United States District Court, D. Massachusetts
MEMORANDUM AND ORDER ON DEFENDANTS' MOTION TO
DENNIS SAYLOR, IV UNITED STATES DISTRICT JUDGE.
an action to prevent a mortgage foreclosure. Plaintiffs Leo
and Victoria Paulding (1) seek a declaratory judgment that
their mortgage is void because the original lender was not
licensed to extend mortgage loans in Massachusetts and (2)
assert claims for breach of contract, breach of the implied
covenant of good faith and fair dealing, and violation of
Mass. Gen. Laws Chapter 93A against the present mortgagee and
its present and former loan servicers.
have filed a joint motion to dismiss the complaint. For the
reasons set forth below, that motion will be granted in part
and denied in part.
facts are set forth as alleged in the complaint, except as
Victoria Paulding are co-owners of a property at 3 Glacier
Path, East Sandwich, Massachusetts. (Am. Compl. ¶¶
1, 6). The Pauldings purchased the property on December 5,
2006. (Id. ¶ 10). To do so, they borrowed $585,
000 secured by a mortgage on the property. (Id.)
New Penn Financial, LLC d/b/a Shellpoint Mortgage Servicing
(“Shellpoint”) is the current servicer or
subservicer of the Pauldings' mortgage. (Id.
¶¶ 8, 37). Defendant Bank of America, N.A. is the
former servicer and successor to Countrywide Home Loans.
(Id. ¶ 7). Defendant The Bank of New York
Mellon f/k/a the Bank of New York (“BNY Mellon”)
is the trustee for the Certificateholders of CWALT, Inc.,
Alternative Loan Trust 2006-J8, Mortgage Pass-Through
Certificates, Series 2006-J8 (the “Trust”), the
trust that currently holds the mortgage. (Id.
¶¶ 9, 29).
to the complaint, the source of the mortgage loan was
“America's Wholesale Lender, ” which
purported to be a New York corporation; “America's
Wholesale Lending was a non-existent, fictitious legal
entity that was never incorporated anywhere in the United
States and was not authorized to conduct business in the
Commonwealth of Massachusetts”; and the funds for
their loan came from Countrywide Home Loans, which was later
purchased by Bank of America. (Compl. ¶¶ 7, 10-13,
2006 mortgage agreement designated Mortgage Electronic
Registration Systems (“MERS”) as the
“nominee for the Lender (AWL) and Lender's
successors and assigns.” (Id. ¶ 14, Ex.
A). MERS assigned the mortgage to BNY Mellon, as trustee, in
September 2012. (Id. ¶ 15, Ex. B).
complaint alleges that on August 21, 2014, Bank of America
entered into a settlement agreement with the Department of
Justice requiring it to forgive portions of certain
borrowers' mortgage loan balances. (Id.
¶¶ 24-25). According to the complaint, the Trust
that owns the Paulding's mortgage was explicitly listed
in the settlement agreement as one whose mortgages were to be
reduced under the settlement, and the settlement did not
require borrowers to be in arrears on their mortgage to be
eligible for forgiveness as long as the mortgage was owned by
one of the listed trusts. (Id. ¶¶ 27-28).
Pauldings defaulted on their mortgage payments on December 1,
2015. (Id. ¶ 31). According to the complaint,
they did so because the interest rate of their
adjustable-rate loan increased, and they could no longer
afford their payments. (Id.).
January 30, 2016, the Pauldings submitted a Loss Mitigation
Application package to Bank of America. (Id. ¶
32). They allege that based on the monthly household income
provided in that application of $12, 086, they were eligible
for a modified monthly mortgage payment of approximately $3,
021 and a reduced loan balance of $337, 500 (the fair market
value of the property). (Id. ¶ 33, 39).
Instead, on April 6, 2016, they were offered a capitalized
loan modification with a monthly payment of $4, 071 and a
capitalized modification balance of $582, 000. (Id.
¶ 34). The Pauldings considered that unfair and
deceptive conduct and sent Bank of America a demand letter
pursuant to Mass. Gen. Laws ch. 93A requesting (1) $244, 500
(the difference between the balance of their mortgage and the
fair market value of their home) and/or (2) a modification
under the Home Affordable Modification Program
(“HAMP”) Tier 2 or the DOJ settlement to reduce
their loan to $337, 500. (Id. ¶ 36, Ex. F).
complaint alleges that, in May 2016, Bank of America
transferred the “servicing” of the loan to
Shellpoint. (Id. ¶ 37; see also Id.
¶ 7 (calling Bank of America the “former
servicer”)). As the underlying mortgage loan had been
assigned to BNY Mellon in 2012, a transfer of the full
servicing rights would mean that, from May 2016 onward, Bank
of America had no further rights or obligations with respect
to the Pauldings' mortgage. Elsewhere, however, the
complaint calls Shellpoint the “servicer” or
“servicing agent” for Bank of America,
(id. ¶¶ 41, 78); calls Shellpoint a
“sub-servicer” of Bank of America that is bound
by Bank of America's servicing-related commitments,
(id. ¶¶ 37, 44); and speaks of Bank of
America as remaining an “investor” on the loan,
with supervisory responsibilities over Shellpoint,
(id. ¶¶ 37, 42, 85). Taking these
allegations in the light most favorable to plaintiffs, the
Court will assume that the complaint is alleging that Bank of
America remained the “servicer” on the loan-that
is, the party owning the servicing rights-and Shellpoint
became a “subservicer” on the loan-that is, a
party with the contractual right to receive a fee from the
servicer in exchange for the performance of day-to-day
servicing functions-and thereby an agent of Bank of America.
See Fogg v. Ocwen Loan Servicing, LLC, 2015 WL
1565229, at *10 (D. Me. Apr. 8, 2015).
August 17, 2016, the Pauldings submitted another Loss
Mitigation Application package, this time to Shellpoint,
stating that their monthly household income was $11, 892.
(Am. Compl. ¶ 38). According to the complaint, this
should have entitled them to a monthly mortgage payment of
$2, 937 and a reduced loan balance of $337, 500.
(Id. ¶ 39). Instead, they were offered a
capitalized modification which “raised their mortgage
payment to $3, 268 from its existing payment of $3, 150 and
did nothing to address the Plaintiffs'
‘underwater' status on their loan.”
(Id. ¶ 40).
complaint alleges that on November 14, 2016, Ezra Bailey, a
representative of Shellpoint, falsely told plaintiffs'
counsel that neither Shellpoint nor Bank of America were
participating in HAMP or the DOJ settlement, and Shellpoint
had no obligation to comply with those programs.
(Id. ¶ 44).
that conversation, the Pauldings sent a Chapter 93A demand
letter to Shellpoint, requesting the same relief they
requested from Bank of America in their previous Chapter 93A
demand letter. (Id. ¶ 45).
10, 2017, Shellpoint sent the Pauldings a foreclosure
acceleration letter. (Id. ¶ 23, Ex. D).
filed the complaint on April 10, 2017, in state court.
(Notice of Removal ¶ 1). Defendants removed the case to
federal court, and subsequently filed a motion to dismiss the
complaint for failure to state a claim. Plaintiffs responded
by filing an amended complaint, and defendants then filed a
new motion to dismiss the amended complaint. Neither party
requested a hearing on the motion.
amended complaint contains seven counts. Count 1 seeks a
declaratory judgment that “the plaintiffs' 2006
mortgage is void because America's Wholesale Lender was
never incorporated in New York, never registered as a d/b/a
in Massachusetts by Countrywide or Bank of America and was
never licensed to conduct business as a lender in the
Commonwealth, ” in violation of Mass. Gen. Laws ch.
255E, § 2. (Am. Compl. ¶¶ 46-51). Count 2
seeks a declaratory judgment that “the plaintiffs'
2006 mortgage [is] void because the 2012 assignment from MERS
to Bank of New York was invalid on its face.”
(Id. ¶¶ 52-56). Counts 3 and 4 allege that
the defendants breached the implied covenant of good faith
and fair dealing and the mortgage agreement, respectively, by
(1) sending an inaccurate foreclosure acceleration letter and
(2) filing a foreclosure petition in the Land Court prior to
sending the acceleration letter, publishing a notice of
mortgage sale in the local newspaper, and filing an affidavit
of compliance with the registry of deeds. (Id.
¶¶ 57-68). Counts 5 and 6 allege that Bank of
America and Shellpoint, respectively, engaged in unfair and
deceptive trade practices in violation of Chapter 93A by
failing to offer the Pauldings a modification under HAMP or
the DOJ settlement. (Id. ¶¶ 69-81). Count
7 alleges that Bank of America's refusal to offer a
modification under the DOJ settlement was a breach of the
implied covenant of good faith and fair dealing.
(Id. ¶¶ 82-87).