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Harry v. American Brokers Conduit

United States District Court, D. Massachusetts

January 12, 2017




         This is a dispute arising out of a mortgage issued to plaintiffs in 2006. On December 21, 2006, plaintiffs took out a $450, 000 loan to refinance their existing mortgage and executed a new mortgage on their property to secure payment of that loan. Plaintiffs stopped making payments on the new mortgage in 2008. Several foreclosure attempts followed. Plaintiffs have now filed suit, alleging in substance that the note and mortgage are void because the lender, American Brokers Conduit, was not an incorporated entity and was not licensed to do business in any state at the time of the loan. The complaint further alleges that all subsequent assignments of the mortgage were void and all attempts to collect on the note or to foreclose on the property were unauthorized.

         Plaintiffs do not dispute that they received the $450, 000 loan to refinance their mortgage. They likewise do not dispute that they continue to possess the property and have made no mortgage payments for more than eight years.

         This is not a typical situation in which homeowner plaintiffs are seeking to forestall a mortgage foreclosure, contending that there is some defect in the assignment of the mortgage or the note. Instead, plaintiffs claim that the entire 2006 lending transaction should be declared void. They seek “to have the original note marked cancelled and returned to [them], ” “to have [the] mortgage . . . released in the land records, ” and to recover compensatory and punitive damages of more than $197 million. In other words, plaintiffs want to undo the loan transaction-but they also want to keep both the $450, 000 loan proceeds (which, presumably, they used to discharge their prior mortgage) and the property. Put simply, plaintiffs want to erase their debt, keep the house (for free), and to be compensated handsomely for their trouble.

         Defendants have moved to dismiss the complaint for the failure to state a claim upon which relief can be granted. There are multiple problems with plaintiffs' claims, beginning with the fact that the loan transaction occurred in 2006, and the limitations period for almost all of their claims expired some time ago. As to most of their claims, the only real question is whether the limitations period should be tolled for any reason. Because the complaint fails to allege any plausible reason why those limitations periods should be equitably tolled, the motions to dismiss, with one exception, will be granted.

         I. Background

         A. Factual Background

         The facts are set forth as described in the complaint.

         1.The Loan Application and Closing

         Sometime prior to November 2006, plaintiffs Timothy and Karen Harry were contacted by defendant APEX Mortgage Services, LLC, a mortgage servicing company, about refinancing the mortgage on their home in Mashpee, Massachusetts. (Am. Compl. ¶¶ 1, 5, 15). In late November 2006, plaintiffs began the process of applying for a new loan. (Id. ¶ 15). APEX faxed to the plaintiffs a “Borrower's Certification and Authorization Certification” form dated December 2, 2006. (Id.). That form required plaintiffs' signatures, certifying that the information they provided in their loan application was true and complete. (Id.). The form also stated that APEX had the right to initiate a full documentation review to verify the information plaintiffs provided, and that it, and the mortgage guaranty insurer (if any), might verify the information in the loan application and in any other documentation provided in connection with the loan. (Id.). The form also required plaintiffs to authorize APEX to provide any requested documents to any investor to whom APEX might sell the mortgage. (Id.).

         On December 13, 2006, plaintiffs formally applied with APEX for a refinancing loan. (Id. ¶ 17). The loan application was prepared by APEX, not by plaintiffs themselves, and was faxed to plaintiffs on December 13. (Id. ¶ 18). According to the complaint, the application indicated that it was for a loan amount of $445, 500 with an interest rate of 1.750% for 480 months (40 years). (Id.). The complaint alleges that APEX falsified information on the application by, for example, significantly overstating plaintiffs' monthly income and referring to unspecified credit union accounts and life insurance policies. (Id.). It also alleges that the application was backdated to November 29, 2006, and that the application was prepared by Pierre Haber, “a known illegal robo-signer.” (Id. ¶ 22).

         Along with the loan application, APEX also sent plaintiffs a Good Faith Estimate (“GFE”) form and Truth in Lending (“TIL”) disclosure statement, both dated November 20, 2006. (Id. ¶¶ 25, 30). The GFE stated a loan number of 0611EM005801, a base loan amount of $445, 500, an interest rate of 1.750%, a term of 480 months (40 years), as well as a number of fees associated with the loan. (Id. ¶ 25). According to the complaint, the information provided in the TIL disclosure differed from that in the GFE. (Id. ¶ 31). The TIL disclosure stated a loan amount of $458, 089.49, an APR of 6.246%, and a term of 30 years. (Id. ¶¶ 30, 52).

         On December 21, 2006, defendant Fidelity Title Company prepared a HUD-1A settlement statement for plaintiffs' loan. (Id. ¶ 36). The complaint alleges that Fidelity Title Company does not exist. (Id. ¶¶ 8, 38). According to the complaint, the HUD-1A included a number of differences from the GFE and TIL disclosure statement. The HUD-1A allegedly stated that American Brokers Conduit was the lender, provided a different loan number of 0001552524, and stated a loan amount of $450, 000. (Id. ¶ 38). The complaint alleges that American Brokers Conduit did not legally exist as an entity in 2006 and has never been legally incorporated in any state. (Id. ¶¶ 4, 37). Accompanying the HUD-1A was a form prepared by Chicago Title Insurance Company, apparently explaining the title insurance policy that it was issuing to American Brokers Conduit for the plaintiffs' mortgage. (Id. ¶ 42). The insurance form stated a commitment date of November 20, 2006, and a loan amount of $450, 000. (Id.).

         The loan closing took place on December 21, 2006. On that day, the note was issued and a mortgage on plaintiffs' property executed in order to secure payment of the note. (Id. ¶¶ 49, 58, 61). The note issued to plaintiffs stated an interest rate of 1.725%, but on January 1, 2007, the interest rate allegedly jumped to 10.083%. (Id. ¶ 50). It appears that an adjustable rate rider and a prepayment rider accompanied the note. (Id. ¶ 65). The note also stated the loan was a 40-year loan in the amount of $450, 000. (Id. ¶¶ 51-52).

         The mortgage stated a loan amount of $450, 000, payable to Mortgage Electronic Registration System, Inc. (“MERS”), as nominee for American Bankers Conduit. (Id. ¶ 61). According to the complaint, the MERS identification number listed on the mortgage is associated with American Home Mortgage Holding, Inc., and not with American Brokers Conduit. (Id. ¶ 63). The mortgage was recorded on February 7, 2007, in the Barnstable Registry of Deeds by Fidelity Title Group. (Id. ¶ 61). According to the complaint, plaintiffs' signatures on the mortgage do not match their signatures on the adjustable rate and prepayment riders, and therefore their signatures were forged. (Id. ¶ 65).

         Plaintiffs began making payments on February 1, 2007. (Id. ¶ 56). The last payment they made was on October 1, 2008. (Id.).

         2.The Assignments and Modification

         On May 1, 2009, MERS, as nominee for American Brokers Conduit, assigned the mortgage, but not the underlying note, to Deutsche Bank National Trust Company as Trustee for American Home Mortgage Assets Trust 2007-02. (Id. ¶ 71). The assignment was allegedly backdated, stating that it was effective as of April 27, 2009. (Id. ¶ 73). According to the complaint, that assignment was void because American Brokers Conduit did not exist, and therefore could not appoint MERS as its nominee, and therefore MERS had nothing to assign. (Id. ¶ 75). The complaint further alleges that the trust to which the mortgage was transferred had “closed” in February 2007, and therefore could not have accepted the assignment in 2009. (Id.). The assignment was prepared and recorded by DOCX, a subsidiary of Fidelity Financial. (Id. ¶ 76). The complaint alleges that six “illegal robo-signers, ” all MERS employees, executed the assignment. (Id. ¶ 78).

         On July 7, 2010, MERS again assigned the mortgage to Deutsche Bank as Trustee for the same trust. (Id. ¶ 82). According to the complaint, the second assignment provided a new trust address, which was that of American Home Mortgage Servicing, Inc. (“AHMSI”). Also according to the complaint, the second assignment was intended to correct defects in the first assignment. (Id. ¶ 85). However, the complaint alleges that the second assignment was also signed by “another known illegal robo-signer.” (Id. ¶ 85). The complaint alleges that all defendants knew or should have known that the assignments were fraudulent and void. (Id. ¶ 87).

         On May 15, 2012, plaintiffs received a letter from AHMSI informing them of the availability of several payment options. (Id. ¶ 129). That communication listed plaintiffs' gross monthly income as $5, 063.78, as compared to the gross monthly income of $14, 950.00 that was stated on the loan application allegedly prepared by APEX. (Id.). The complaint alleges that the inconsistency confirms that APEX falsified information on the loan application. (Id. ¶ 131). According to the complaint, plaintiffs never agreed to a modification of their payment obligations. (Id. ¶ 130).

         3.The Foreclosure Attempts

         Plaintiffs stopped making payments on their mortgage after October 1, 2008. (Id. ¶ 88). They received multiple notices regarding their mortgage from AHMSI from November 1, 2008, through June 5, 2012, when AHMSI changed its name to Homeward Residential. (Id.).[1] The complaint alleges that AHMSI/Homeward Residential knew that the issuer of the note-that is, American Brokers Conduit-was a non-existent entity and that therefore the note was void, yet continued to press for payment. (Id. ¶ 89-90). Ocwen Financial Corporation purchased Homeward Residential on October 3, 2012. (Id. ¶ 92). According to the complaint, without inquiring into the facts surrounding the plaintiffs' mortgage, Ocwen continued to harass them for payment on the loan. (Id.).

         On September 28, 2009, Deutsche Bank filed a complaint in the Superior Court of Massachusetts, Barnstable County, seeking foreclosure on the property. (Id. ¶ 94).[2] A notice of mortgagee's sale of the property was published on November 6, 2009. (Id. ¶ 95). However, according to the complaint, nothing happened for more than a year, until November 11, 2010, when Deutsche Bank sent plaintiffs a notice of intention to foreclose and second notice of mortgagee's sale of the property. (Id. ¶¶ 101-02). A sale by public auction was scheduled for December 17, 2010, but was later cancelled. (Id. ¶¶ 102-03).

         Deutsche Bank allegedly issued a third notice of foreclosure on July 14, 2011. (Id. ¶ 104). On September 1, 2011, plaintiffs then received another notice of foreclosure sale and notice of mortgagee's sale of the property, stating that the property would be sold by public auction on October 7, 2011. (Id. ¶ 105). Again, no sale ever took place. (Id. ¶ 106).

         On February 13, 2015, plaintiffs received a notice from Ocwen of its intent to foreclose on the property on behalf of Deutsche Bank. (Id. ¶ 115). On May 27, 2015, plaintiffs' attorney sent Ocwen a dispute of the alleged debt and requested that, from that point forward, Ocwen communicate only with plaintiffs' attorney. (Id. ¶ 116). On June 10, 2015, Ocwen sent, directly to plaintiffs, a notice of default stating an amount past due of $223, 611.23 on loan number 7140304192. (Id. ¶ 117). That notice also stated that Ocwen intended to foreclose on the mortgage unless plaintiffs became current on their payments. (Id.). Ocwen sent another notice to the same effect, also directly to plaintiffs, on July 1, 2015. (Id. ¶ 118).

         According to the complaint, Ocwen mailed plaintiffs two letters on July 20, 2015. (Id. ¶¶ 119-20). The first stated that Ocwen had received plaintiffs' correspondence but needed more time to respond. (Id. ¶ 119). The second stated that it had received plaintiffs' request to communicate only through their attorney, but could not authorize their attorney to receive information regarding the loan because their signatures on the request did not match their signatures on their loan documents. (Id. ¶ 120). Ocwen mailed another letter to plaintiffs on September 4, 2015, stating that it had received plaintiffs' request but was unable to provide a response. (Id. ¶ 121). It is unclear from the complaint whether that third letter was referring to plaintiffs' letter disputing the debt or the letter requesting to authorize their attorney to receive communications.

         On January 28, 2016, plaintiffs received another letter from Ocwen threatening litigation and foreclosure. (Id. ¶ 122). Plaintiffs responded by disputing the debt. (Id. ¶ 123).

         It does not appear that a foreclosure of plaintiffs' property has occurred, or that foreclosure proceedings are imminent.

         4. Plaintiffs' Attempted Rescission and “Qualified Written Request”

         On March 20, 2015, plaintiffs sent to all defendants a rescission notice pursuant to the Truth in Lending Act (“TILA”).[3] The complaint alleges that, due to that rescission notice, defendants were required to return to plaintiffs any money they had paid towards the note. (Id. ¶ 142).

         On July 30, 2015, plaintiffs sent a “Qualified Written Request and Validation of Debt” letter to Ocwen. (Id. ¶ 132).[4] In response, Ocwen sent plaintiffs two packages of documents, one on September 11, 2015, and another on September 30, 2015. (Id. ¶ 133). According to the complaint, the documents sent were inadequate because they failed to adequately document “the historical evolution of the alleged debt.” (Id. ¶ 134).

         B. Procedural History

         Plaintiffs filed the original complaint in this action on March 18, 2016, in Massachusetts state court. Defendants removed the action to this Court on May 17, 2016. Plaintiffs filed an amended complaint on June 22, 2016. The amended complaint alleges (1) a violation of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961 et seq., as to all defendants (Count One); a claim that the statute of limitations to collect on the note has expired (Count Two); a violation of Mass. Gen. Laws ch. 93A as to all defendants (Count Three); violations of the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692 et seq., as to defendants AHMSI, Deutsche Bank, Ocwen, and Homeward (Count Four); violations of the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2601, as to defendants APEX, American Brokers Conduit, AHMSI, Fidelity Financial, Fidelity Title Company, and Fidelity Title Group (Count Five); a violation of 18 U.S.C. § 1014, as to all defendants (Count Six); violations of the Truth in Lending Act, 15 U.S.C. § 1601 et seq., as to defendants APEX, American Brokers Conduit, AHMSI, Fidelity Financial, Fidelity Title Company, and Fidelity ...

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