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Dionne v. Federal National Mortgage Association

United States District Court, D. New Hampshire

June 14, 2016

Jason S. Dionne, et al.
v.
Federal National Mortgage Association and JPMorgan Chase Bank, N.A. Opinion No. 2016 DNH 093

          David E. Buckley, Esq. Gary Goldberg, Esq. Andrea Bopp Stark, Esq. Nathan Reed Fennessy, Esq.

          ORDER

          Landya McCafferty United States District Judge

         Plaintiffs originally filed this mortgage foreclosure dispute in the New Hampshire Superior Court, Hillsborough County, Southern District. Defendants Federal National Mortgage Association (“Fannie Mae”) and JPMorgan Chase Bank, N.A. (“Chase”) removed the lawsuit to this court and now move to dismiss it. Plaintiffs object.

         The Legal Standard

         Under Federal Rule of Civil Procedure 12(b)(6), the court must accept the factual allegations in the complaint as true, construe reasonable inferences in the plaintiff’s favor, and “determine whether the factual allegations in the plaintiff’s complaint set forth a plausible claim upon which relief may be granted.” Foley v. Wells Fargo Bank, N.A., 772 F.3d 63, 71 (1st Cir. 2014) (citations and internal quotation marks omitted). A claim is facially plausible “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678(2009). Analyzing plausibility is “a context-specific task” in which the court relies on its “judicial experience and common sense.” Id. at 679.

         Background[1]

         Denise Dionne has lived at her home at 40 Tallant Road in Pelham, New Hampshire (the “property”) since 1977. In 2005, Denise added her son, Jason Dionne, to the property’s deed. In 2006, Denise, Jason, and Jason’s wife, Kathy Dionne (collectively, the “Dionnes”), took out a loan, which was secured by a mortgage on the property. The mortgage states that Mortgage Electronic Registration Systems, Inc. (“MERS”) is the mortgagee as nominee for the lender, Domestic Bank.

         MERS assigned the mortgage and note to Washington Mutual Bank (“Mutual Bank”) in 2008. Chase obtained the mortgage and note when it acquired Mutual Bank later in 2008. In 2010, Chase assigned the mortgage to Fannie Mae. Chase also acted as the loan servicer at all times relevant to this case. The Dionnes allege that they were in default on their obligations under the note when Mutual Bank and Chase obtained the loan, and when Chase began servicing the loan.

         In 2010, the Dionnes’ loan was modified after they fell behind on their loan payments. Sometime after the 2010 loan modification, the Dionnes again fell behind on their modified loan payment obligations.

         In August 2014, Chase sent the Dionnes[2] a letter informing them that “the foreclosure sale date has been rescheduled” for October 1, 2014.[3] Doc. no. 21-2 at 1. Chase did not serve or deliver the letter via registered or certified mail. The letter did not inform the Dionnes of their right to petition the New Hampshire Superior Court to enjoin the sale.

         After receiving the letter informing them of the rescheduled foreclosure date, the Dionnes completed a loss mitigation application (which they downloaded from Chase’s website) seeking a modification of their loan. Kathy faxed the application to Chase on August 25, 2014.[4]

         Chase acknowledged receiving the Dionnes’ application in a letter dated August 27, 2014. See doc. no. 21-3. The letter requested additional documents and stated that Chase would make a determination of eligibility within 30 days of receiving the additional documents. Kathy contacted Chase and determined that the missing documents were pay stubs and a proof of benefits statement. Soon thereafter, Kathy sent the additional documents to Chase.

         On October 2, 2014, Chase sent the Dionnes a “Notice of Intent to Foreclose, ” which stated that Chase may accelerate the loan and commence foreclosure proceedings if they failed to cure the default.[5] See doc. no. 21-4. On October 3, 2014, Chase sent the Dionnes a second letter acknowledging receipt of their loss mitigation application. See doc. no. 21-5. Like the August 27 letter, the October 3 letter stated that the application was incomplete. The Dionnes allege, however, that “the letter further includes a ‘document status’ which stated that nothing was needed from the Dionnes at that time.” Doc. no. 21 at ¶ 39.

         On October 7, 2014, the Dionnes received two letters from Chase. The first, like the October 3 letter, stated that the Dionnes’ loss mitigation application was incomplete. See doc. no. 21-6. The Dionnes allege that the first letter again indicated in the “document status” section that nothing was needed from them. The letter stated that Chase needed to receive a completed application by November 6, 2014, and that it would contact the Dionnes within 30 days of receiving the missing documents.

         In the second October 7, 2014 letter, Chase again stated that the loss mitigation application was incomplete. See doc. no. 21-7. The “document status” section of the second letter stated that pay stubs and a benefits statement or letter were received, but that both were incomplete or not legible. Id. at 5. The letter requested another copy of those documents. The letter also listed the November 6, 2014 deadline, and stated that Chase would contact the Dionnes within 30 days of receiving the missing documents.

         Kathy called Chase shortly after receiving the October 7 letters. Chase informed her that she needed to provide statements showing she received “SSDI deposits” into her account and a printout for deposits and purchases made with her food stamp card. Kathy faxed those documents to Chase on October 17, 2014. The Dionnes allege that as of that date (October 17), their loss mitigation application was complete.

         Chase, however, sent the Dionnes two additional letters stating that their loss mitigation application was incomplete. Chase sent such letters on October 18 and 21, 2014. See doc. nos. 21-9 and 21-10. Both letters stated that pay stubs and a benefits statement or letter were received, but that both were incomplete or not legible. Both letters listed the November 6, 2014 deadline, and stated that Chase would contact the Dionnes within 30 days of receiving the missing documents. Frustrated that Chase kept claiming that the documents were illegible, Kathy faxed the documents to herself and confirmed that the faxed copies of the documents were legible.

         Kathy contacted Chase regarding the supposedly illegible documents. Chase told Kathy to send pay stubs for the August/September period, so that it could make a determination on the Dionnes’ application as of the time it was originally submitted.

         On November 5, 2014, the Dionnes sent Chase paper copies via overnight mail of the August/September pay stubs Chase had requested. In a letter dated November 8, 2014, Chase again notified the Dionnes that their application was not complete. See doc. no. 21-12. The letter stated that Chase had not received a completed application by the November 6, 2014 deadline, but that it may still be able to review the Dionnes’ request for assistance if they were to send Chase the missing information immediately. Despite stating that the request was incomplete, the “document status” section of the letter listed several required documents, and stated for each that “[t]here is nothing needed from you at this time for this document.” Doc. no. 21-12 at 4-5.

         On November 18, 2014, Harmon Law Office (“Harmon”) sent a letter to the Dionnes on behalf of Chase and Fannie Mae. Harmon notified the Dionnes that their loan “had been accelerated and failure to reinstate would result in foreclosure.” Doc. no. 21 at ¶ 55. The letter further stated that “this office is attempting to collect a debt and that any information obtained will be used for that purpose.” Id. The letter did not notify the Dionnes of their right to petition the court to enjoin the foreclosure.

         On November 19, 2014, Chase sent the Dionnes another letter stating that their loss mitigation application was incomplete. See doc. no. 21-15. As with the November 8 letter, the November 19 letter stated that Chase had not received a completed application by the November 6, 2014 deadline, but that it may still be able to review the Dionnes’ request for assistance if they were to send Chase the missing information immediately. Unlike the November 8 letter, however, the “document status” section of the November 19 letter listed the pay stubs as incomplete or not legible, and requested that the Dionnes send Chase another copy. See Id. at 8.

         In a letter dated November 23, 2014, Chase notified the Dionnes that a foreclosure sale had been rescheduled for January 12, 2015. See doc. no. 21-17. Chase did not serve or deliver the letter via registered or certified mail. The letter did not inform the Dionnes of their right to petition the court to enjoin the foreclosure sale.[6]

         On December 11, 2014, Harmon delivered a foreclosure notice to the Dionnes on behalf of Chase and Fannie Mae. See doc. no. 21-18. The notice informed the Dionnes that a foreclosure sale was scheduled for January 12, 2015, at 1:00 p.m., and that they had the right to petition the court to enjoin the foreclosure sale. This notice was the first time the Dionnes were notified of their right to petition the court to enjoin the foreclosure sale.

         On January 7, 2015, Kathy called Chase and spoke with Kathy Goulden (“Goulden”), a Chase representative. Goulden told Kathy that Chase had not made a decision on the loss mitigation application, that she could not “confirm all options to avoid foreclosure had been exhausted, ” and that she would request that the foreclosure sale be stopped. Doc. no. 21 at ¶ 66. Goulden also asked Kathy to send her copies of the August/September pay stubs, the same documents Kathy had sent to Chase via overnight mail on November 5, 2014.

         On January 9, 2015, Kathy spoke with a Chase representative, who informed her that the August/September pay stubs, as well other documents included with the Dionnes’ loss mitigation application, were “stale” because they were over 90 days old. That same day, Kathy faxed another completed loss mitigation application to Chase. See doc. no. 21-19.

         On January 10, 2015, Kathy spoke with a Chase representative who informed her that the Dionnes’ loss mitigation application was complete. The Dionnes also received a letter from Chase dated that same day, which stated that Chase had not received a completed application by the November 6, 2014 deadline, but that it may still be able to review the Dionnes’ request for assistance if they were to send Chase the missing information immediately. See doc. no. 21-20. Despite stating that the request was incomplete, the “document status” section of the letter listed several required documents, and stated for each that “[t]here is nothing needed from you at this time for this document.” Id. at 4-5.

         The Dionnes do not allege that they heard anything further from Chase about Goulden’s statement that she would make a request to stop the foreclosure. In a letter from Chase dated June 10, 2015 (doc. no. 21-20 at 1) Chase wrote in bold letters:

Your request for mortgage assistance doesn’t stop the foreclosure process or sale. Do not ignore any notices.

         Despite being aware that “they could submit a petition on their own with the court to stop the foreclosure because Chase had not provided them with an answer on the loss mitigation application, ” (doc. no. 21 at ¶ 73), the Dionnes did not file a petition to enjoin the foreclosure sale scheduled for January 12, 2015. On January 12, an auctioneer appeared at the property to conduct the foreclosure sale. Kathy called Chase, Fannie Mae, and Harmon, but each told Kathy that they could not stop the foreclosure sale. The foreclosure sale took place as scheduled, and Fannie Mae purchased the property at the sale.

         Discussion

         Denise and Jason Dionne filed this action in state court seeking an order voiding the foreclosure. Defendants removed the action to this court and filed a motion to dismiss (doc. no. 5). In an order dated June 16, 2015, the court denied defendants’ motion. The Dionnes then amended their complaint (doc. no. 21), adding Kathy as a plaintiff and asserting eight counts against defendants: three against both Chase and Fannie Mae (Counts II, IV, and VII); three against only Chase (Counts I, III, and V); and two against only Fannie Mae (Counts VI and VIII). Defendants move to dismiss the amended complaint in its entirety (doc. no. 23). The Dionnes object (doc. no. 24). The court addresses each count separately below.

         I. Count I: Real Estate Settlement Procedures Act

         In Count I of their amended complaint, the Dionnes allege that Chase violated Regulation X of the Real Estate Settlement and Procedures Act (“RESPA”), 12 C.F.R. § 1024.41, by (1) conducting a foreclosure sale prior to acting on their complete loss mitigation application and (2) failing to act with reasonable diligence by repeatedly asking them for documents that they had already submitted to Chase.[7]

         A. Conducting the Foreclosure

         In relevant part, RESPA provides that

[i]f a servicer receives a complete loss mitigation application more than 37 days before a foreclosure sale, then, within 30 days of receiving a borrower’s complete loss mitigation application, a servicer shall: (i) [e]valuate the borrower for all loss mitigation options available to the borrower; and (ii) [p]rovide the borrower with a notice in writing stating the servicer’s determination . . . .

12 C.F.R. § 1024.41(c). RESPA further provides that “[i]f a borrower submits a complete loss mitigation application after a servicer has made the first notice or filing required by applicable law for any . . . foreclosure process but more than 37 days before a foreclosure sale, a servicer shall not . . . conduct a foreclosure sale . . . .” Id. § 1024.41(g).

         Defendants advance two arguments in support of dismissing the Dionnes’ RESPA claim based on the foreclosure sale. First, they argue that the Dionnes did not submit a complete loss mitigation application more than 37 days before the foreclosure sale. This argument is unavailing.

         RESPA provides that “[a] complete loss mitigation application means an application in connection with which a servicer has received all the information that the servicer requires from a borrower in evaluating applications for the loss mitigation options available to the borrower.” § 1024.41(b)(1). The Dionnes allege that they provided all of the information that Chase requested, often providing documents multiple times as Chase could not locate items they had previously submitted. The Dionnes also allege that the application was complete on or before October 17, 2014, more than the required 37 days before the scheduled foreclosure. Doc. no. 21 at ¶ 44. These allegations are sufficient to support a claim that the Dionnes submitted a complete loss mitigation application more than 37 days prior to the foreclosure sale.

         Defendants’ second argument is that the timing of events precludes relief as to a RESPA claim based on the foreclosure sale. They assert that the notices of foreclosure the Dionnes received in August and December of 2014 were not the “first” such notices. In support, defendants attach as an exhibit to their motion to dismiss a notice of foreclosure from Harmon to Denise dated May 2, 2012. See doc. no. 23-6. Defendants argue that this notice precludes any relief under RESPA for a claim arising out of the foreclosure sale.

         Even if the court could consider the May 2, 2012 notice for purposes of the motion to dismiss, that notice is not dispositive of the Dionnes’ RESPA claim based on the foreclosure. The Dionnes pled violations of 12 C.F.R. § 1024.41(f)(2) and § 1024.41(g) in the alternative. Section 1024.41(f)(2) prohibits a loan servicer from foreclosing under certain circumstances if the borrower submits a complete loss mitigation application before the servicer has made “the first notice or filing required by applicable law” for a non-judicial foreclosure. Section 1024.41(g) prohibits a servicer from foreclosing under certain circumstances if a borrower has submitted a complete loss mitigation application after “the servicer has made the first notice of filing required by law.” Thus, even if defendants had shown that the 2012 notice was the first foreclosure notice, which would preclude relief under § 1024.41(f)(2), that would not be dispositive of the Dionnes’ claim based on defendants’ alleged violation of § 1024.41(g).[8]

         The amended complaint plausibly alleges that the Dionnes timely submitted a complete loss mitigation application, and that Chase violated RESPA by conducting a foreclosure sale prior to acting on the application. Therefore, defendants are not ...


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