees purportedly associated with the
pre-2007 loan. Id.
the deficiencies in SPS's response, Plaintiffs sent
another letter to SPS on July 19, 2017 at the address
designated for QWRs. Id. ¶ 62. Plaintiffs
requested that SPS provide them with (i) all documents
received from Caliber (ii) all documents related to the
purchase and owner of their loan; (iii) any documents related
to any loss mitigation application or decision; (iv) all
audio recordings made related to the loan; and (v) a complete
account of the loan, including a complete accounting of the
escrow account. Id. On July 28, 2017, SPS partially
responded to Plaintiffs' request by sending them another
payoff statement. Id. ¶ 66. The payoff
statement included the same inaccurate details that SPS had
previously provided. Id.
August 16, 2017, SPS further responded by providing
Plaintiffs with the date of the servicing transfer and the
name of the loan's owner. Id. ¶ 67. SPS
also informed Plaintiffs that the purported escrow deficiency
was because although their account was not escrowed, SPS was
collecting for an escrow advance balance transferred from
Caliber for tax advances made by the prior servicer.
Id. SPS also included a printout of Plaintiffs'
servicing history, which indicated that as of August 16,
2017, SPS had collected $55 in ...