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Dumont v. Litton Loan Servicing, Lp

United States District Court, S.D. New York

March 11, 2015

GEORGE DUMONT, JONATHAN GRIMES, YVONNE WILLIAMS and KUJTIM ADILI, On Behalf of Themselves And All Others Similarly Situated, Plaintiffs,


EDGARDO RAMOS, District Judge.

Plaintiffs bring this action against mortgage loan servicers alleging unlawful and deceptive practices in the wake of the recent housing crisis. On March 3, 2014, this Court dismissed several of Plaintiffs' claims without prejudice; the remaining claims were either upheld or dismissed with prejudice. See Doc. 85. Accordingly, Plaintiffs George DuMont, Jonathan Grimes (together, the "DuMonts"), Yvonne Williams ("Williams") and Kujtim Adili ("Adili") (collectively, "Plaintiffs") have amended their complaint, which now presents claims against Defendants Litton Loan Servicing, LP ("Litton") and Ocwen Loan Servicing, LLC ("OLS").[1] Fourth Am. Class Action Compl. ("FAC"), Doc. 92. Litton and OLS were Plaintiffs' mortgage servicers at the time the alleged wrongful acts were committed. The FAC presents four claims against Defendants: (1) breach of contract and the implied covenant of good faith and fair dealing against OLS, (2) violations of the New York General Business Law against OLS; (3) violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law as to both defendants; and (4) violations of the New Jersey Consumer Fraud Act as to both defendants.

Defendants move to dismiss Plaintiffs' first, third, and fourth claims pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Def.'s Mem. L. Support Mot. Dismiss, Doc. 96. For the reasons set forth below, Defendants' motion to dismiss is GRANTED in part and DENIED in part.

I. Background[2]

The Court presumes familiarity with the facts and procedural history of this case, which are detailed in its March 3, 2014 Order (the "March 2014 Order"), granting in part and denying in part Defendants' motion to dismiss.[3] The facts detailed below are those relevant to Defendants' challenge.

A. The DuMont Loan

The DuMonts are residents of Pennsylvania. FAC at ¶ 10. On July 19, 2010, the DuMonts submitted a Home Affordable Modification Program ("HAMP") application to Litton, who was servicing their mortgage. Id. at ¶ 66. More than ten months later, on May 28, 2011, Litton denied the application on the grounds that the DuMonts had not provided all of the required documents. Id. at ¶ 67. However, the DuMonts maintain that throughout the course of the ten months, they submitted the necessary paperwork a number of times in response to letters they received from Litton that mistakenly asserted that they had not submitted the HAMP application. Id. at ¶¶ 68, 71. In numerous telephone conversations detailed in the FAC, Litton representatives consistently assured the DuMonts that their documents had been received and that they should disregard Litton's requests for missing information. Id. at ¶¶ 68, 70. As a result of Litton's ultimate denial of their HAMP application, the DuMonts were purportedly left with no recourse but to pursue an alternative loan modification, otherwise known as a non-HAMP modification. Id. at ¶ 72.

On June 24, 2011, the DuMonts received a letter from Litton containing a temporary agreement referred to as a trial period plan ("TPP"). Id. at ¶ 74. Under the TPP agreement, the DuMonts were required to make three monthly trial payments in order to secure the permanent non-HAMP loan modification. Id. The TPP agreement provided that once the three payments and all required documents were received, the DuMont's mortgage would be permanently modified with a reduced interest rate of two percent. Id. However, the loan servicer was required to execute a separate agreement in order to make the permanent non-HAMP modification effective. Id. at ¶ 114. The DuMonts timely made their trial payments due in August, September and October as required by the TPP agreement. Id. at ¶¶ 75, 79. In the interim, they were informed that the servicing rights to their loan had been transferred to OLS in August. Id. at ¶ 78. Consequently, OLS assumed Litton's TPP agreement with the DuMonts. Id. at ¶ 79.

The DuMonts received a notice of default from OLS on October 18, 2011. Despite the alleged default, however, which the DuMonts deny, they also received a modification agreement from OLS nearly one month later, on November 11, 2011, pursuant to the TPP agreement they had originally entered into with Litton, which they promptly signed and returned. Id. at ¶¶ 80, 83-84. The modification agreement provided that the DuMont's loan would be automatically modified on January 1, 2012, when a first modified payment of $1, 251.23 would be due. Id. at ¶ 83. The agreement further specified a new principal balance and a reduced interest rate of two percent. Id.

Nevertheless, on December 20, 2011, OLS informed the DuMonts that it was unable to grant them a modification because they failed to send the payment or agreement within the required timeframe. Id. at ¶ 86. A series of follow-up calls yielded conflicting messages from OLS representatives as to the status of the DuMonts' account, ranging from confirmation that their documents had been received to a notice of delinquency. Id. at ¶¶ 88, 90, 92. In the meantime, the DuMonts submitted their first and second modified payments in the specified amount to OLS on December 26, 2011 and January 10, 2012, respectively. Id. at ¶ 89. However, they subsequently received a series of letters from OLS stating that their January payment was being returned for failure to satisfy the amount required to reinstate the mortgage loan and avoid foreclosure. Id. at ¶¶ 93, 95, 96, 102. The DuMonts' attempts to resolve the issue once again resulted in contradicting responses from OLS representatives. Id. at ¶¶ 99, 100. The DuMonts resubmitted a cashier's check in the amount of $1, 251.23 on February 9, 2012, which OLS once more returned as being insufficient to cure default. Id. at ¶ 102.

OLS initiated foreclosure proceedings in February 2012. Id. at ¶103. A series of exchanges between OLS and the DuMonts culminated in a May 4, 2012 letter from OLS stating that it was willing to honor the terms of the modification agreement if it received the funds necessary to bring the plan current for November 2011 through May 2012. Id. at ¶ 111. On May 21, 2012, the DuMonts sent OLS a check in the amount they had agreed to with OLS. Id. at ¶ 112. In June 2012, the DuMonts received yet another letter from OLS concerning their "severely delinquent mortgage loan." Id. at ¶ 113. As of the filing of the FAC, the DuMonts have not received a counter-signed modification agreement from OLS. Id. at ¶ 117.

The DuMonts allege that OLS breached the TPP agreement by failing to modify the loan by January 1, 2012, and by neglecting to execute the modification agreement to make the permanent loan modification effective, as it was required to do.[4] Id. at ¶ 114. The FAC alleges that OLS damaged the DuMont's credit by reporting the purported delinquencies to credit agencies. Id. at ¶ 115. The DuMonts have allegedly been subjected to various fees, along with increased principal and interest amounts, and a longer loan payoff time. Id. at ¶¶ 116-117.

B. The Adili Loan

Adili resides in New Jersey. Id. at ¶ 12. On April 21, 2010, Adili submitted a HAMP application to his mortgage servicer, Litton. Id. at ¶ 171. In May 2010, Litton sent two separate letters to Adili confirming receipt of his HAMP application, but claiming that it was missing documents which Adili maintains he had already sent. Id. at ¶ 172. Nonetheless, Adili resubmitted the requested information. Id. Starting in May 2010, Adili received numerous additional letters from Litton requesting the same missing information. Id. at ¶ 175. In response to Adili's inquiries, Litton also repeatedly confirmed receipt of the documents. Id. at ¶¶ 177, 179.

On July 2, 2010, Litton informed Adili of its denial of his HAMP application for failure to provide the requested information. Id. at ¶ 180. An excerpt from the letter quoted in the FAC indicates that Adili was also denied a non-HAMP loan modification for failure to properly endorse or notarize the original Loan Modification Agreement and/or pay the required funds. Id. Yet, Adili contends that he never received a Loan Modification Agreement, a fact which Litton later admitted. Id. at ¶ 182. As a result, the FAC states that Adili experienced increased interest and service fees, a longer loan payoff time, and a higher principal balance. Id. at ¶ 189.

On October 14, 2011, Adili learned that the servicing of his loan was being transferred to OLS. Id. at ¶ 190. In April 2012, Adili received a HAMP application from OLS, which he promptly submitted. Id. at ¶ 191. On September 4, 2012, OLS sent a TPP agreement to Adili, which indicated that his mortgage would be permanently modified once the three trial payments were made. Id. at ¶¶ 193-194. On October 9, 2012, shortly after Adili made his first trial payment, he received a HAMP modification agreement from OLS. Id. at ¶ 195. The modification agreement provided that, once the preconditions to the modification were completed, his loan would "automatically become modified on 1/1/2013[.]" Id. at ¶ 196. Furthermore, all remaining unpaid late charges would be waived at that time and Adili would receive a new principal balance and a lower interest rate of two percent. Id. On January 17, 2013, OLS confirmed receipt of Adili's HAMP modification agreement and his three trial payments on a timely basis. Id. at ¶ 199.

However, when Adili attempted to make his new, modified February 2013 payment, he discovered that his account was "frozen." Id. at ¶ 200. OLS claimed that it received Adili's signed HAMP modification agreement two days past the deadline, which Adili contests. Id. at ¶ 201. On February 19, 2013, OLS called Adili to inform him that his mortgage payment was past due and his home was in foreclosure. Id. at ¶ 202. OLS refused to accept mortgage payments from Adili until he brought the instant action. Id. at ¶ 205, 208. At that time, it also finally returned an executed HAMP modification contract on May 31, 2013. Id. at ¶ 208.

Adili claims OLS breached the TPP agreement by failing to timely execute the HAMP modification agreement and permanently modify his loan. Id. at ¶ 206. The FAC states that, as a result of OLS delay, Adili has suffered late charges, an increased principal amount, unwarranted fees, and harm to his credit score. Id. at ¶ 207.

C. Mass. Denial Sweeps

Both the DuMonts and Adili allege that they were victims of Litton's "mass denial sweeps." Id. at ¶ 71, 188. Plaintiffs use the term to refer to Litton's purported policy of denying homeowners modifications on the grounds that documents were missing. Id. at ¶ 57. Litton allegedly put in place processes to "foster delay, mislead homeowners, and avoid modifying mortgage loans" because as mortgage servicers, Defendants benefit from the increased fees generated by servicing distressed loans. Id. Plaintiffs specifically accuse Defendants of taking advantage of mortgagors "by impermissibly delaying loan modifications in order to collect excessive fees on troubled mortgages." Id. at ¶ 55.

II. Discussion

A. 12(b)(6) Motion to ...

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