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Robinson v. Nationstar Mortgage LLC

United States District Court, D. Maryland

September 9, 2019




         Plaintiffs Demetrius and Tamara Robinson (the "Robinsons") have resided in a home in Damascus, Maryland that has been subject to a mortgage loan. After attempts to modify the loan failed, the Robinsons filed a class action Complaint against Defendant Nationstar Mortgage, LLC ("Nationstar") for alleged violations of the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. §§ 2601-2617 (2012), specifically RESPA's implementing regulations known as "Regulation X," 12 C.F.R. § 1024.41 (2019), and the Maryland Consumer Protection Act ("MCPA"), Md. Code Ann., Com. Law §§ 13-101 to 13-411 (West 2015). Presently pending is Nationstar's Motion for Summary Judgment, Nationstar's Motion to Strike, and the Robinsons' Motion for Class Certification. The Motions are fully briefed, and no hearing is necessary to resolve the issues. See D. Md. Local R. 105.6. For the following reasons, the Motion for Summary Judgment will be GRANTED IN PART and DENIED IN PART; the Motion to Strike will be DENIED; and the Motion for Class Certification will be GRANTED IN PART and DENIED IN PART.


         Relevant factual and procedural background is set forth in the Court's prior Memorandum Opinion granting in part and denying in part Nationstar's partial Motion to Dismiss. See Robinson v. Nationstar Mortg. LLC, No. 14-3667, 2015 WL 4994491, at *1-2 (D. Md. Aug. 19, 2015). Additional facts relevant to the pending motions are set forth below.

         I. Motion for Summary Judgment

         The Robinsons own a business called Green Earth Services, which provides waste and recycling services to clients. They have a home in Damascus, Maryland purchased by Demetrius Robinson ("Mr. Robinson"). In 2007, Mr. Robinson obtained a loan with the principal amount of $755, 000 to refinance the property. While Mr. Robinson signed the promissory note ("the Note"), the deed of trust ("the Deed"), and the balloon payment rider for the 2007 loan, Tamara Robinson ("Mrs. Robinson") signed only the Deed and balloon payment rider and did not sign the Note. Nationstar ultimately became the servicer of the Robinsons' loan.

         After several customers of Green Earth Services canceled its services, the Robinsons sought loss mitigation in the form of a loan modification from Nationstar. Between July 2010 and November 2013, the Robinsons submitted and Nationstar denied three applications for a loan modification under the Home Affordable Modification Program ("HAMP"). The denial letters stated that the loan's principal balance exceeded the limit under HAMP. As to the third denial on November 7, 2013, Nationstar informed the Robinsons that the loan modification application was denied because the mortgage loan was not in default.

         During this period, in August 2013, the Robinsons retained a forensic loan auditor, Professional Compliance Examiners ("PaCE"), and paid it $2, 275 to help them communicate with Nationstar. In February 2014, after their income had further decreased, the Robinsons ceased making payments on the mortgage loan. After this missed payment, Nationstar assessed a late fee.

         After they became delinquent on their loan, the Robinsons submitted another loan modification application to Nationstar on March 7, 2014. When Nationstar received the application, it prevented late fees from being assessed and put a hold on any foreclosure proceedings. However, Nationstar did not comply with all requirements of Regulation X, which became effective on January 10, 2014. At the time, Nationstar had not completed the process of updating its systems to conform to those requirements. Accordingly, Nationstar did not send the Robinsons an acknowledgment letter within five days stating that it had received the application, as required by Regulation X.

         On March 8, 2014, Nationstar sent to Mr. Robinson a letter stating that he was ineligible for a HAMP modification, but on March 15, 2014, it sent a different letter offering a loan modification under which Mr. Robinson would receive a reduced interest rate for two years. In approving such a modification, Nationstar made a mistake: the underwriter working on the Robinsons' loan had erroneously double-counted their income. Before the error was discovered, Mr. Robinson appealed this offer as insufficient on April 10, 2014.

         The Robinsons and Nationstar then engaged in a series of tortured exchanges over the next several months. Mrs. Robinson was the primary point of contact for the Robinsons in interacting with Nationstar. Although she has worked as a bookkeeper for various companies, she was not employed between March and September 2014. On May 5, 2014, Nationstar asked the Robinsons for additional information to evaluate the appeal, including documents to verify their income. In response, on May 30, 2014, Mr. Robinson sent Nationstar the exact same application that he had submitted on March 7, 2014. On July 17, 2014, Nationstar informed Mr. Robinson by letter that he did not qualify for a HAMP modification and that since the March 14 loan modification offer had not been accepted, it was withdrawn.

         Mr. Robinson then submitted another loan modification application on August 25, 2014. The next day, Nationstar sent a letter noting that the August 25 application had been received and requesting additional information. On September 9, 2014, Nationstar sent Mr. Robinson a letter denying the loan modification application and stating that it could not offer him any modification because his income was not high enough to cover the mortgage payments under any modification option. During this time and up until September 25, 2017, Nationstar had not begun any foreclosure proceedings on the Robinsons' home. The Robinsons have not made any mortgage payments since January 2014 and have not been assessed any late fees since February 2014. From January 2014 to the present, the Robinsons have not pursued other loss mitigation options, such as a short sale.

         The Robinsons assert that they have paid a total of $6, 147.12 in unspecified fees to Nationstar. In addition to the fee paid to PaCE, the Robinsons also assert as damages $50.58 in administrative costs, specifically postage fees for sending information relating to their loan modification application to Nationstar, and 120 hours of time expended on the loan modification process. The Robinsons also claim as damages interest overcharges of approximately $141, 000.

         II. Motion for Class Certification

         A. Procedural History

         Before relating the facts relevant to the Motion for Class Certification, the Court will highlight the relevant procedural history affecting the record before the Court. A Scheduling Order was first entered on November 24, 2015, and the period for discovery was extended four times between November 2015 and January 2017. On February 16, 2017, the Court referred the case to United States Magistrate Judge Charles B. Day to address discovery issues. On June 16, 2017, the Magistrate Judge bifurcated discovery to focus initially on the merits of the Robinsons' individual claim and the question of class certification, ordered Nationstar to disclose electronic records so that the Robinsons could sample Nationstar's data for purposes of a motion for class certification, and limited the discovery of such records to a sample of 400 loans from the period from January 10, 2014 to June 30, 2014 and "to areas which inform" the Court's decision on class certification, namely whether Nationstar was in compliance with Regulation X. Mot. Class Certif. Joint Record ("MCC JR") 0907. After two more extensions were granted, based on a finding by the Magistrate Judge that "Defendant has failed to comply" with its discovery obligations and delayed the process, discovery closed on March 22, 2018. Order, ECF No. 125.

         Throughout discovery, Nationstar repeatedly stated that it could not produce the data on loss mitigation or loan modification applications from its databases in the form requested by the Robinsons. As a result, on January 29, 2018, the Magistrate Judge granted the Robinsons' Motion to Compel in which the Robinsons had sought to have the Court order Nationstar to accept and run scripts created by the Robinsons' expert to extract the relevant data from Nationstar's databases on the sample of loans from which they could test their methodology for identifying members of the proposed classes. The Robinsons' expert had written the scripts using data dictionaries and without accessing the databases. The Magistrate Judge ordered Nationstar to run those scripts and return the electronic data to the Robinsons. When those scripts did not produce data that allowed the Robinsons to conduct the sampling, the Magistrate Judge ordered Nationstar on April 3, 2018 to run certain "structural scripts" on two of its four databases. Discovery Order, ECF No. 143. The Robinsons appealed the Magistrate Judge's ruling because it did not require Nationstar to run a structural script for a third database. On July 16, 2018, the Court affirmed the Magistrate Judge's ruling and required Nationstar to produce all outstanding "records subject to discovery orders." Order at 2, ECF No. 164. After an additional period of expert discovery relating to the class certification motion, discovery closed on December 30, 2018.

         B. Nationstar Tracking Systems

         Nationstar employees use four software applications and databases to store and track electronic information relating to loans: (1) Loan Services and Accounting Management System ("LSAMS"), Nationstar's primary loan servicing software, which contains data for loans, including the permanent records of the accounting history, communication logs, and letters documented with codes that were sent to the borrower; (2) Remedy Star, Nationstar's proprietary loss mitigation and loan modification management system, which, among other tasks, tracks the status and timeline of a loan modification and links to documents stored in FileNet; (3) LPS Desktop ("LPS"), an application which Nationstar uses to track and manage foreclosure processes and communicate with outside attorneys; and (4) FileNet, a platform that houses PDF images of documents, including letters sent to borrowers by Nationstar. Every mortgage has a unique loan number that can be used to identify the borrower and the loan in each of the four databases.

         At different stages in the processing of a loan modification application, Nationstar employees enter certain codes into certain databases, and certain information can be stored and accessed through those applications. According to Nationstar's Underwriting Workflow Procedures, which sets forth the steps followed to review loans for modifications, when a borrower submits a loan modification application, a code is entered into LSAMS and updates the loan's substatus in Remedy Star. A letter noting receipt of the application is automatically generated and sent to the borrower, and a Nationstar employee checks the application's documentation to determine if it is complete based on a checklist. Whether an application is complete depends on the requirements of the investor who holds the loan. If the initial application is complete, the substatus in Remedy Star is changed to refer the application to an underwriter for review, and an additional code is added in LSAMS. A code is also added to LSAMS to put a hold on foreclosure proceedings. If the initial application is not complete, a different Remedy Star substatus notation and LSAMS code are entered, and a letter is created and sent to the borrower asking for the required documents. A code is entered in Remedy Star when the letter is sent. These letters are based on standard Nationstar templates, and the code reflects the type of letter sent.

         Once an underwriter is assigned, that employee double-checks whether the application contains all required documentation and is complete. If more documents are required, then the same Remedy Star substatus and LSAMS code that denote missing documents are entered. Once the documents are received, the Remedy Star substatus and LSAMS code are changed again to mark the application complete. The loan is then evaluated for loan modification options. If the application is denied, a notice to that effect is sent to the borrower. When each event occurs- either the mailing of a letter or the changing of a code or substatus-the date is recorded in the databases.

         C. Class Methodology

         The Robinsons' designated expert, Geoffrey Oliver, has offered a methodology for identifying class members and when their rights under RESPA and the MCPA have been violated. Oliver is the Chief Executive Officer of Hilltop Advisors LLC, a financial services consulting, compliance audit, and accounting advisory firm, and has extensive experience conducting compliance reviews for mortgage servicers, including for compliance with loss mitigation procedures. He was retained by the Robinsons under an arrangement through which he is to be paid a flat fee of $125, 000: $62, 500 up front, with an additional $62, 500 to be paid if a class is certified in this case. To prepare his expert report, Oliver reviewed a randomly selected sample of 400 loans serviced by Nationstar in which a loan modification application was submitted.

         For the claims that rely on the timing of a response, Oliver and the Robinsons propose using changes in the Remedy Star substatus or LSAMS codes and documents stored in FileNet to identify the date a loan modification application was received or marked as complete, to identify the date a response was sent, and to count the number of days between events. According to Oliver, to determine that certain disclosures or specific information were conveyed to borrowers, the "object_id" field used in FileNet can be used to identify the type of letter sent. Furthermore, Oliver states that since Nationstar employees used templates to communicate with borrowers, he could determine whether there were violations of certain RESPA provisions based on entries showing that Nationstar employees used templates that did not comply with RESPA. He asserts that damages to borrowers can be calculated based on entries in LSAMS and other data showing that fees were assessed, and that it would be possible to identify which fees would not have been assessed but for a RESPA violation.

         Because of the manner in which class discovery was conducted, see supra part II.A, Oliver did not have access to all of Nationstar's data fields for the representative sample of loans. Instead, he analyzed certain data fields that were returned by the scripts written by a different expert. According to Oliver, if he used incorrect data, that was a result of the limited data fields and definitions provided to him. Based on his experience and review of deposition transcripts of Nationstar employees, Oliver asserts that Nationstar has computerized data from which RESPA violations may be identified, not least because Nationstar must be able to demonstrate its compliance with RESPA to regulators.

         In contrast, Nationstar maintains that there is no way to reliably identify when a loss mitigation application is submitted or complete using codes and status change entries in its existing software, and that the only way to make those determinations is through a file-by-file review. Specifically, the application itself would have to be reviewed to determine when it was stamped as received by Nationstar. In addition, Nationstar asserts that not all loan modification applications referred to an underwriter are complete. While the Nationstar employee who conducts the initial processing of an application may refer it to an underwriter based on its facial completeness, the underwriter makes the final determination of whether the application is complete and is responsible for obtaining any additional required documentation. Through both a declaration by a Nationstar Vice President of Default Servicing, Brandon Anderson, and an expert report by Stuart D. Gurrea, Nationstar contests Oliver's analysis and endeavors to establish that the only way to identify RESPA violations using Nationstar's data is through a file-by-file review. For example, since default fees are often paid by sources other than the borrower, such as in a short sale or refinancing, Nationstar challenges Oliver's assessment that fees identified through LSAMS can be deemed to constitute damages from RESPA violations, because the software does not reflect who paid the fee.

         Furthermore, according to Nationstar, to identify the content of a letter sent to a borrower, the letter itself must be viewed. Nationstar has no process for standardizing file names. The entry under "object_id" acts as a unique identifier for an electronic file, but it does not contain information about the file's substance and could in fact contain multiple submissions or documents relating to one borrower. Moreover, because borrowers often submit multiple loan modification applications, and because Nationstar's data is stored at the loan level, not at the application level, Nationstar claims that it is not possible to tell from the data alone, without reviewing the files, whether a status or code change is in response to a specific loan modification application. Nationstar claims that manual review of each file would take about 60 to 90 minutes per file.


         I. Motion for Summary Judgment

         Nationstar seeks summary judgment on the Robinsons' RESPA claims on the grounds that (1) Mrs. Robinson is not a proper plaintiff because she is not a "borrower" within the meaning of RESPA; (2) RESPA is inapplicable because Nationstar was required to comply with Regulation X only as to the Robinsons' first loss mitigation application; (3) there is no evidence to support a violation of 12 C.F.R. §§ 1024.41(f), (g), and (h); and (4) there is no evidence of actual damages from any RESPA violation. Nationstar also asserts that the Robinsons have not identified evidence sufficient to support their MCPA claims.

         A. Legal Standard

         Under Federal Rule of Civil Procedure 56(a), the Court grants summary judgment if the moving party demonstrates that there is no genuine issue as to any material fact, and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). In assessing the Motion, the Court views the facts in the light most favorable to the nonmoving party, with all justifiable inferences drawn in its favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). The Court may rely only on facts supported in the record, not simply assertions in the pleadings. Bouchat v. Bait. Ravens Football Club, Inc., 346 F.3d 514, 522 (4th Cir. 2003). A fact is "material" if it "might affect the outcome of the suit under the governing law." Anderson, 477 U.S. at 248. A dispute of material fact is only "genuine" if sufficient evidence favoring the nonmoving party exists for the trier of fact to return a verdict for that party. Id. at 248-49.

         B. RESPA

         Congress enacted RESPA to protect consumers from "unnecessarily high settlement charges caused by certain abusive practices" in the real estate mortgage industry, and to ensure "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). RESPA's implementing regulations, codified at 12 C.F.R. §§ 1024.1 to 1024.41 and known as "Regulation X," see 12 C.F.R. ยง 1024.1, prescribe additional duties and responsibilities of mortgage servicers under RESPA. Regulation X went into effect on January 10, 2014. Mortgage Servicing Rules ...

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