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Lucas v. New Penn Financial, LLC

United States District Court, D. Massachusetts

January 31, 2019




         Plaintiffs David and Louise Lucas bring claims for violations of the Real Estate Settlement Procedures Act (“RESPA”) (Counts I through V), 12 U.S.C. §§ 2601 et seq., 12 C.F.R. §§ 1024.35, 1024.41, the Fair Debt Collection Practices Act (“FDCPA”) (Count VI), 15 U.S.C. § 1692 et seq., Mass. Gen. Laws ch. 93A (Count VII), and intentional and/or negligent misrepresentation (Count VIII)[1] against Defendant New Penn Financial, LLC d/b/a Shellpoint Mortgage Servicing (“Shellpoint”). [ECF No. 8 (“Compl.”)]. Before the Court is Shellpoint's motion to dismiss Counts I, IV, V, and VI. [ECF No. 9]. For the reasons set forth herein, the motion is GRANTED IN PART and DENIED IN PART.

         I. BACKGROUND

         The following facts are drawn from the Amended Complaint. The Court, as it must, takes the well-pleaded allegations as true in evaluating the motion to dismiss. See Ruivo v. Wells Fargo Bank, N.A., 766 F.3d 87, 90 (1st Cir. 2014). Certain details are also culled from official public records and documents whose authenticity is not disputed. See Watterson v. Page, 987 F.2d 1, 3 (1st Cir. 1993) (noting that although documents other than those attached to the complaint are, ordinarily, not considered when deciding a motion to dismiss, there are “narrow exceptions for documents the authenticity of which are not disputed by the parties; for official public records; for documents central to plaintiffs' claim; or for documents sufficiently referred to in the complaint”).

         Plaintiffs are the former owners of a house in Peabody, Massachusetts. Compl. ¶¶ 1, 28. In July 2001, Plaintiffs executed a note that was secured by a mortgage on the property in favor of Citiwide Home Mortgage. Compl. ¶¶ 9-10. In 2013, David Lucas experienced serious health problems that led to economic distress and caused Plaintiffs to default on the loan. Compl. ¶ 12. Plaintiffs retained counsel to assist them in seeking a loan modification. In May 2016, their attorney, Brian Goodwin, filed a loss mitigation application with then-mortgage servicer Rushmore Loan Management Services (“Rushmore”), but received no response to that application. Compl. ¶¶ 11, 14, 17. On June 1, 2016, the mortgage loan servicer changed from Rushmore to Defendant Shellpoint. Compl. ¶ 15. After Shellpoint informed Plaintiffs that a new loss mitigation application was required, Attorney Goodwin submitted a second application to Shellpoint on December 12, 2016. Compl. ¶ 17. Shellpoint acknowledged receipt of the complete application via letter dated December 14, 2016. Compl. ¶ 74.

         Even though Plaintiffs submitted their loss mitigation application through their attorney, Shellpoint continued to contact them directly, including through letters dated December 13, 14, and 16, 2016 and January 9, 2017 as well as numerous telephone calls. Compl. ¶¶ 20, 21. Plaintiffs did not receive a denial of their loss mitigation application, but were informed in March 2017, by an unspecified person, that a foreclosure sale had been scheduled for their property. Compl. ¶¶ 24-25. Shortly thereafter, on March 24, 2017, Shellpoint informed Attorney Goodwin that Plaintiffs had been approved for a loan modification, that the modification paperwork would be sent shortly, and that the foreclosure sale would be postponed until completion of trial payments. Compl. ¶¶ 22, 25. Neither Plaintiffs nor their attorney ever received the modification paperwork, and Plaintiffs' attempts to discuss the situation with Shellpoint in late March and early April 2017 were unsuccessful. Compl. ¶¶ 26-27. Plaintiffs' house was sold at a foreclosure sale on April 12, 2017, and they were subsequently evicted. Compl. ¶¶ 28-29, 43.

         Attorney Goodwin responded to the foreclosure sale by sending notices of error to Shellpoint on April 12 and May 26, 2017. Compl. ¶¶ 30, 32. Plaintiffs received a USPS return receipt showing that their April 12 notice of error had been delivered but did not otherwise receive a response to that notice. Compl. ¶¶ 30-31, Ex. B. Shellpoint sent a response to the May 26 notice of error in June 2017 attaching a purported January 11, 2017 letter denying Plaintiffs' loss mitigation application, but Plaintiffs had not previously received that denial. Compl. ¶¶ 35- 36, Ex. D at 6-15. The January 11 letter asserted that Plaintiffs' “financial and other information indicates that although [Plaintiffs] may have a hardship, [Plaintiffs] do not qualify for a loan modification Trial Period Plan. [Plaintiffs] are however conditionally approved for the foreclosure alternatives described below.” Compl. Ex. D at 6.


         On a motion to dismiss for failure to state a claim, the Court accepts as true all well-pleaded facts in the complaint and draws all reasonable inferences in the light most favorable to the plaintiff. United States ex rel. Hutcheson v. Blackstone Med., Inc., 647 F.3d 377, 383 (1st Cir. 2011). While detailed factual allegations are not required, the complaint must set forth “more than labels and conclusions, ” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007), and it must contain “factual allegations, either direct or inferential, respecting each material element necessary to sustain recovery under some actionable legal theory.” Gagliardi v. Sullivan, 513 F.3d 301, 305 (1st Cir. 2008) (citations omitted). The facts alleged, taken together, must “state a claim to relief that is plausible on its face.” A.G. ex rel. Maddox v. Elsevier, Inc., 732 F.3d 77, 80 (1st Cir. 2013) (quoting Twombly, 550 U.S. at 570). “A claim is facially plausible if supported by ‘factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.'” Eldredge v. Town of Falmouth, 662 F.3d 100, 104 (1st Cir. 2011) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).

         When assessing the sufficiency of a complaint, the Court first “separate[s] the complaint's factual allegations (which must be accepted as true) from its conclusory legal allegations (which need not be credited).” Maddox, 732 F.3d at 80 (quoting Morales-Cruz v. Univ. of P.R., 676 F.3d 220, 224 (1st Cir. 2012)). Next, the Court “determine[s] whether the remaining factual content allows a ‘reasonable inference that the defendant is liable for the misconduct alleged.'” Id. “[T]he court may not disregard properly pled factual allegations, ‘even if it strikes a savvy judge that actual proof of those facts is improbable.'” Ocasio-Hernandez v. Fortuño-Burset, 640 F.3d 1, 12 (1st Cir. 2011) (quoting Twombly, 550 U.S. at 556). “[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, ” however, a claim may be dismissed. Iqbal, 556 U.S. at 679.


         A. Count I: RESPA Violation of 12 C.F.R. § 1024.41(b)

         Plaintiffs claim that Shellpoint violated 12 C.F.R. § 1024.41(b) by failing to review their loss mitigation applications and bring a claim for that violation pursuant to 12 U.S.C. § 2605(f) (“Count I”), which allows individuals to recover “actual damages, ” plus statutory damages of up to $2, 000 upon the showing of a pattern or practice of noncompliance. See 12 C.F.R. § 1024.41(a). A mortgage loan servicer who receives a loss mitigation application “45 days or more before a foreclosure sale” must “promptly . . . review the loss mitigation application to determine if the loss mitigation application is complete” and “[n]otify the borrower in writing within 5 days (excluding legal public holidays, Saturdays, and Sundays)” that it has received the application and determined either that the application is complete or incomplete. 12 C.F.R. § 1024.41(b)(2)(i).[2]

         Here, the Complaint asserts that Plaintiffs sent Shellpoint their complete loss mitigation application on December 12, 2016, and that Shellpoint acknowledged receipt of the complete application in a letter dated December 14, 2016. Plaintiffs cannot maintain a claim that Shellpoint violated 12 C.F.R. § 1024.41(b) based on the December 12 application given that Shellpoint correctly acknowledged receipt of the complete loss mitigation application within the allowed five days.

         Although Count I refers only to “the Application, ” which is defined as the December 12, 2016 loss mitigation application, Plaintiffs argue that the motion to dismiss should be denied because they did not receive a response to the May 2016 application that they sent to then-servicer Rushmore. [ECF No. 15 at 4-5]. The applicable regulations require a transferee servicer (such as Shellpoint) to acknowledge receipt of a loss mitigation application within 10 days of the date servicing transferred if “the period to provide the notice required by paragraph (b)(2)(i)(B) of this section has not expired as of the transfer date and the transferor servicer has not provided such notice.” 12 C.F.R. § 1024.41(k)(2)(i) (emphasis added). Servicing of Plaintiffs' loan was transferred to Shellpoint on June 1, 2016, and as a result, Shellpoint had an obligation to acknowledge receipt only if the application was received by Rushmore after May 24, 2016 (such that the 5 days excluding ...

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