United States District Court, E.D. Virginia, Richmond Division
ANTHONY D. PHILLIPS and REBECCA E. PHILLIPS, Plaintiffs,
WELLS FARGO BANK, N.A., and SAMUEL I. WHITE, P.C., Defendants.
A. GIBNEY JR. UNITED STATES DISTRICT JUDGE.
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
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.
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.
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.)
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
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.
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. 12 C.F.R. § 1024.41(c)(1).
This claim fails.
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. 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).
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. 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).
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. Specifically, RESPA did not require Wells
Fargo to notify the Phillips of their pending foreclosure 38