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Cindy Corazzini, Individually and On Behalf of All Others Similarly v. Litton Loan Servicing Llp and Hsbc Bank Usa

June 15, 2011

CINDY CORAZZINI, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFF,
v.
LITTON LOAN SERVICING LLP AND HSBC BANK USA, NATIONAL ASSOCIATION, AS TRUSTEE UNDER THE POOLING AND SERVICING AGREEMENT DATED AUGUST 1, 2006, ACE SECURITIES CORP. HOME EQUITY LOAN TRUST SERIES 2006-FM1, ASSET BACKED PASS-THROUGH CERTIFICATES, DEFENDANTS.



The opinion of the court was delivered by: Mae A. D'Agostino, U.S. District Judge:

MEMORANDUM-DECISION AND ORDER

I. INTRODUCTION

On February 18, 2009, plaintiff commenced this action alleging that defendant Litton Loan Servicing, LP ("defendant") and defendant HSBC Bank USA violated (1) the Fair Debt Collection Practices Act ("FDCPA"), (2) the Real Estate Settlement Procedures Act ("RESPA"), (3) the Truth in Lending Act ("TILA"), and (4) New York State General Business Law § 349. The complaint also alleged intentional misrepresentation, negligence, gross negligence, breach of the implied covenant for good faith and fair dealing, and negligent hiring. In a Memorandum-Decision and Order dated March 23, 2010, the Court dismissed all claims against defendant HSBC and further dismissed counts five through ten. See Dkt. No. 34 at 7-16. Additionally, the Court, sua sponte, dismissed plaintiff's class claims, concluding that the allegations could not proceed as a class action. See id. at 17-20.

On February 3, 2011, plaintiff sought leave to amend the complaint to add an additional count regarding a different alleged violation of the FDCPA. See Dkt. No. 52. In a February 14, 2011 text order, the Court denied that request.

Currently before the Court is defendant's motion for summary judgment on the remaining claims.*fn1

II. BACKGROUND*fn2

Defendant is primarily a residential mortgage loan servicer, with offices in Houston, Texas. See Dkt. No. 56-2 at ¶ 1. Defendant services residential mortgage loans secured by property located in all fifty states, including New York. See id. at ¶ 2.

A. Plaintiff's loan from Fremont Investment & Loan

On or about April 21, 2006, plaintiff obtained a mortgage refinance loan from Fremont Investment & Loan ("Fremont") on the property located at 21 Spice Hill Boulevard, Halfmoon, New York (the "Property"). The loan is evidenced by an Adjustable Rate Note (the "Note"), which is for the principal amount of $536,000, and was to be repaid over a term of thirty (30) years at an introductory interest rate of 8.9%. See id. at ¶ 4. The Note states that plaintiff's initial monthly payment of principal and interest was $4,274.27. See id. at ¶ 5. The Note is secured by a mortgage on the Property, which plaintiff executed on or about April 21, 2006, in Fremont's favor. See id. at ¶ 6.

B. Defendant's servicing of plaintiff's loan

Effective June 1, 2008, Fremont transferred the servicing rights to plaintiff's loan to defendant. See id. at ¶ 7. Both Fremont and defendant furnished plaintiff with notices of the transfer of servicing. See id. at ¶ 8. In particular, defendant sent plaintiff a notice of transfer of servicing dated June 8, 2008. See id. at ¶¶ 9-10. Among other things, defendant's June 8, 2008 notice of transfer of servicing sets forth (a) the June 1, 2008 effective date of the transfer of servicing from Fremont to defendant; (b) defendant's address and toll-free number; (c) a toll-free number at Fremont for plaintiff to call with "any questions relating to the transfer of servicing;"(d) a notice to contact defendant's Customer Care Department at the toll-free number with "questions regarding the servicing of your loan;" (e) a notice that Fremont would no longer accept payments from plaintiff as of June 1, 2008; (f) a notice that "premiums for mortgage, life, accidental death, or disability insurance will not be transferred from [Fremont]," and that plaintiff "may contact [her] carrier for arrangements to maintain . . . coverage;" and (g) a statement that the transfer of servicing to defendant "does not affect any term or condition of the mortgage instruments, other than terms directly related to the servicing of [plaintiff's] loan." See id. at ¶ 10.

C. Interest rate adjustments under the terms of plaintiff's note

The Note provides that the interest rate on plaintiff's loan would change on May 1, 2008 and at six-month intervals thereafter (the "change date"). See id. at ¶¶ 11-12. On or about September 24, 2008 (prior to the first change date after defendant acquired servicing rights to plaintiff's loan), defendant mailed a notice informing plaintiff that the interest rate applicable to her loan would adjust on November 1, 2008. See id. at ¶ 13. Defendant's September 24, 2008 letter to plaintiff states, among other things, that, (a) prior to November 1, 2008, the interest rate applicable to plaintiff's loan was 9.5%, which was based on an Index Value of 2.67100%; (b) after November 1, 2008, the interest rate applicable to plaintiff's loan would adjust to 9.875%, which was based on an Index Value of 3.01625%; (c) effective November 1, 2008, plaintiff's monthly payment of principal would adjust from $4,499.46 to $4,640.95; and, (d) as of November 1, 2008, the projected unpaid balance on plaintiff's loan would be approximately $526,232.55. See id. at ¶ 14. On March 20, 2009 and September 24, 2009, defendant sent plaintiff notice of further interest rate changes. See id. at ¶ 15.

D. Late fees assessed to plaintiff's loan

Under the terms of the Note, plaintiff is required to make payments of principal and interest by the first day of each month. See id. at ¶ 17. The Note further provides that plaintiff may be charged up to five percent of any overdue payment of principal and interest that is not received "by the end of 15 calendar days after the date it is due." See id. at ¶ 18.

According to defendant's records, as of June 1, 2008, the date on which servicing of plaintiff's loan transferred from Fremont to defendant, plaintiff's account had five outstanding late fees. See id. at ¶ 19. According to defendant's records, Fremont waived two of the late fees prior to the date on which servicing of plaintiff's loan was transferred to defendant. See id. at ¶ 21. The total balance of late fees on plaintiff's loan at the time of transfer was approximately $640.40. See id. at ¶ 22.

After the transfer of servicing to defendant in June of 2008, defendant assessed plaintiff late fees in the amount of $89.99 (two percent of the unpaid, adjusted principal and interest payment due in each respective month) when plaintiff failed to make the outstanding principal and interest payment for a given month by the expiration of fifteen calendar days after the due date. See id. at ¶ 24. Specifically, defendant assessed late fees to plaintiff's account as follows:

Contractual Due Date Date of Late Fee Amount Date Payment Received July 1, 2008 July 16, 2008 $89.99 Sept. 5, 2008 Aug. 1, 2008 Aug. 16, 2008 $89.99 Sept. 15, 2008 Sept. 1, 2008 Sept. 16, 2008 $89.99 Oct. 17, 2008 Oct. 1, 2008 Oct. 16, 2008 $89.99 No payment received Nov. 1, 2008 Nov. 16, 2008 $89.99 No payment received

Total: $449.95

See id. As such, as of December 1, 2008, the total outstanding balance for late fees assessed to plaintiff's account was $1,090.35, not including the two late fees waived by Fremont before servicing of plaintiff's loan transferred to defendant. See id. at ¶ 26.

E. The November 14, 2008 letter and defendant's response

On or about November 25, 2008, defendant received a letter from plaintiff dated November 14, 2008. See id. at ¶ 27; see also Dkt. No. 57-9. The letter sets forth twenty-seven separate requests relating to a range of topics, including the origination and securitization of plaintiff's loan. See id. at ¶ 28; Dkt. No. 57-9. The letter also demands, among other things, that defendant provide an "affidavit" that it is "a nationally chartered commercial bank or lending institution." See id. at ¶ 29; Dkt. No. 57-9.

On November 26, 2008, defendant sent plaintiff a letter confirming receipt of her November 2008 letter. See Dkt. No. 56-2 at ¶ 32. In further response to the November 2008 letter, defendant mailed two pieces of correspondence dated December 9, 2008. See id. at ¶¶ 33-37. The first correspondence states that, as of December 9, 2008, plaintiff's loan was due for the October 1, 2008 payment, and, therefore, was three months in arrears. See id. at ¶ 34; see also Dkt. No. 1 at Exhibit "A." The letter also states that the outstanding late-fee balance as of that date was $1,090.35. See id. at ¶ 35. Finally, the letter indicated that "[a] complete Loan History will be forwarded under separate cover for your review." See id. at ¶ 36. The second correspondence from defendant to plaintiff included the copy of plaintiff's loan payment history referenced in the first letter. See id. at ¶ 37.

In the sixty days after its receipt of the November 2008 letter, defendant did not submit credit reporting information regarding plaintiff's loan to any consumer reporting agencies. See id. at ¶ 38.*fn3 In fact, defendant has not reported plaintiff's loan to consumer reporting agencies at any time since it acquired servicing rights in 2008. See id. at ¶ 39.

F. Other fees for property valuation and other expenses

Under the terms of the mortgage, plaintiff is responsible for preserving and maintaining the property to prevent the property from deteriorating or decreasing in value. See id. at ¶ 41. The mortgage provides for the recovery from plaintiff for corporate and escrow advances made for the purpose of payment of real estate taxes, lender-placed insurance premiums, property preservation and valuation costs, and costs associated with curing default, including foreclosure related costs. See id. at ¶ 42. Section 14 of plaintiff's mortgage provides, in relevant part, that "[defendant] may charge me fees for services performed in connection with my default, for the purpose of protecting [defendant's] interest in the Property and rights under this Security Instrument including, but not limited to . . . property inspection and valuation fees." See id. at ¶ 43.

As of December 9, 2008, plaintiff owed $128.19 for fees that defendant had advanced for property inspection and valuation services in accordance with the terms of the mortgage. See id. at ¶ 44. Specifically, prior to that date, defendant had paid for one broker price option ("BPO")*fn4 and three property inspections with respect to the Property. See id. at ¶ 45. One of the property inspections was requested by Fremont during the time that it serviced plaintiff's loan. See id. at ¶ 55. As to the BPO and the property inspections requested by defendant, those services were provided by third-party vendors with whom defendant has no affiliation. See id. at ¶ 56.

G. Current status of plaintiff's loan

Defendant contends that, as of April 29, 2011, plaintiff is due and owing for her October 2008 monthly payment and that her last payment to defendant was received on or about October 17, 2008. See id. at ¶¶ 64-65. Moreover, defendant claims that the outstanding principal amount on plaintiff's loan, as of April 29, 2011, is approximately $526,891.61. See id. at ¶ 66. Further, defendant alleges that it has advanced approximately $69,279.86 for unpaid property taxes on plaintiff's loan, for which plaintiff is responsible. See id. at ¶¶ 68-69.

Plaintiff contends that defendant incorrectly states that she "'has not paid any of the Freemont late fees or the late fees that [defendant] assessed in 2008 or any later assessed late fees for untimely payments.'" See Dkt. No. 59 at 6 (quotation omitted). Plaintiff claims that defendant's own records establish she paid the late fees, but a later letter acknowledges that defendant "'reversed' the payment and put Plaintiff's late fee payment in a suspense account." See id. (citing Exhibit "J"). Moreover, plaintiff asserts that defendant incorrectly states that she has failed to make any payments since 2008. See id. (citing Exhibit "I"). In fact, plaintiff claims that she made a payment in 2009, but that defendant refused to accept the payment and returned the check to her. See id. Finally, plaintiff alleges that defendant demanded different amounts due in three letters which was "misleading to the 'least sophisticated consumer.'" See ...


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