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Kenney v. U.S. Bank, N.A.

United States District Court, D. Massachusetts

November 9, 2017

KEVIN KENNEY, Plaintiff,
v.
U.S. BANK, N.A., Defendant.

          MEMORANDUM AND ORDER ON DEFENDANT'S MOTION TO DISMISS

          F. Dennis Saylor IV, United States District Judge.

         This is a dispute concerning an upcoming mortgage foreclosure. Plaintiff Kevin Kenney has been in default on his mortgage for approximately nine years. U.S. Bank, N.A., the current holder of the note, now seeks to foreclose. Kenney has brought suit against U.S. Bank under state law seeking to enjoin the foreclosure and recover damages. U.S. Bank has moved to dismiss the complaint in its entirety. For the following reasons, the motion to dismiss will be granted in part and denied in part.

         I. Background

         A. Factual Background

         The facts are set forth as alleged in the complaint and attached exhibits.

         Kevin Kenney owns a residential property located at 1 Chamberlain Street in Hopkinton, Massachusetts (the “property”). (Compl. ¶ 3). U.S. Bank is the successor-in-interest to various parties who were assigned the note. (Id. ¶ 2).

         On April 24, 2006, Kenney applied for his first mortgage refinancing with Mortgage Lenders Network USA, Inc. According to the complaint, Mortgage Lenders was a “prodigious ‘subprime' lender” that has since filed for bankruptcy. (Id. ¶¶ 4-5). Mortgage Lenders served as the mortgage broker on the transaction and received a commission for its services. (Id. ¶ 6). Before Kenney signed the mortgage documents, Mortgage Lenders representatives allegedly told him that he would receive an “interest only” fixed-rate loan with a 6% interest rate. (Id. ¶¶ 7-8). However, the loan included an adjustable rate “balloon” note with an initial rate of 8.69%, capped at 14.69%. (Id. ¶ 9).[1] During the 2006 refinancing process, Kenney contends that he was unaware he was signing an adjustable rate mortgage, because the loan documents were “misleading and confusing.” (Id. ¶¶ 10, 20-21). The principal amount of the refinancing loan was $380, 700. (Compl. Ex. F. at 3).

         Mortgage Lenders allegedly did not require written verification of Kenney's income during the application process. (Compl. ¶ 11). The complaint alleges that Mortgage Lenders inflated Kenney's income, as his actual resources would not justify the “terms and provisions of the mortgage.” (Id. ¶¶ 12-13). The complaint further alleges that Mortgage Lenders knew that it was misleading Kenney and other borrowers about their mortgages, allegedly as part of the practice of “mortgage flipping, ” whereby lenders saddle borrowers with debt to eliminate home equity and increase the likelihood of foreclosure. (Id. ¶¶ 16, 18). Mortgage Lenders allegedly encouraged its brokers to falsify loan documents to increase the number of subprime mortgages. (Id. ¶ 23).

         Kenney went into default on his loan in 2008. (Compl. Ex. A at 1).[2] In October 2014, he was offered a temporary loan modification through the Home Affordable Modification Program. (Compl. ¶ 24).[3] He would receive a permanent loan modification if he successfully made all payments under a trial period plan (“TPP”). (Id.).

         Under the terms of the TPP, Kenney was required to make three monthly payments of $2, 580.44 on December 1, 2014; January 1, 2015; and February 1, 2015. (Compl. Ex. A at 6). The first two payments were made on time without issue. (Id. at 1; Compl. ¶ 25).

         A series of severe snowstorms then hit New England in January 2015, causing severe disruptions to the area. (Compl. Ex. A at 2). According to the complaint, the loan servicer, Wells Fargo (doing business as America's Servicing Company) allegedly assured Kenney that “his loan was in forbearance” and that the February 1, 2015 payment due date would be postponed until the weather improved. (Id.). The letter does not, however, indicate when the payment was actually going to be due; instead, it alleges that “the bank would wait until the weather improved and commerce returned to normalcy before any payment was required.” (Id.). Sometime after February 1, 2015-the letter does not say when-Kenney attempted to make the third TPP payment. (Id.). However, the payment was declined as late.

         Foreclosure proceedings have now commenced. (Id. at 2-3). U.S. Bank, which has acquired the note, allegedly has not yet offered a “face-to-face” meeting with Kenney under Massachusetts's right-to-cure law. (Compl. ¶ 27).

         B. Procedural Background

         Kenney filed suit in state court on July 14, 2017. The complaint asserted ten counts: violation of Mass. Gen. Laws ch. 93A (Count 1); violation of Mass. Gen. Laws ch. 183C (Count 2); violation of 940 CMR 8.00 et seq. (Count 3); violation of the Truth in Lending Act (Count 4); violation of the Federal Real Estate Settlement Procedures Act (Count 5); unconscionability (Count 6); fraud (Count 7); unjust enrichment (Count 8); estoppel (Count 9); and breach of contract (Count 10).

         That same day, Kenney also filed an ex parte motion for a temporary restraining order and preliminary injunction to prevent the bank from foreclosing on his property, which was then scheduled for July 18, 2017. The state court issued the TRO and scheduled a preliminary injunction hearing for July 21, 2017, which was later rescheduled for August 8, 2017. Because of the TRO, defendant postponed the foreclosure sale. The bank then ...


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