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Searle v. RBS Citizens Bank N.A.

United States District Court, D. Massachusetts

March 7, 2018




         Plaintiffs Robert and Susan Searle bring this action against RBS Citizens, N.A. (“Citizens”) and Ditech Financial LLC, formerly known as Green Tree Servicing LLC (“Ditech/Green Tree”) (collectively “Defendants”), in an attempt to avert the foreclosure of their home located at 9 Prospect St., Merrimac, Massachusetts. Plaintiffs claim that Defendants failed to respond to their requests to produce certain documents related to the mortgage, and thus violated (1) the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2605(e)(1)(A) and (B), and Regulation X at 24 C.F.R. § 3500; (2) the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692(a); and (3) the Truth in Lending Act (“TILA”), 15 U.S.C. § 1640(a)(1) and (2). [ECF No. 19]. Currently pending are Plaintiffs' motion for leave to file a Second Amended Complaint and motion for a preliminary injunction to prevent the foreclosure of the property, and Defendants' motion to dismiss. [ECF Nos. 21, 22, 26].

         For the reasons stated herein, the motion for leave to file a Second Amended Complaint and motion to dismiss [ECF Nos. 21, 22] are GRANTED and the motion for a preliminary injunction [ECF No. 26] is DENIED.


         On June 10, 2005, Plaintiffs took out a $50, 000 home equity line of credit[2] from First Horizon Home Loan Corporation. [ECF Nos. 26 at 1, 26-1 at 23].[3] The line of credit served as a second lien behind their original mortgage. [ECF No. 26-1 at 2]. The agreement that governed the line of credit stipulated that the initial interest rate would be 6.5%, with a five-year draw period. After the end of the draw period, the loan would go into a fifteen year repayment period with a fixed interest rate, during which time the Plaintiffs were to make a monthly payment of principal plus interest. [ECF No. 26 at 1].

         Plaintiffs allege that as the end of the draw period approached, they realized that their new payment was not going to be affordable. [ECF No. 26 at 1]. By then, Plaintiffs had both lost their jobs and were struggling financially due to their reduction in income. Id. Because of this, for the first ten months after the loan converted to a fixed rate loan, they continued to make “interest only” payments, even though the agreement required them to pay interest plus principal. Id. Along with each “interest only” payment made over the ten-month period, Plaintiffs sent letters to the lender, Citizens, [4] and the servicer at that time, Green Tree, [5] requesting a loan modification. [ECF Nos. 26-1 at 1-4, 26-2 at 25]. After ten months, the servicer sent a letter to Plaintiffs stating that it “would no longer accept [the] ‘interest only' payments and would foreclose on [Plaintiffs' property] if [they] did not pay the monthly [p]rincipal and [i]nterest payment they had requested.” [ECF No. 26-1 at 2]. Plaintiffs were persistent in their efforts to research and request a loan modification, including making daily inquiries over a period of several months. Id. at 2-3. Plaintiffs assert that eventually, the servicer advised them that it does not make loan modifications. [ECF Nos. 26 at 2, 26-2 at 17, 29].

         In early 2012, Plaintiffs sought the help of the Massachusetts Attorney General's Office, and over the next year, that office assisted Plaintiffs in their efforts to obtain a modification by coordinating communication with Green Tree. [ECF Nos. 26 at 2, 26-1 at 20-22, 26-2 at 11-13, 16]. After some back and forth, Plaintiffs were able to obtain a modification. [ECF No. 26-1 at 3]. In early April 2012, Green Tree sent Plaintiffs documents to modify the interest rate and extend the maturity date of the loan by eighteen months (“the Modification Agreement”). [ECF No. 26 at 3, 26-2 at 2-9 ]. Plaintiffs claim that, when they reviewed the documents, they realized that the interest rate would actually go up, it was not clear what the monthly payment would be, and the documents were otherwise “shoddy” and “inconsistent.” [ECF No. 26-1 at 2-5]. Despite these concerns, however, Plaintiffs signed the Modification Agreement on April 19, 2012. [ECF No. 21-5 at 3].

         Thereafter, Plaintiffs wrote four letters, which they believed to be “Qualified Written Requests” under RESPA, from November 9, 2014 to November 4, 2016. [ECF Nos. 26 at 4, 26-2 at 2-9]. Plaintiffs sent copies of each letter to the lender, Citizens, and to the servicer. Id. Plaintiffs believed that Citizens and Ditech/Green Tree did not have the legal right to collect payments. In a letter to Green Tree, dated March 28, 2015, Plaintiffs requested, among other items:

• “copies of ALL documents since consummation of the loan to further insure a Validation of Debt with also a Request for Accounting;”
• “an itemized accounting of the ‘Corporate Advances' that have been accumulating on each monthly statement and where they derive;”
• “any and all reference to ‘insurance' and costs associated with insurance and/or taxes;” and
• “validation of who owns the note and . . . a copy of same along with copy of the assignments from the original note holder to the current note holder.”

[ECF No. 26-2 at 5]. On that same date, Plaintiffs requested similar documents from Citizens.[6]Id. at 3-4. Plaintiffs allege that Defendant “failed to comply on all requests, ” though they also acknowledge that they received replies that contained monthly statements and a “spreadsheet accounting.” [ECF No. 26 at 4].

         The complaint states that Ditech became the servicer of the loan in late 2015. Id. at 8. The complaint does not describe the relationship between Green Tree and Ditech, or assert that servicing rights were transferred from Green Tree to Ditech. Defendants clarify that Ditech previously did business under the name “Green Tree Servicing” [ECF No. 21 at 1-2], which Plaintiffs do not dispute.

         Plaintiffs contend that they have suffered financially and have been kept in “foreclosure status” for the past seven years. [ECF No. 26 at 9]. They claim that “[c]ontinuing to avoid compliance with this request for pertinent documents has damaged [them] and continues to keep them from moving forward in obtaining financing elsewhere due to the ‘Foreclosure Status' they are forced to remain in.” Id. at 5. Additionally, Plaintiffs allege that Defendants have “threaten[ed] to foreclose on the property, and provide[d] foreclosure auction dates that encourage the public to visit their home to take pictures.” [ECF No. 26-1 at 3]. Furthermore, Plaintiffs assert that many individuals have approached the house, knocked on the door, and asked if they can buy the house, which Plaintiffs claim is a violation of their right to quiet enjoyment. Id.

         On March 6, 2017, Plaintiffs filed their initial complaint and motion for preliminary injunction in Essex Superior Court, which requested that the court enjoin Defendants from conducting a foreclosure sale of the property. [ECF No. 28 at 2-3]. On March 15, 2017, Defendants removed the case to this Court [ECF No. 1], and on April 5, 2017, they filed a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) for failure to state a claim [ECF No. 9].

         On June 23, 2017, with leave of the court, Plaintiffs filed an amended complaint and motion for preliminary injunction. [ECF No. 19]. On July 1, 2017, Defendants filed a motion to dismiss the amended complaint. [ECF No. 21]. On August 2, 2017, Plaintiffs moved for leave to file a second amended complaint. [ECF No. 22]. On August 30, 2017, Plaintiffs filed their proposed second amended complaint and another motion for a preliminary injunction. [ECF No. 26]. On September 11, 2017, Defendants filed a supplemental opposition to Plaintiffs' ...

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