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Adt v. Nationstar Mortgage LLC

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

March 30, 2018

SUE J. ADT and THE ESTATE OF JOSEPH F. ADT, Plaintiffs,
v.
NATIONSTAR MORTGAGE LLC, Defendant.

          MEMORANDUM OPINION

          M. HANNAH LAUCK, United States District Judge.

         This matter comes before the Court on Defendant Nationstar Mortgage, LLC's ("Nationstar") Motion for Judgment on the Pleadings (the "Motion"), brought pursuant to Federal Rule of Civil Procedure 12(c).[1] (ECF No. 5.) Plaintiffs Sue J. Adt and the Estate of Joseph F. Adt responded, [2] (ECF No. 9), and Nationstar replied, (ECF No. 14). The Court dispenses with oral argument because the materials before it adequately present the facts and legal contentions, and argument would not aid the decisional process. Accordingly, the matter is ripe for disposition. The Court exercises jurisdiction pursuant to 28 U.S.C. §§ 1331[3] and 1367.[4] For the reasons that follow, the Court will grant the Motion in part and deny it in part. The Court will dismiss Counts I-A, I-B, III, IV, V, and VI.

         I. Standard of Review

         "A motion for judgment on the pleadings under Rule 12(c) is assessed under the same standard that applies to a Rule 12(b)(6)[5]motion.'' Occupy Columbia v. Haley, 738 F.3d 107, 115 (4th Cir. 2013). As a practical matter, "the distinction is one without a difference." Bitrbach Broad. Co. of Delaware v. Elkins Radio Corp., 278 F.3d 401, 405 (4th Cir. 2002). "A motion to dismiss under Rule 12(b)(6) tests the sufficiency of a complaint; importantly, it does not resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses." Republican Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992) (citing 5A Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure § 1356 (1990)). In considering a motion to dismiss for failure to state a claim, a plaintiffs well-pleaded allegations are taken as true and the complaint is viewed in the light most favorable to the plaintiff. Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993); see also Martin, 980 F.2d at 952.

         The Federal Rules of Civil Procedure "require[] only 'a short and plain statement of the claim showing that the pleader is entitled to relief, ' in order to 'give the defendant fair notice of what the .. . claim is and the grounds upon which it rests.'" Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (omission in original) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). Plaintiffs cannot satisfy this standard with complaints containing only "labels and conclusions" or a "formulaic recitation of the elements of a cause of action." Id. (citations omitted); see also Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). Instead, a plaintiff must assert facts that rise above speculation and conceivability to those stating a claim that is "plausible on its face." Twombfy, 550 U.S. at 570. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 556). Therefore, in order for a claim or complaint to survive dismissal for failure to state a claim, the plaintiff must "allege facts sufficient to state all the elements of [his or] her claim." Bass v. E.I. DuPont de Nemours & Co., 324 F.3d 761, 765 (4th Cir. 2003) (citations omitted).

         In ruling on a motion for judgment on the pleadings, the Court "'may consider the Answer[6] as well, ' and the factual allegations in the Answer are taken as true to the extent they have not been denied or do not conflict with the Complaint." Pro-Concepts, LLC v. Resh, No. 2;12cv573, 2014 WL 594294, at *5 (E.D. Va. Feb. 11, 2014) (quoting Mendenhall v. Hanesbrands, Inc., 856 F.Supp.2d 717, 723 (M.D. N.C. 2012)); see also Bremus v. AMR Corp., 527 B.R. 221, 225 (E.D. Va. 2014) ("District courts may consider the complaint, answers, matters of public record, exhibits to the complaint and answer, and 'exhibits to the Rule 12(c) motions that were integral to the complaint and authentic.'" (footnote omitted) (quoting Massey v. Ojaniit, 759 F.3d 343, 347 (4th Cir. 2014))).

         A court should grant a motion for judgment on the pleadings only if, '"after accepting all well-pleaded allegations in the plaintiffs complaint as true and drawing all reasonable factual inferences from those facts in the plaintiffs favor, it appears certain that the plaintiff cannot prove any set of facts in support of his claim entitling him to relief.'" Drager v. PLIVA USA, Inc., 741 F.3d 470, 474 (4th Cir. 2014) (quoting Edwards v. City of Golds boro, 178 F.3d 231, 244 (4th Cir.1999)); see also Pro-Concepts, 2014 WL 549294, at *5 ("[J]udgment on the pleadings is only appropriate when, ... the case can be determined as a matter of law.").

         II. Factual and Procedural Background

         A. Summary of Allegations in the Complaint

         In February of 1981, Mrs. Adt and her husband entered into a mortgage loan agreement to finance the purchase of land in Mechanicsville, Virginia 23116 (the "Property"). The loan was evidenced by a Promissory Note and secured by a Deed of Trust.

         In October of 2015, Mr. Adt passed away, significantly reducing the Adts' household income. Shortly thereafter, Nationstar acquired the mortgage loan and became Mrs. Adt's loan servicer. Although Mrs. Adt had timely made all previous mortgage payments, she contacted Nationstar to inquire whether she could do anything "to make her mortgage payment more affordable." (Compl. ¶ 9, ECF No. 1-1.) Nationstar informed Mrs. Adt that she could apply for a loan modification, which she did. On March 1, 2016, Nationstar approved Mrs. Adt for a trial loan modification, and sent her a letter confirming the approval and setting forth a schedule and terms for trial period payments (the "TPP Agreement").[7]

         The TPP Agreement stated that the trial loan modification was "the first step in the process toward qualifying for a permanent loan modification." (TPP Agreement 3, ECF No. 6-4 (emphases in original).) The TPP Agreement directed Mrs. Adt to make mortgage payments in April, May, June, and July of 2016, and informed her that "[a]fter all trial payments are made on time and you have submitted all the required documents, your mortgage will then be reviewed to be permanently modified." (Id.) Specifically, the TPP Agreement provided that once Mrs. Adt had timely made each payment, "submitted two signed copies of the modification agreement, " and Nationstar had signed the modification agreement, her mortgage would "be permanently modified in accordance with the terms of the modification agreement." (Id. at 5.) The TPP Agreement stated that Mrs. Adt's "current loan documents [would] remain in effect, " but Mrs. Adt could choose to "make the trial period payment instead of the payment required under [her] loan documents." (Id.) In addition, Nationstar agreed that it would "not refer [the] loan to foreclosure or proceed to foreclosure sale during the Trial Period Plan, " so long as the Mrs. Adt complied "with the terms of the Trial Period Plan." (Id.)

         Mrs. Adt timely made all payments in the trial period. In July of 2016, after making the final payment, she contacted Nationstar twice[8] to request information regarding finalizing her loan modification. Nationstar informed Mrs. Adt that "it would only be a few days" before the final loan modification documents would be ready, and told her not to make further payments. (Compl. ¶ 16.) When the documents did not arrive, Mrs. Adt continued to regularly follow up on the status of the final loan modification. Each time Mrs. Adt contacted Nationstar, Nationstar informed her that the documents "were ready but waiting for approval from the underwriter, " and told her to withhold further mortgage payments. (Id. ¶ 17.) During the same period, however, Nationstar began calling Mrs. Adt and sending her letters indicating that her loan was delinquent and had been referred to an attorney for legal action. (Compl. ¶¶ 21-22.) When Mrs. Adt called Nationstar, it informed her that she had "nothing due" and advised her to continue to wait for the final loan modification documents. (Compl. ¶ 21.)

         In October of 2016, Mrs. Adt hired an attorney who contacted Nationstar on October 26, 2016. A Nationstar representative informed Mrs. Adt's attorney that "the investor had to 'reclassify the loan[, f [which] needed to be 60 days past due for the final modification documents to be generated[, ] but any missed payments during that time would be capitalized in the loan modification and would not negatively affect the loan." (Id. ¶ 25.) The representative also stated that Mrs. Adt could "make a payment if she chooses, " but that nothing was due at that time and any payments would "be applied to the princip[al] of the loan." (Id. ¶ 26.)

         In November of 2016, on three separate occasions, three different Nationstar representatives informed Mrs. Adt that her loan was current and that the underwriting department was still reviewing the final loan modification. "During this entire time, [Nationstar] falsely reported information regarding Mrs. Adt's debt[] to one or more consumer reporting agencies and failed to report the debt as being in dispute" (Id. ¶ 39.) Mrs. Adt "saved enough funds to cover a payment in the amount of the loan modification for each and every month that Nationstar refused to accept payment." (Id. ¶ 30.)

         Sometime after November 15, 2016, Ms. Adt, through her attorney, received notice of a pending foreclosure sale on the Property, scheduled for December 16, 2016. Her attorney sent Nationstar a Notice of Error pursuant to 12 C.F.R. § 1024.35, [9] but received no response. On November 29, 2016, the foreclosure sale was postponed. (Compl. ¶ 36.) Mrs. Adf s attorney contacted Nationstar several more times regarding the status of the loan modification and was informed each time that the documents were still under review.

         B. Procedural Background

         On January 30, 2017, Plaintiffs filed their six-count Complaint in the Circuit Court of Hanover County, Virginia. Nationstar timely removed to this Court and filed an Answer and the Motion. Plaintiffs responded to the Motion, and Nationstar replied.

         Plaintiffs assert the following six counts against Nationstar:

Count I: Nationstar violated various provisions of the RESPA[10] by failing to respond to the Notice of Error and provide timely disclosures, and by scheduling the Property for a foreclosure sale (the "Regulation X Claim").[11]
Count II: Nationstar breached the terms of the TPP Agreement by failing to modify Mrs. Adfs loan as promised (the "Breach of TPP Agreement Claim").
Count III: Nationstar violated the covenant of good faith and fair dealing inherent in the Promissory Note and Deed of Trust (the "Good Faith and Fair Dealing Claim").
Count IV[12]: Nationstar affirmatively made false or misleading representations in violation of Section 5(a) of the FTCA (the "FTCA Claim").
Count V: Nationstar violated various provisions of the FCRA by continuing to furnish incomplete or inaccurate information to credit reporting agencies without providing notice that Mrs. Adt disputed the information (the "FCRA Claim").
Count VI: Nationstar breached certain provisions of the FDCPA by falsely representing the character, amount, or status of the debt, (the "FDCPA Claim").

         Plaintiffs seek statutory damages, punitive damages, and $326, 000 in compensatory damages.[13]

         III. Analysis

         Nationstar moves for judgment on the pleadings as to all of Plaintiffs' claims. Accordingly, the Court examines each count to assess whether, "'after accepting all well-pleaded allegations in [Plaintiffs'] complaint as true and drawing all reasonable factual inferences from those facts in [Plaintiffs'] favor, it appears certain that [Plaintiffs'] cannot prove any set of facts in support of [their] claim entitling [them] to relief."' Drager, 741 F.3d at 474 (quoting Edwards, 178 F.3d at 244). The Court finds that Plaintiffs state a claim for part of Count One, the Regulation X Claim, and Count Two, the Breach of the TPP Agreement Claim. Plaintiffs, however, fail to state a claim for Count Three, the Good Faith and Fair Dealing Claim, Count Five, the FCRA Claim, and Count Six, the FDCPA Claim.

         A. Count One, the Regulation X Claim

         Plaintiffs assert that Nationstar violated various provisions of the RESPA. First, they contend that Nationstar violated 12 C.F.R. § 1024.35(e)(3)[14] by not responding to the Notice of Error[15] Mrs. Adt's attorney sent (Count I-A, the "Notice of Error Subclaim"), and § 1024.38(b)[16] by failing to investigate and provide Mrs. Adt with timely disclosures of information (Count I-B, the "Timely Disclosure Subclaim"). Second, Plaintiffs contend that Nationstar breached § 1024.41[17] by scheduling the Property for a foreclosure sale (Count I-C, the "Wrongful Foreclosure Subclaim").

         Because no private right of action exists under §§ 1024.35 and 1024.38, Counts I-A and I-B, the Notice of Error Subclaim and the Timely Disclosure Subclaim, both fail. However, private citizens may sue for violations of § 1024.41, under which Plaintiffs bring their Wrongful Foreclosure Subclaim. Taking the allegations in the Complaint as true, Nationstar lacked authorization to refer the loan to foreclosure, and Plaintiffs state a claim in Count I-C for a violation of 12 C.F.R. § 1024.41, the Wrongful Foreclosure Subclaim.

         1. The Notice of Error and Timely Disclosure Subclaims Fail Because No Private Right of Action Exists Under Sections 1025.35 or 1024, 38

         Plaintiffs contend that Nationstar violated §§ 1024.35 and 1024.38 of Regulation X by failing to respond to Mrs. Adt's Notice of Error requesting accurate and timely disclosures and corrections to Mrs. Adt's loan information. (Compl. ¶¶ 46-49.) Nationstar argues that neither section provides Plaintiffs with a private right of action. Plaintiffs do not respond to this assertion. Regardless, the Notice of Error and Timely Disclosure Subclaims both fail because private citizens lack authorization to enforce 12 C.F.R. §§ 1024.35 and 1024.38.

         Private citizens generally cannot sue to enforce federal law unless Congress has provided a private cause of action. See, e.g.. Alexander v. Sandoval, 532 U.S. 275, 288-89 (2001). Congress provided no private cause of action for a violation of §§ 1024.35 or 1024.38. Accordingly, even assuming that Nationstar violated these subsections, Plaintiffs possess no private right of action for those violations. See, e.g., Agomuoh v. PNC Fin. Servs. Grp., No. GJH-16-1939, 2017 WL 657428, at *10 (D. Md. Feb. 16, 2017) (holding that no private cause of action exists to enforce violations of 12 C.F.R. § 1024.38); Brown v. Bank of N.Y.Mellon, No. 1:16-cv-194, 2016 WL 2726645, at *2 (E.D. Va. May 9, 2016) ("Unlike Section 1024.41, Section 1024.39 does not explicitly convey a private right of action to borrowers." (quoting Gresham v. Wells Fargo Bank, N.A., No. 15-40748, 2016 WL 1127717, at *3 (5th Cir. Mar. 21, 2016)).

         Accordingly, Plaintiffs fail to state a claim for violations of 12 C.F.R, §§ 1024.35 and 1024.38, Counts I-A and I-B, the Notice of Error and Timely Disclosure Subclaims. The Court will grant the Motion as to Counts I-A and I-B, the §§ 1024.35 and 1024.38 aspects of Count I, the Regulation X Claim.

         2. Plaintiffs State a Claim for Nationstar's Violation of § 1024.41, the Wrongful Foreclosure Subclaim

         Plaintiffs also assert that Nationstar violated 12 C.F.R. § 1024.41 by scheduling the Property for a foreclosure sale during Mrs. Adt's trial loan period. Nationstar contends that § 1024.41 applies only to pending loan modification applications. Nationstar argues that Mrs. Adt's application had been reviewed and approved for trial loan modification, bringing her claim outside the scope of § 1024.41. Notwithstanding Nationstar's contentions, Plaintiffs state a claim for a violation of § 1024.41 because they adequately allege facts supporting the reasonable inference that Nationstar initiated a foreclosure sale at a time when § 1024.41 prohibited it from doing so.

         a. Legal Standard: Violation ot'§ 1024.41

         Section 1024.41 specifically provides for a private right of action for a violation of that section. Unlike §§ 1024.35 and 1024.38, Mrs. Adt, as a borrower, can personally enforce the provisions of § 1024.41. 12 C.F.R. § 1024.41(a) ("A borrower may enforce the provisions of this section pursuant to section 6(f) of RESPA."); see also Brown, 2016 WL 2726645, at *2 ("12 C.F.R. § 1024.41 does allow a borrower to 'enforce the provisions of this section pursuant to section 6(f) of the [RESPA] ...." (quoting 12 C.F.R. § 1024.41(a))). As relevant here, § 1024.41 specifies certain procedures loan servicers must follow when reviewing a borrower's complete loss mitigation application, commonly referred to as a "loan modification application/"[18] 12 C.F.R. § 1024.41(b). Section 1024.41(f)[19] prohibits a loan servicer such as Nationstar[20] from initiating a foreclosure sale if a borrower submits a complete loss mitigation application before the loan becomes 120 days delinquent, unless one of the following conditions (the "pre-foreclosure conditions") has occurred: (1) the servicer has sent the borrower notice that the borrower is "not eligible for any loss mitigation option"; (2) "[t]he borrower rejects all loss mitigation options offered by the servicer"; or, (3) "[t]he borrower fails to perform under an agreement on a loss mitigation option. 12 C.F.R. § 1024.4 l(f)(2)(i)-(iii).

         b. Plaintiffs Sufficiently Allege that Nationstar Violated ยง 1024.41 by Initiating a Foreclosure Sale Before ...


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