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Beck v. Bank of New York Mellon Corporation

United States District Court, D. Massachusetts

March 19, 2015

DAVID B. SULLIVAN AND DONNA L. BECK, Plaintiffs,
v.
THE BANK OF NEW YORK MELLON CORPORATION FKA THE BANK OF NEW YORK, as Trustee for the Sasco 2005-16 Trust Fund, and NATIONSTAR MORTGAGE, LLC, Defendants

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[Copyrighted Material Omitted]

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For David B. Sullivan, Donna L. Beck, Plaintiffs: Hugh D. Heisler, LEAD ATTORNEY, Heisler, Feldman & McCormick, & Garrow, PC, Springfield, MA.

For The Bank of New York Mellon Corporation, as Trustee for the SASCO 2005-16 Trust Fund formerly known as The Bank of New York, Nationstar Mortgage LLC, Defendants: Matthew A. Gens, LEAD ATTORNEY, James B. Fox, Bernkopf Goodman LLP, Boston, MA.

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MEMORANDUM AND ORDER REGARDING DEFENDANTS' MOTION TO DISMISS

MARK G. MASTROIANNI, United States District Judge.

(Dkt. No. 17)

I. Introduction

David B. Sullivan and Donna L. Beck (" Plaintiffs" ) brought this action in state court against the Bank of New York Mellon Corporation FKA The Bank of New York, as Trustee for the Sasco 2005-16 Trust Fund, and Nationstar Mortgage, LLC (together, " Defendants" ). On November 4, 2014, Defendants removed the action to this court pursuant to 28 U.S.C. § 1441.

Plaintiffs' claims arise out of a mortgage dispute and threatened foreclosure sale of their home.[1] In particular, Plaintiffs assert in their amended complaint claims for breach of contract (Count I), violation of M.G.L. c. 183, § 21 (Count II), violation of M.G.L. c. 244, § 35A (Count III), violation of M.G.L. c. 244, § 35B (Count IV), wrongful foreclosure (Count V), breach of implied covenant of good faith and fair dealing (Count VI), violation of M.G.L. c. 93A (Count VII), and negligence (Count VIII).[2]

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Defendants have filed a motion to dismiss asserting tat Plaintiffs' amended complaint fails to state a claim upon which relief may be granted. For the following reasons, the court will grant Defendants' motion in part and deny it in part.

II. Background

The following facts come directly from Plaintiffs' amended complaint.[3] On June 28, 2005, David Sullivan purchased property in Monson (" Property" ) for $280,500 with two simultaneous loans from E-Loan, Inc. (Dkt. No. 16, Am. Compl. ¶ ¶ 4, 10.) The first loan was in the amount of $224,400, which was 80% of the purchase price of the Property. (Id. ¶ 11.) It was for a term of thirty years, with monthly payments for the first ten years going towards interest only; the monthly payments started at $1,075.25, but after ten years they were scheduled to increase to $1,575.48. (Id.) Sullivan is the only borrower on the note for the first loan. (Id. ¶ 12.) This loan was secured by a mortgage given by both Plaintiffs, dated June 29, 2005 (" First Mortgage" ), and the mortgagee under the First Mortgage is listed as Mortgage Electronic Registration Systems, Inc. (" MERS" ), acting solely as a nominee for E-Loan, Inc. (Id. ¶ 13.) Paragraph 22 of the First Mortgage provides, in relevant part, that

Lender shall give notice to Borrower prior to acceleration following Borrower's breach of any covenant or agreement in this Security Instrument . . . . The notice shall specify: (a) the default; (b) the action required to cure the default; (c) a date, not less than 30 days from the date the notice is given to the Borrower, by which the default must be cured; and (d) that failure to cure the default on or before the date specified in the notice may result in acceleration of the sums secured by this Security Instrument and sale of the Property. The notice shall further inform Borrower of the right to reinstate after acceleration and the right to bring a court action to assert the non-existence of a default or any other defense of Borrower to acceleration and sale. If the default is not cured on or before the date specified in the notice, Lender at its option may require immediate payment in full of all sums secured by this Security Instrument without further demand and may

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invoke the STATUTORY POWER OF SALE and any other remedies permitted by Applicable Law.

(Id. ¶ 14; Dkt. No. 1-3, Ex. 6 (emphasis added).)

The second loan from E-Loan, Inc. was in the amount of $56,100, which was 20% of the purchase price of the Property. (Dkt. No. 16, Am. Compl. ¶ 15.) Although the loan was termed a " Home Equity Line of Credit," the lender was aware that Sullivan would be borrowing the maximum principal amount to complete the purchase of the Property. (Id.) Sullivan is the only borrower under the note for the second loan. (Id. ¶ 16.) The second loan was also secured by a mortgage given by both Plaintiffs and also listed MERS as the mortgagee. (Id. ¶ 17.) The two loans were underwritten as part of a loan transaction in which the combined loan-to-value ratio was 100%. (Id.) Moreover, the Uniform Residential Loan Application signed by Sullivan shows the ratio of Plaintiffs' housing-related and recurring monthly debt to their monthly income exceeded 38%. (Id. ¶ 19.)

Plaintiffs believed at the time that they would be able to make the monthly payments, because Sullivan had recently obtained new job-related responsibilities as the Founding Director of the Western New England College Polling Institute and his employer assured him he would receive additional compensation. (Id. ¶ 20.) Unfortunately, however, Sullivan's compensation was not increased, and Plaintiffs experienced significant increases in their personal and household expenses. (Id. ¶ 21.) Toward the end of 2009, Plaintiffs had nearly exhausted their savings in order to keep up with the two monthly mortgage payments. (Id. ¶ 22.) In November, 2009, Plaintiffs began requesting a modification of the terms of the mortgages from the companies servicing the two loans. (Id. ¶ 22.) Initially, Plaintiffs' First Mortgage was serviced by Aurora Loan Services LLC, but Nationstar took over as servicer around July 1, 2012. (Id. ¶ 23.)

Plaintiffs allege that, beginning in November, 2009, and continuing for approximately the next three and a half years, they repeatedly submitted applications for modifications and other debt relief to the servicing companies, along with all the documentation requested by the servicers to support the applications. (Id. ¶ 24.) However, long delays ensued without any word from the servicers and, in response to their numerous inquiries, Plaintiffs received form letters and electronic messages indicating the applications were still being processed or requesting documentation which had already been provided. (Id. ¶ 25.) On a number of occasions, the servicing companies refused to process Plaintiffs' Home Affordable Modification Program (" HAMP" )[4] receiving income documentation from Beck, who was not a borrower under the original notes. (Id. ¶ 26.) On two different occasions, Plaintiffs received notification from Aurora that separate applications for a loan modification under HAMP had been denied for reasons which were false. (Id. ¶ 27.)

Thereafter, Plaintiffs received an offer of modification from Aurora which called for monthly payments approximately $400 higher than the existing monthly payments. (Id. ¶ ¶ 28-29.) Plaintiffs, desperate to avoid foreclosure, signed the second modification offered by Aurora on February 9, 2012 and made their first payment

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thereunder. (Id. ¶ 31.) The Loan Modification Agreement did not constitute a new loan but, rather, " amend[ed] and supplement[ed]" both the First applications without first Mortgage, under which Beck and Sullivan are listed as borrowers, and the original note, under which only Sullivan is obligated as a borrower. (Id. ¶ 32.) The " Lender" under the Loan Modification Agreement is listed as Aurora Bank FSC, but that bank was not the current holder of the First Mortgage when the modification occurred. (Id. ¶ 33.) After entering into the Loan Modification Agreement, Plaintiffs recognized the payments were unaffordable and realized they would be unable to keep up with the scheduled payments, so they filed for bankruptcy to try to save their home. (Id. ¶ 34.)

In March, 2013, Plaintiffs each received from Nationstar: (1) a set of letters dated March 18, 2013 notifying them that they were in default on their first loan and requiring payment of $19,189.68 within 35 days or the full amount due on the loan would be accelerated; (2) a set of letters dated March 19, 2013 notifying them they were in default and requiring payment of $19,119.68 within 150 days or the full amount due on the loan would be accelerated; and (3) another letter dated March 19, 2013 notifying them of their right to request a modified mortgage loan. (Id. ¶ 35; Dkt. No. 1-3, Ex. 6.) In response, Plaintiffs submitted another request for a loan modification, along with all the completed forms and supporting documentation requested by Nationstar over the following two months. (Dkt. No. 16, Am. Compl. ¶ 36.) On the first page of Plaintiffs' Request for Mortgage Assistance (" RMA" ), dated May 29, 2013, Plaintiffs highlighted the fact that Beck was not a coborrower under the note and that she was listed on the RMA only because she is on the deed and is a " Borrower" on the mortgage. (Id. ¶ 37.) While Plaintiffs sent Nationstar all of the documentation requested, Plaintiffs were informed their application for a HAMP modification had been denied by Nationstar because they had not submitted required documentation. (Id. ¶ 38.) After Sullivan inquired further, Plaintiffs received a letter dated July 11, 2013 stating that their HAMP application had been rejected because they failed to provide certain documentation which Plaintiffs had already submitted to Nationstar and Aurora on multiple prior occasions. (Id. ¶ 39; Dkt. No. 1-3, Exs. 7 and 8.) Again, among the requested documentation was income information for Beck, even though she was not a borrower under the original note. (Dkt. No. 16, Am. Compl. ¶ 39; Dkt. No. 1-3, Ex. 8.) The letter also assured Plaintiffs that Nationstar had created a new HAMP case for Plaintiffs' mortgage account and that it would " happily review the account for payment assistance." (Id.)

In August, 2013, Plaintiffs each received three letters from Nationstar dated August 21, 2013. (Dkt. No. 16, Am. Compl. ¶ 40; Dkt. No. 1-3, Ex. 9.) Similar to the March letters, the first letters indicated they were in default on their first loan and required payment of $28,976.58 within 35 days or the full amount due on the loan would be accelerated. (Id.) This letter also stated: " You are hereby informed that you have the right to 'cure' or reinstate the loan after acceleration and the right to assert in the foreclosure proceeding the non-existence of a default or any other defense you may have to acceleration and sale." (Id. (emphasis added).) The second letter indicated they were in default on their first loan and required payment of $28,905.58 (an amount slightly lower than that listed in the first letter) within 150 days or the full amount due on the loan would be accelerated. (Id.) Appended to this letter was a page of " Additional

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Disclosures" which stated the current holder of Plaintiffs' mortgage was " The Bank of New York Mellon FKA the Bank of New York, as Trustee for the Sasco 2006-16 Trust Fund." (Id.) The third letter again notified Plaintiff of their right to request a modified mortgage loan and stated that Nationstar's records indicated Plaintiffs were eligible to request a mortgage modification. (Id.)

In response, Plaintiffs again submitted a new loan modification application on August 25, 2013, along with all the required supporting documentation. (Dkt. No. 16, Am. Compl. ¶ 41; Dkt. No. 1-3, Ex. 10.) Plaintiffs, however, never received any further communication from Nationstar regarding their eligibility for a loan modification. (Dkt. No. 16, Am. Compl. ¶ 42.)[5] Moreover, Defendants never sent any correspondence to Plaintiffs reflecting a final determination on their application for HAMP ...


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