Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Phillips v. Wells Fargo Bank, N.A.

United States District Court, E.D. Virginia, Richmond Division

February 1, 2018

WELLS FARGO BANK, N.A., and SAMUEL I. WHITE, P.C., Defendants.



         The plaintiffs, Anthony D. Phillips and Rebecca E. Phillips, entered into a mortgage loan contract with defendant Wells Fargo Bank, N.A. ("Wells Fargo"). The Phillips fell behind on their payments and Wells Fargo denied their loss mitigation application, resulting in a foreclosure sale of their home.

         The Phillips sued Wells Fargo and substitute trustee Samuel I. White, P.C. ("SIWPC") for violating Regulation X of the Real Estate Settlement Procedures Act ("RESPA") and breaching the duty of good faith and fair dealing. The defendants moved to dismiss. The Phillips' RESPA claim fails because they could not avail themselves of the RESPA loss mitigation requirements more than once. The Phillips adequately allege a breach of the duty of good faith and fair dealing embodied in their mortgage contract against Wells Fargo. They fail to plead allegations against SIWPC, but the Court will grant leave to amend as to this defendant.

         I. BACKGROUND

         In 2006, with Wells Fargo as their lender, the Phillips bought a home on Winterpock Road in Chesterfield County. In 2012, the Phillips reached out to Wells Fargo to ask about loan modification or loss mitigation options. A representative from Wells Fargo told the Phillips that they could only apply for these options if they were behind on their monthly payments. Accordingly, the Phillips fell behind on their payments, and then applied for loss mitigation. Wells Fargo denied their application. In 2013, Mr. Phillips filed for bankruptcy to postpone the foreclosure sale scheduled after Wells Fargo denied their loan modification. During the course of the bankruptcy proceedings, the Phillips continued to make occasional payments to Wells Fargo as they could.

         On June 27, 2017, the Phillips received notice of a foreclosure sale scheduled for July 27, 2017. On July 13, 2017, a Wells Fargo representative told the Phillips' attorney that they could not submit an application for a loan modification because of the pending foreclosure proceeding, and because borrowers must submit a loss mitigation package 38 days before the auction date. The Phillips moved for a preliminary injunction or temporary restraining to prevent the foreclosure sale. (Dk.No. 5.) The Court denied the motion on July 26, 2017. (Dk. No. 9.)

         II. DISCUSSION[1]

         The Phillips allege two counts in their complaint: (I) violation of RESPA Regulation X; and (II) breach of the duty of good faith and fair dealing. The defendants have moved to dismiss both counts.

         The complaint does not contain any allegations as to defendant SIWPC, except to explain that SIWPC is the substitute trustee that intended to sell the Phillips' property at auction on July 27, 2017. As such, the Court dismisses SIWPC for failure to state a claim against this defendant. See Soblotne v. Ditech Fin. LLC, No. 2:16-cv-556, 2016 WL 9412464, at *2-3 (E.D. Va. Nov. 8, 2016) (dismissing substitute trustee because the sole allegation stated the trustee would conduct a foreclosure sale on a certain date). The remaining discussion pertains to defendant Wells Fargo.

         A. RESPA Claim

         The complaint does not cite to specific sections of RESPA, but it appears to allege that Wells Fargo violated RESPA's requirement that a loan servicer evaluate a borrower's complete loss mitigation application if received more than 37 days before a foreclosure sale.[2] 12 C.F.R. § 1024.41(c)(1). This claim fails.

         RESPA requires servicers to give borrowers an opportunity to submit a loss mitigation application before pursuing foreclosure, and outlines certain procedures that servicers must follow concerning an application. 12 C.F.R. § 1024.41. A servicer must comply with these loss mitigation provisions only for a single, complete loss mitigation application on a given loan.[3] 12 C.F.R. § 1024.41(i) (amended Oct. 19, 2017). Therefore, § 1024.41(i) prevents borrowers from bringing actions for violations of loss mitigation rules if they have already availed themselves of the loss mitigation process once. Magnum v. First Reliance Bank, No. 4:16-cv-2214, 2017 WL 1062534, at *2-3 (D.S.C. Mar. 21, 2017); see also Trionfo v. Bank of Am., N.A., No. JFM-15-925, 2015 WL 5165415, at *4 (D. Md. Sept. 2, 2015), appeal dismissed, No. 15-2068 (4th Cir. Jul. 5, 2016) (observing that the statute applies only to first-time applicants).

         After falling behind on their loan in 2012, the Phillips submitted a loss mitigation package to Wells Fargo. Wells Fargo denied the application on May 6, 2013, explaining that the Phillips did not qualify for loss mitigation.[4] Wells Fargo also considered the Phillips' appeal of that denial, finding on June 6, 2013 that the Phillips remained ineligible. These actions indicate that Wells Fargo regarded their 2013 submission as a complete application. Lindsay v. Rushmore Loan Mgmt., Servs., LLC, No. PWG-15-1031, 2017 WL 1230822, at *4 (D. Md. Apr. 4, 2017).

         At all relevant times, RESPA required Wells Fargo to comply with its loss mitigation procedural requirements only once over the life of the Phillips' loan. The Phillips completed a loss mitigation application in 2013, so they cannot allege that Wells Fargo must have adhered to the RESPA loss mitigation rules again in 2017.[5] Specifically, RESPA did not require Wells Fargo to notify the Phillips of their pending foreclosure 38 ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.