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Ayoub v. Citimortgage, Inc.

United States District Court, D. Massachusetts

March 14, 2018




         Plaintiff Marie Claire Ayoub filed this action against her current mortgage servicer, Defendant CitiMortgage, Inc., based on the denial of her applications for a loan modification. Currently pending before the Court are Plaintiff's request for a preliminary injunction, as set forth in the operative Complaint [ECF No. 37], and Defendant's motion to dismiss for failure to state a claim. [ECF No. 44]. For the reasons that follow, the request for a preliminary injunction is DENIED and Defendant's motion to dismiss is GRANTED as to Count II and DENIED as to Counts I and III.

         I. BACKGROUND

         In evaluating Defendant's motion to dismiss, the Court accepts the well-pleaded allegations as true. See Ruivo v. Wells Fargo Bank, 766 F.3d 87, 90 (1st Cir. 2014). Plaintiff has attached several documents to the Complaint, which the Court may consider as part of the pleadings. See Giragosian v. Ryan, 547 F.3d 59, 65 (1st Cir. 2008); Trans-Spec Truck Serv., Inc. v. Caterpillar Inc., 524 F.3d 315, 321 (1st Cir. 2008). The Court may also look to documents that are central to Plaintiff's claim and documents sufficiently referred to in the Complaint. See Watterson v. Page, 987 F.2d 1, 3 (1st Cir. 1993).

         On September 30, 2005, Plaintiff obtained a loan for $288, 000 from First Franklin, Inc. (“First Franklin”), which was secured by a mortgage on her home in Methuen, Massachusetts. Compl. ¶¶ 4, 6. First Franklin represented to Plaintiff that she was entering into a fixed-rate mortgage at 5.25%. The mortgage was, in actuality, a “predatory” two-year adjustable-rate mortgage with a fully indexed rate of 13%. Id. ¶¶ 7-8. Once adjusted to the fully indexed rate, her monthly mortgage payments exceeded 50% of her and her husband's monthly household income, and the loan amount equaled or exceeded the value of the property. Id. ¶¶ 9-10. Plaintiff eventually defaulted on the mortgage. Id. ¶ 12.

         On February 16, 2013, Plaintiff applied to Defendant for a loan modification through the Home Affordable Modification Program (“HAMP”). Id ¶ 13. HAMP was a sub-part of the Troubled Asset Relief Program, which delegated broad powers to the Secretary of the Treasury Department “to mitigate the financial impact of the foreclosure crisis and preserve homeownership.” Bosque v. Wells Fargo Bank, N.A., 762 F.Supp.2d 342, 346-47 (D. Mass. 2011). HAMP was intended to “provide relief to borrowers who [had] defaulted on their mortgage payments or who [were] likely to default by reducing mortgage payments to sustainable levels, without discharging any of the underlying debt.” Id. at 347. Mortgage servicers, including Defendant, Compl. ¶ 59, entered into Servicer Participation Agreements with the government, pursuant to which they “agreed to identify homeowners who were in default or would likely soon be in default on their mortgage payments, and to modify the loans of those eligible under the program.” Young v. Wells Fargo Bank, N.A., 717 F.3d 224, 228-29 (1st Cir. 2013) (quoting Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547, 556 (7th Cir. 2012)). The Treasury Department issued “a series of directives that provide guidance to servicers implementing HAMP.” Bosque, 762 F.Supp.2d at 347; see Charest v. Fed. Nat'l Mortg. Ass'n, 9 F.Supp.3d 114, 125 (D. Mass. 2014) (“HAMP guidelines impose a series of detailed obligations on participating servicers . . . in processing an application for a loan modification”).

         To be eligible for HAMP, “the mortgage must be a first lien mortgage that originated on or before January 1, 2009, the mortgage must be delinquent or default [must be] reasonably foreseeable, the current unpaid principal balance must be less than a certain amount of money for a given type of property, the required monthly payments on the mortgage must exceed 31% of the homeowner's monthly income, and the property must not be condemned.” Regal v. Wells Fargo Bank, N.A., 205 F.Supp.3d 195, 202 (D. Mass. 2016). “If the servicer determines that the borrower's mortgage meets those criteria, the servicer must also subject each applicant's information to Net Present Value (NPV) Testing.” Id. (citation and quotation marks omitted). The NPV test “uses a number of inputs to determine whether a loan modification would create greater financial value than a foreclosure sale.” Morris v. BAC Home Loans Servicing, L.P., 775 F.Supp.2d 255, 260 n.3 (D. Mass. 2011). “If the borrower appears to qualify under the HAMP guidelines, he or she is given a document entitled Home Affordable Modification Trial Period Plan (TPP).” Durmic v. J.P. Morgan Chase Bank, NA, No. 10-10380, 2010 WL 4825632, at *1 (D. Mass. Nov. 24, 2010). A TPP initiates a “period during which the [borrower] is to make the modified mortgage payments.” In re JPMorgan Chase Mortg. Modification Lit., 880 F.Supp.2d 220, 226 (D. Mass. 2012). If the borrower successfully completes the TPP, “the servicer offers the [borrower] a permanent mortgage modification.” Id.

         On July 16, 2013, Defendant informed Plaintiff by telephone that her application was denied, because the HAMP guidelines “could not create an affordable payment for her income.” Compl. ¶ 17; [ECF No. 37-2]. Plaintiff appealed the decision on the grounds that she plainly satisfied the HAMP eligibility requirements. Compl. ¶¶ 14-16. On July 29, 2013, Defendant affirmed the denial of her application, but with little to no explanation of its reasoning. Id. ¶¶ 17-19; [ECF Nos. 37-2, 37-3]. In support of the motion to dismiss, Defendant filed a copy of a notice letter to Plaintiff dated July 31, 2013, stating that she was denied for the following reason: “Application Discrepancy: we are unable to offer you a [HAMP modification] because there was an irreconcilable discrepancy with your application request.” [ECF No. 45-1]. The letter further stated that Defendant considered Plaintiff's IRS Form 4506-T and most recent profit and loss statement in reaching its decision. Id. On April 28, 2014, Plaintiff sent Defendant a written demand for a HAMP modification, pursuant to Mass. Gen. Laws ch. 93A (“Chapter 93A”), based on the predatory terms of her mortgage and her eligibility for a loan modification. Compl. ¶ 21; [ECF No. 37-4]. Defendant disputed Plaintiff's arguments therein and did not provide a reasonable settlement offer in response. Compl. ¶ 22.

         About one year later, on June 3, 2014, Plaintiff submitted a second HAMP application to Defendant. Id. ¶ 23. On June 26, 2014, Defendant requested that Plaintiff supplement her application with additional documents that Plaintiff alleges were already included with her second application or were not required under the HAMP guidelines. Id. ¶¶ 24-25. The June 26 request sought the following from Plaintiff: (1) original bank statements from the past two months; (2) resubmission of IRS Form 4506-T, because Plaintiff's prior form contained an illegible or missing social security number; (3) homeowner's association dues statement or a letter indicating that there were no applicable dues; (4) paystubs from the past 30 or 45 days, because her documents on file were incomplete or illegible; (5) business and personal tax returns for the year 2012; (6) a contribution letter from Plaintiff's husband; and (7) a profit and loss statement for any additional household income that listed the business or owner's name and business income and expenses. [ECF No. 37-5].

         On July 31, 2014, Defendant requested another set of documents that, according to Plaintiff, had also been provided with Plaintiffs second application. Compl. ¶ 28; [ECF No. 37-6]. Although Plaintiff resubmitted IRS Form 4506-T in response to the June 26 request, the July 31 request again sought a new IRS Form 4506-T, ostensibly because Plaintiff's most recent submission included a different address than on her original form. [ECF No. 37-6]. The July 31 request also asked for updated income and bank statements, to the extent that Plaintiff had received any such documents since filing her application, and a profit and loss statement of additional household income. Id.

         On September 22, 2014, Defendant issued a third request for documents that Plaintiff again states had already been provided to Defendant, including: (1) a request for mortgage assistance form (“RMA”) or hardship affidavit, because the document on file had expired; (2) the four most recent paystubs from Plaintiff's husband, because the documents on file had expired; (3) a profit and loss statement with itemized business expenses; (4) a signed and dated August 2014 profit and loss statement; (5) bank statements for July to August 2014 and August to September 2014; (6) a letter explaining why Plaintiff's or her husband's self-employment income was not reflected on their tax returns; (7) 2012 to 2013 business tax returns; and (8) the three most recent business bank statements. Compl. ¶ 31; [ECF No. 37-8]. Plaintiff sent emails to Defendant on October 20, November 17, and December 1, 2014, seeking an update on the status of her application, but received no response. Compl. ¶¶ 32-33; [ECF No. 37-9].

         On January 7, 2015, Defendant denied Plaintiff's second HAMP application due to a “quality application discrepancy.” Compl. ¶ 35; [ECF No. 37-10]. On January 18, 2015, Plaintiff sent Defendant a second written demand under Chapter 93A, but Defendant again did not respond with a reasonable settlement offer. Compl. ¶ 38; [ECF No. 37-11].

         On July 9, 2015, Plaintiff initiated this lawsuit in Massachusetts Superior Court, and Defendant removed the case to this Court on August 24, 2015. [ECF Nos. 1, 5]. On or around September 12, 2015, in connection with the parties' efforts to resolve this action, Plaintiff filed a third HAMP application. Compl. ¶ 41; [ECF No. 6]. On December 1, 2016, Defendant denied the application due to an “irreconcilable discrepancy within her application.” Compl. ¶ 42. The notice of the denial of her application did not further explain the basis for the decision. [ECF No. 37-13]. On January 3, 2017, Plaintiff sent a written demand under Chapter 93A asking that Defendant offer her a TPP. Compl. ¶¶ 43-45, 47.

         As a result of Defendant's conduct, Plaintiff alleges that she will lose her home, and has already lost equity, suffered damage to her credit rating, and accumulated unnecessary mortgage arrearages. Id. ΒΆΒΆ 39, 75. She requests judgment in her favor on all counts, the issuance of a preliminary injunction enjoining the scheduling of any foreclosure on her home during the pendency of this ...

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