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Dionne v. Federal National Mortgage Association

United States District Court, D. New Hampshire

November 21, 2016

Jason S. Dionne, et al.
v.
Federal National Mortgage Association and JPMorgan Chase Bank, N.A. Opinion No. 2016 DNH 209

          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, seeking to enjoin defendants Federal National Mortgage Association (“Fannie Mae”) and JPMorgan Chase Bank, N.A. (“Chase”) from recording a foreclosure deed on their home. Defendants removed the lawsuit to this court, and plaintiffs filed an amended complaint, asserting eight claims against defendants, five of which remain. The parties have filed cross-motions for summary judgment.

         Standard of Review

         Cross motions for summary judgment proceed under the same standard applicable to all motions for summary judgment, but the motions are addressed separately. Fadili v. Deutsche Bank Nat'l Tr. Co., 772 F.3d 951, 953 (1st Cir. 2014). A movant is entitled to summary judgment where he “shows that there is no genuine dispute as to any material fact and [that he] is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). In reviewing the record, the court construes all facts and reasonable inferences in the light most favorable to the nonmovant. Kelley v. Corr. Med. Servs., Inc., 707 F.3d 108, 115 (1st Cir. 2013).

         Background

         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 and Jason took out a $300, 000 loan (the “Loan”) from Domestic Bank, 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 Domestic Bank and its successors in interest. Jason's wife, Kathy Dionne, did not sign the note, but signed the mortgage.

         On June 13, 2006, Domestic Bank assigned its interest in the Loan to Fannie Mae. Fannie Mae has owned the Loan since that time.

         MERS, as nominee for Fannie Mae, assigned the mortgage to Washington Mutual Bank (“Mutual Bank”) in April 2008. In July 2008, Denise and Jason entered into a loan modification agreement with Mutual Bank. Shortly thereafter, in September 2008, Chase became the servicer of the Loan. The Loan was in default at the time Chase acquired the servicing rights.[1] Chase has been the Loan servicer since September 2008.

         At some point after Chase acquired the Loan servicing rights, the Dionnes fell behind on their payments under the modification agreement.[2] In March 2009, the Dionnes signed a forbearance agreement, in which Mutual Bank agreed not to proceed with foreclosure if the Dionnes complied with the payment schedule outlined in the agreement. At some point in 2009, the Dionnes fell behind on their payments under the forbearance agreement.

         In late 2009 or early 2010, after falling behind on their payments under the forbearance agreement, the Dionnes submitted another loan modification application. On March 2, 2010, Chase and the Dionnes entered into a second loan modification agreement.

         Shortly after entering into the second loan modification agreement, Denise lost her job. The Dionnes subsequently fell behind on their payments under the second loan modification agreement.

         In the fall of 2010, the Dionnes received a notice of an intent to foreclose, and a foreclosure sale was scheduled for October 15, 2010.[3] The foreclosure sale was eventually postponed. Chase subsequently sent the Dionnes another notice of intent to foreclose in May 2011, setting a foreclosure date for June 10, 2011.

         Shortly thereafter, the Dionnes submitted a third loan modification application. Chase denied the application in September 2011. The Dionnes then submitted a fourth loan modification application in January 2012. Chase denied the application in February 2012.

         On May 2, 2012, Fannie Mae, through its foreclosure counsel, Harmon Law Office (“Harmon”), sent a notice of foreclosure sale to the Dionnes via certified mail, setting a foreclosure date of June 1, 2012. The notice informed the Dionnes of their right to petition the superior court to enjoin the foreclosure sale. On August 29, 2012, the Dionnes filed a Chapter 13 bankruptcy petition.[4] The bankruptcy court dismissed the petition on February 24, 2014, when the Dionnes fell behind on their plan payments to the bankruptcy Trustee.

         In March 2014, Chase sent the Dionnes paperwork for a fifth loan modification application. On August 12, 2014, the Dionnes received a notice scheduling a foreclosure sale for October 1, 2014.

         The Dionnes faxed Chase their loan modification application on August 25, 2014 (the “August 2014 application”). On the application, the Dionnes identified Denise's current employers as Accountemps and Demoulas Supermarket (“Demoulas”). 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.

         At some point after the Dionnes submitted the August 2014 application, but no later than the first week of September, Denise lost her job with Demoulas. Denise remained unemployed until mid-November. Defendants assert that Kathy subsequently misrepresented to Chase during a phone call on September 19, 2014 that Denise was “fully employed by Demoulas.” Doc. no. 41-23 at 2. The Dionnes deny that Kathy made that representation.

         On October 3, 2014, Chase sent the Dionnes a second letter acknowledging receipt of the August 2014 application. See doc. no. 21-5. Like the August 27 letter, the October 3 letter stated that the application was incomplete.

         On October 7, 2014, the Dionnes received two letters from Chase. The first, like the October 3 letter, stated that the Dionnes' loan modification application was incomplete. See doc. no. 21-6. 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 loan modification 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.

         The Dionnes assert that Kathy called Chase after receiving the October 7 letters and that a Chase representative told Kathy to resubmit certain documents. The Dionnes state that Kathy faxed those documents on October 17, 2014, and that the August 2014 application was complete on that date.

         Chase, however, sent the Dionnes two additional letters on October 18 and 21, 2014, stating that their loan modification application was incomplete. 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.

         The Dionnes assert that on November 5, 2014, they 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. The letter listed several documents that had been received but were pending review. See id.

         On November 18, 2014, Harmon sent a letter to Denise and Jason on behalf of Chase and Fannie Mae. Harmon notified the Dionnes that their loan had been referred to Harmon for foreclosure. Doc. no. 43-20. 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. at 2.

         On November 19, 2014, Chase sent the Dionnes another letter stating that their loan modification 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 complete 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.

         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 superior court to enjoin the foreclosure sale.

         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 it could not stop the foreclosure sale. The foreclosure sale took place as scheduled, and Fannie Mae purchased the property at the sale.

         Discussion

         The parties separately move for summary judgment on all five counts in the amended complaint. The court addresses each count separately below.

         I. Count I: Real Estate Settlement Procedures Act (“RESPA”)

         In Count I of their amended complaint, the Dionnes allege that Chase violated five separate provisions of Regulation X of RESPA, 12 CFR § 1024.41. The five violations fall into two categories of conduct: (1) failing to properly review the Dionnes' loss mitigation application, see 12 CFR §§ 1024.41(b)(1) & (b)(2), and (2) conducting a foreclosure sale prior to acting on their complete loss mitigation application, see 12 CFR §§ 1024.41(c), f(2), & (g).[5]

         The Dionnes and defendants separately move for summary judgment on the RESPA claim in its entirety. Although the parties address the individual RESPA violations specifically, defendants also raise certain threshold issues with regard to the claim, which they assert are dispositive of the RESPA claim in its entirety. Therefore, the court addresses the threshold issues first before turning to the parties' arguments as to the individual RESPA violations.

         A. Threshold Issues

         Defendants argue that they are entitled to summary judgment on the Dionnes' RESPA claim in its entirety because the Dionnes submitted several other loss mitigation applications prior to the August 2014 application. Defendants contend that these prior loss mitigation applications eliminate RESPA protection for the August 2014 application. Defendants also argue that the Dionnes have not suffered any damages from the alleged RESPA violations and that, regardless, defendants are entitled to summary judgment as to Kathy Dionne's RESPA claim because she did not sign the note.

         1. Prior Loss Mitigation Applications

         Under RESPA, “[a] servicer is only required to comply with the requirements of [the statute] for a single complete loss mitigation application for a borrower's mortgage loan account.” 12 CFR § 1024.41(i). Defendants argue that because Chase considered several loss mitigation applications that the Dionnes submitted prior to 2014, and even agreed to a loan modification in 2010, Chase did not need to comply with RESPA when considering the August 2014 application. The Dionnes argue that Chase had to comply with the requirements of RESPA at least once after January 10, 2014, the date § 1024.41 became effective, regardless of whether the Dionnes had submitted other loss mitigation applications prior to that date.

         Federal courts have consistently held that a loan servicer must comply with the requirements of § 1024.41 at least once after the January 10, 2014 effective date of the regulation, regardless of whether the servicer evaluated a borrower's prior loss mitigation application prior to that date. See, e.g., Garmou v. Kondaur Capital Corp., No. 15-12161, 2016 WL 3549356, at *3 (E.D. Mich. June 30, 2016); Bennett v. Bank of Am. N.A., 126 F.Supp.3d 871, 884 (E.D. Ky. 2015). Here, Chase reviewed the Dionnes' other applications prior to January 10, 2014. Therefore, consideration of those loan modification applications does not relieve Chase of its obligations to comply with RESPA for the August 2014 application.

         Thus, Chase has not shown that it satisfied § 1024.41(i), and defendants are not entitled to summary judgment on the Dionnes' RESPA claim on that basis.

         2. Damages

         Defendants argue that summary judgment is appropriate on the Dionnes' RESPA claim in its entirety because the Dionnes have failed to establish that the alleged RESPA violations caused them actual damages, including emotional distress damages. The Dionnes argue that there is sufficient evidence in the record of actual damages to support the claim.

         Under RESPA, the borrower may recover (1) any actual damages suffered as a result of the loan servicer's failure to comply with RESPA and (2) any additional damages, as the court may allow, in the case of a pattern or practice of noncompliance, in an amount not to exceed $2, 000. See 12 U.S.C. § 2605(f)(1). To recover such damages, though, a plaintiff “must present specific evidence to establish a causal link between the financing institution's violation and their injuries.” Moore v. Mortg. Elec. Registration Sys., Inc., No. 10-cv-241-JL, 2013 WL 1773647, at *3 (D.N.H. Apr. 25, 2013) (internal quotation marks and citation omitted). Actual damages under RESPA include damages for emotional distress, provided that the plaintiff establishes a causal relationship between that distress and the alleged RESPA violation. Moore v. Mortg. Elec. Registration Sys., Inc., 848 F.Supp.2d 107, 123 (D.N.H. 2012).

         The record evidence includes testimony from both Jason and Denise that Chase's conduct during the loss mitigation application process caused anxiety and distress. The Dionnes also point to out-of-pocket expenses allegedly incurred as a result of Chase's RESPA violations, such as the cost of mailings. Viewed favorably to the Dionnes, the record contains sufficient evidence to create a jury question as to whether Chase's alleged violations of RESPA caused the Dionnes to suffer actual damages.

         3. Kathy Dionne's Standing

         Defendants argue that one of the plaintiffs, Kathy Dionne, lacks standing to recover damages for Chase's alleged RESPA violations. Defendants assert that because Kathy did not sign the promissory note, she is not a “borrower” protected by RESPA.

         RESPA provides that whoever fails to comply with its provisions “shall be liable to the borrower” for damages. § 2605(f). Under RESPA, the term “borrower” means a borrower on the loan, not merely a borrower named in the mortgage. See Sharp v. Deutsche Bank Nat'l Trust Co., No. 14-cv-369-LM, 2015 WL 4771291, at *5-6 (D.N.H. Aug. 11, 2015) (collecting cases). Therefore, a plaintiff named as a borrower in the mortgage but who did not sign the note lacks standing to pursue a RESPA violation. Id.

         The record is clear that although Kathy signed the mortgage, she did not sign the promissory note as a borrower. Thus, Kathy is not a borrower on the loan and lacks standing to assert a claim under RESPA.

         Accordingly, defendants are entitled to summary judgment to the extent Count I is based on Kathy Dionne's claims against Chase. The Dionnes cannot recover damages suffered ...


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