Friess v. Shellpoint Mortgage Servicing

1 WO [5] 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA [8] 9 Julie D. Friess, No. CV-21-08101-PCT-GMS 10 Plaintiff, ORDER 11 v. 12 Shellpoint Mortgage Servicing, 13 Defendant. [15] 16 Pending before the Court is Shellpoint Mortgage Servicing’s (“Defendant”) Motion 17 to Dismiss (Doc. 17). For the reasons below, Defendant’s Motion is granted. 18 BACKGROUND 19 For the purposes of the Motion, the Court construes all facts in the Complaint as 20 true. Defendant is the current servicer of Plaintiff’s mortgage. (Doc. 1 at 2.) On January 21 13, 2021, Plaintiff sent a letter to Defendant asking for “the entirety of her loan file.” (Doc. 22 1 at 3–4, 8.) Defendant did not provide the records requested. (Doc. 1 at 3.) Instead, 23 Defendants responded on March 1, 2021 with a copy of the loan history statement. (Doc. 24 1 at 3.) Plaintiff now sues, alleging that Defendant’s response violated the Real Estate 25 Settlement Procedures Act (“RESPA”). (Doc. 1 at 5–6.) 26 DISCUSSION 27 “[RESPA] provides an action for damages against mortgage-loan servicers who fail 28 to respond to certain types of inquiries from borrowers.” Medrano v. Flagstar Bank, FSB, [1] 704 F.3d 661, 663 (9th Cir. 2012). Pursuant to RESPA, when a borrower sends a 2 “Qualified Written Request” (“QWR”), the servicer must (1) acknowledge receipt of the 3 request “within five days” and, (2) depending on the request, either (i) provide the borrower 4 with the requested information, or conduct a reasonable investigation and provide written 5 notice that the requested information is not available, or (ii) correct the errors the borrower 6 has indicated, or conduct a reasonable investigation and provide the borrower with written 7 notice that no error has occurred. 12 C.F.R. § 1024.35 , 1024.36. If the servicer fails to 8 respond properly to the QWR, the statute entitles the borrower to recover “actual damages 9 to the borrower as a result of the failure.” 12 U.S.C. § 2605 (f)(1)(A). 10 Plaintiff alleges two theories for relief under RESPA. First, Plaintiff alleges that 11 Defendant failed to acknowledge receipt of her QWR within five days. (Doc. 1.) Second, 12 Plaintiff alleges that Defendant failed to adequately respond to the QWR as required by 13 RESPA. (Doc. 1.) Defendants argue that Plaintiff’s Complaint should be dismissed for 14 failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). 15 I. Legal Standard 16 A. Motion to Dismiss 17 To survive dismissal for failure to state a claim pursuant to Federal Rule of Civil 18 Procedure 12(b)(6), a complaint must contain more than a “formulaic recitation of the 19 elements of a cause of action”; it must contain factual allegations sufficient to “raise a right 20 to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544 , 555 21 (2007). When analyzing a complaint for failure to state a claim, “allegations of material 22 fact are taken as true and construed in the light most favorable to the nonmoving party.” 23 Smith v. Jackson, 84 F.3d 1213, 1217 (9th Cir. 1996). However, legal conclusions couched 24 as factual allegations are not given a presumption of truthfulness, and “conclusory 25 allegations of law and unwarranted inferences are not sufficient to defeat a motion to 26 dismiss.” Pareto v. F.D.I.C., 139 F.3d 696, 699 (9th Cir. 1998). 27 B. Evidence Outside the Pleadings 28 “[E]vidence outside the pleadings . . . cannot normally be considered in deciding a 1 12(b)(6) motion.” Cervantes v. City of San Diego, 5 F.3d 1273, 1274 (9th Cir. 1993). “A 2 court may, however, consider certain materials—documents attached to the complaint, 3 documents incorporated by reference in the complaint, or matters of judicial notice— 4 without converting the motion to dismiss into a motion for summary judgment.” United 5 States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003); see Fed. R. Civ. P. 12(d). “Even if a 6 document is not attached to a complaint, it may be incorporated by reference into a 7 complaint if the plaintiff refers extensively to the document or the document forms the 8 basis of the plaintiff’s claim.” Ritchie, 342 F.3d at 908 . 9 Plaintiff has attached several documents to her Complaint that the Court will 10 consider. These are (1) the January 13 correspondence at issue, (Doc. 1 at 8–12); (2) a 11 certified mail receipt documenting Defendant’s receipt of the January 13 correspondence, 12 (Doc. 1 at 14–16); (3) Defendant’s March 1 response to Plaintiff’s correspondence, (Doc. 13 1 at 18–41); (4) Plaintiff’s response to Defendant’s March 1 letter, (Doc. 1 at 43–45); and 14 (5) another letter from Defendant dated March 17, 2021, (Doc. 1 at 47–48). Defendant 15 also provides a letter, dated January 29, 2021, allegedly sent to Plaintiff acknowledging 16 her request. (Doc. 17-1.) 17 II. Defendant’s Failure to Acknowledge 18 Defendant first argues that Plaintiff’s written correspondence does not constitute a 19 “QWR” under RESPA, and its duty to acknowledge her response was therefore never 20 triggered. (Doc. 17 at 6.) Under RESPA, a QWR is a “written request from the borrower 21 (or an agent of the borrower) for information relating to the servicing of such loan.” 12 22 U.S.C. § 2605 (e)(1)(A). A QWR “(i) includes, or otherwise enables the servicer to 23 identify, the name and account of the borrower; and (ii) includes a statement of the reasons 24 for the belief of the borrower, to the extent applicable, that the account is in error or 25 provides sufficient detail to the servicer regarding other information sought by the 26 borrower.” Id. § 2605(e)(1)(B). The second requirement is divided into “Notices of Error” 27 and “Requests for Information,” as described in two implementing regulations. 12 C.F.R. 28 § 1024.35(a), 1024.36(a); Rakestraw v. Nationstar Mortg., LLC, NO. 1:18-cv-03144-ELR1 LTW, 2019 WL 3521954 , at *3 (N.D. Ga. May 29, 2019); see also Cruz v. Freedom Mortg. 2 Corp, No. CV 18-1438 PSG (KSx), 2018 WL 6118532 , at *4 (C.D. Cal. May 3, 2018). 12 3 C.F.R. § 1024.35 explains the procedures for “Notices of Error,” which pertain to QWRs 4 that allege errors in the servicing of the loan. 12 C.F.R. § 1024.36 provides the procedures 5 for QWRs that request information (“RFIs”) related to the servicing of the loan. Plaintiff 6 has pleaded the latter in her Complaint, (Doc. 1).1 7 Plaintiff’s requests for information must relate to the “servicing” of the loan to 8 qualify as a QWR. 12 U.S.C. § 2605 (e)(1)(A); McCoy v. Wells Fargo Bank, N.A., No. 9 1:20-cv-00176-CL, 2021 WL 4451423 , at *4 (D. Or. July 21, 2021). “The term ‘servicing’ 10 means receiving any scheduled periodic payments from a borrower pursuant to the terms 11 of any loan . . . and making the payments of principal and interest and such other payments 12 with respect to the amounts received from the borrower as may be required pursuant to the 13 terms of the loan.” 12 U.S.C. § 2605 (i)(3). “Servicing,” therefore, “does not include the 14 transactions and circumstances surrounding a loan’s origination—facts that would be 15 relevant to a challenge to the validity of an underlying debt or the terms of a loan 16 agreement.” Medrano, 704 F.3d at 666–67. “Such events precede the servicer’s role in 17 receiving the borrower’s payments and making payments to the borrower’s creditors.” Id. 18 Courts reject RFIs that broadly request information that do not relate to the servicing 19 of the loan.2 See, e.g., McCoy, 2021 WL 4451423 , at *6 (“Where the majority of requests 20 in a purported Inquiry are not related to the servicing of a loan, the Court should not treat 21 it as a request under the statute.”); Anderson v. Wells Fargo Home Mortg., No. 2:16–CV– 22 01783 LEK, 2017 WL 4181114 , at *5 (E.D. Cal. Sept. 21, 2017) (holding that request for 23 “complete life of loan transactional history” was overbroad); Crowley v. Ameriprise Fin., [24] 1 Although the parties use the term “QWR” instead of “RFI,” the Court will use the term 25 “RFI” because it more specifically denotes what Plaintiff has pleaded. (Doc. 1 at 5–6.) 26 2 There is some confusion surrounding the proper terminology to be used for QWRs that post-date the 2014 regulations. McCoy, 2021 WL 4451423 , at *5 n.1. Some of the Court’s 27 cited cases use the term “QWR” quite liberally, but because these cases involved requests for information—as in, the plaintiff requested that the defendant provide her with 28 documents—the Court relies on them as persuasive authority in this case. See 12 C.F.R. § 1024.36 (a). 1 Inc., No. CV 14-02194 BRO (AGR), 2014 WL 12586069 , at *3 (C.D. Cal. Sept. 3, 2014) 2 (“RESPA does not protect ‘laundry list’ demands for information. . . .”); Bhatti v. Guild 3 Mortg. Co., No. C11–0480JLR, 2011 WL 6300229 , at *7–8 (W.D. Wash. Dec. 16, 2011) 4 (“Because Plaintiffs[’] letters effectively demand anything and everything that relates to 5 their loan, from its inception . . . their letters do not assist [the defendant] in identifying and 6 investigating any purported discrepancies with the servicing of their loan.”). Still, other 7 courts have held that mixed requests—containing both requests for servicing and non8 servicing information—can be a QWR. See, e.g., Pendleton v. Wells Fargo Bank, N.A., [9] 993 F. Supp. 2d 1150, 1153 (C.D. Cal. 2013) (“Courts have held that a letter that mixes 10 servicing requests and non-servicing requests can constitute a valid QWR.”); Rey v. 11 OneWest Bank, FSB, No. 2:12–cv–02078–MCE–GGH, 2013 WL 1791910 , at *3 (E.D. 12 Cal. Apr. 26, 2013) (collecting cases); Diunugala v. JP Morgan Chase Bank, N.A., 81 F. 13 Supp. 3d 969, 982 (S.D. Cal. 2015). 14 In Plaintiff’s January 13 correspondence, she requested her “complete loan file.” 15 (Doc. 1 at 8.) She defined “complete loan file” as “includ[ing], but . . . not limited to”: 16 (1) “[a] full detailed accounting” of her payments and how they had been applied; (2) “[a]ll 17 loan documents,” including “forbearance applications, agreements[,] and repayment 18 plans”; (3) “[a]ll written communications . . . regarding the underlying loan and 19 [Defendant’s] servicing”; (4) “[a]ny recordings or transcripts of telephonic 20 communications between [Defendant] and any party regarding the underlying loan and 21 [Defendants’] servicing”; and (5) “[a]ny and all reports from investigations” ordered by 22 Defendant in the course of servicing the loan, including records from those investigations. 23 (Doc. 1 at 11.) 24 Plaintiff’s request for her entire loan file, even when considered in conjunction with 25 her specific requests, is insufficient to trigger Defendant’s duty to acknowledge under 26 RESPA. Plaintiff’s specific requests are too broad and only tangentially related to 27 “servicing” as defined by RESPA.3 Unlike the Pendleton line of cases—all of which 28 3 Defendant complied with Plaintiff’s First Request by providing a full accounting of her loan as of December 2020. (Doc. 1 at 27–41.) This accounting was again provided to 1 contained specific requests for documents, only some of which were outside the scope of 2 RESPA—Plaintiff’s purported RFI is all encompassing. See Compl. Exh. A, Pendleton v. 3 Wells Fargo Bank, N.A., 993 F. Supp. 2d 1150, 1153 (C.D. Cal. 2013) (No. 13–6283), ECF 4 No. 1; Compl. Exh. R, Rey v. OneWest Bank, FSB, No. 2:12–cv–02078 (E.D. Cal. Apr. 26, 5 2013), ECF No. 1-4. Aside from asking for her entire file, which is clearly outside the 6 scope of RESPA, Plaintiff asks for “all” or “any” loan documents, written communications, 7 reports, recordings, or transcripts related to Defendant’s servicing of the loan. (Doc. 1 at 8 11.) These broad requests do not “provide[] sufficient detail to the [Defendant] regarding 9 . . . information sought by the borrower.” 12 U.S.C. § 2605 (e)(1)(B). Instead, the requests 10 are “more akin to a discovery demand than a qualified written request.” Moon v. 11 Countrywide Home Loans, Inc., No. 3:09–CV–00298–ECR–VPC, 2010 WL 522753 , at *5 12 (D. Nev. Feb. 9, 2010); Rizk v. Residential Credit Sols., Inc., No. CV-14-09371-MWF-JC, [13] 2016 WL 6211727 , at *2 (C.D. Cal. Apr. 12, 2016) (holding that purported QWR 14 requesting “‘all documentation pertaining to the servicing of [the] mortgage’ and all 15 documents comprising [the] ‘loan history,’ covering ‘the entire life of the loan’” was too 16 broad); Croskrey v. Ocwen Loan Servicing LLC, No. SA CV 14-1318-DOC (DFMx), 2016 17 WL 3135643 , at *11 (C.D. Cal. June 2, 2016) (“‘Given the breadth of plaintiffs’ putative 18 QWR,’ it does appear that some of the requests of information may have touched on 19 servicing practices; ‘but in the court’s opinion, it cannot fairly be said that the letter sought 20 information relating to the servicing of plaintiffs’ loan.” (quoting Hopson v. Chase Home 21 Fin. LLC, 14 F. Supp. 3d 774, 787 (S.D. Miss. 2014))); Hollenshead v. Bank of Am., N.A., 22 No. 4:18-CV-00724-ALM-CAN, 2020 WL 4615096 , at *7 (E.D. Tex. May 19, 2020) 23 Plaintiff in response to her January 13 correspondence. (Doc. 1 at 18, 27–41.) Plaintiff’s Second Request for “all loan documents,” (Doc. 1 at 11), is outside the scope of RESPA. 24 Aazami v. Wells Fargo Bank, N.A., No. 3:17-CV-01564-BR, 2019 WL 281286 , at *11 (D. Or. Jan. 22, 2019) (“[A] borrower’s requests relating to loan modification are not related 25 to ‘servicing’ of the loan.”); Medrano, 704 F.3d at 666–67. Plaintiff’s Third through Fifth Requests are broadly worded to include “[a]ll written communications,” “[a]ny recordings 26 or transcripts,” and “[a]ny and all reports” that relate to “the underlying loan and [Defendant’s] servicing.” (Doc. 1 at 11.) These requests cannot be saved merely by using 27 the word “servicing” because they are still too broad to “provide[] sufficient detail to the servicer regarding [the] information sought by the borrower.” 12 U.S.C. 28 § 2605(e)(1)(B)(ii); see also Ovsepyan v. OneWest Bank, FSB, No. CV 11–8714–GHK (RZx), 2012 WL 10423213 , at *3 (C.D. Cal. June 14, 2012) (collecting cases). 1 (collecting cases). Plaintiff’s written correspondence is not an RFI as contemplated by 2 § 1024.36.4 3 III. Adequacy of Response 4 For the reasons explained above, supra Part II, Plaintiff’s written correspondence 5 does not meet the definition of an RFI, and Defendants were under no obligation to 6 respond. Even if the Court construed it as such, however, Defendant properly complied 7 with its obligations under RESPA. RESPA does not require a servicer “to provide the 8 requested information or conduct an investigation if it determines that the request for 9 information is duplicative of information the servicer has already provided the borrower, 10 is irrelevant because it is not ‘directly related’ to the borrower’s mortgage loan account, or 11 the request is overbroad or unduly burdensome.” Lebeau v. U.S. Bank, N.A., No. 17-32912 JJM-PAS, 2019 WL 1077285 , at *4 (D.R.I. Mar. 7, 2017); 12 C.F.R. § 1024.36 (f)(1)(i), 13 (f)(1)(iii), (f)(1)(iv). To invoke one of those exceptions, the servicer must provide notice 14 to the borrower within five days of making the determination that the exception applies. [15] 12 C.F.R. § 1024.36 (f)(2). 16 Defendant made such a determination and sent the required notice in its March 1 17 letter to Plaintiff. (Doc. 1 at 18.) Although Plaintiff pleaded that she did not receive 18 “written notice that [Defendant] was not required to comply [with RESPA],” (Doc. 1 at 6), 19 this allegation is directly contradicted by the March 1 letter, which was attached to the [20] 4 Even if the Court treated Plaintiff’s correspondence as an RFI, Plaintiff has failed to 21 properly plead damages. RESPA provides that anyone who violates RESPA shall be liable for actual damages to an individual who brings an action. See 12 U.S.C. § 2605 (f)(1). 22 “[T]he loss alleged must be related to the RESPA violation itself.” Lal v. Am. Home Servicing, Inc., 680 F. Supp. 2d 1218, 1223 (E.D. Cal. 2010). Here, Plaintiff alleges that 23 she has suffered actual damages because of Defendant’s failure to acknowledge her January 13 correspondence, including mailing expenses and attorney’s fees, emotional 24 distress, late fees and interest charges, and the inability to refinance or sell her property. (Doc. 1 at 6, 45.) But Plaintiff does not plead facts that connect any of these damages to 25 Defendant’s failure to acknowledge her January 13 correspondence. Though these damages may be related to either Defendant’s allegedly deficient March 1 response, 26 Defendant’s allegedly deficient servicing of the loan, or Plaintiff’s own conduct, Plaintiff does not plead facts plausibly linking these damages to Defendant’s failure to respond 27 within five days. Therefore, even if the Court were to consider Plaintiff’s written correspondence as a proper RFI, the failure-to-acknowledge theory would still be 28 dismissed. 1 Complaint, (Doc. 1 at 18.)5 In the letter, Defendant noted that it “[had] already responded 2 to a previous dispute substantially the same as [the] current dispute,” provided Defendant’s 3 prior response, informed Plaintiff that the matter was referred to a foreclosure attorney, and 4 provided the contact information for the attorney. (Doc. 1 at 18.) Plaintiff does not allege 5 that Defendant’s representation was false, nor does Plaintiff challenge that the letter did 6 not meet the five-day deadline, which is measured from when the determination was made, 7 as opposed to when the RFI was received. 12 C.F.R. § 1024.36 (f). Plaintiff must 8 affirmatively plead a RESPA violation, which she has not done here. Hudgins v. Seterus, 9 Inc., 192 F. Supp. 3d 1343, 1348 (S.D. Fla. 2016) (“[I]in order to survive a motion to 10 dismiss, a complaint like Plaintiff’s must sufficiently allege that . . . Defendant failed to 11 respond adequately.”); Hollenshead, 2020 WL 4615096 , at *6 (collecting cases). 12 IV. Leave to Amend 13 Plaintiff has asked for leave to amend should the Court grant Defendant’s Motion. 14 (Doc. 18 at 13.) Federal Rule of Civil Procedure 15(a) provides that leave to amend shall 15 be freely given when “justice so requires.” Fed. R. Civ. P. 15(a). “But a district court need 16 not grant leave to amend where the amendment: (1) prejudices the opposing party; (2) is 17 sought in bad faith; (3) produces an undue delay in litigation; or (4) is futile.” 18 AmerisourceBergen Corp. v. Dialysist W., Inc., 465 F.3d 946, 951 (9th Cir. 2006). Leave 19 to amend lies within “the sound discretion of the trial court”; however, this Circuit has 20 instructed that Rule 15’s policy favoring amendment “should be applied with extreme 21 liberality.” DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 186 (9th Cir. 1987). The party 22 opposing amendment bears the burden of establishing futility or one of the other 23 permissible reasons for denying a motion to amend. Angel Jet Servs., L.L.C. v. Raytheon 24 Health Benefits Plan, No. 2:10-CV-01385-PHX-JAT, 2011 WL 744917 , at *2 (D. Ariz. 25 Feb. 25, 2011). 26 Defendant does not claim that Plaintiff’s amendment would be prejudicial, in bad 27 5 “[Courts] are not required to accept as true conclusory allegations which are contradicted by documents referred to in the complaint.” Steckman v. Hart Brewing, Inc., 143 F.3d 28 1293 , 1295–96 (9th Cir. 1998). || faith, or dilatory. Instead, Defendant relies on Local Rule 15.1 and futility. (Doc. 20 at 2|| 6-7.) Although Plaintiff did not comply with the local rule by lodging an amended 3 || complaint or attaching it to her response, the Court will consider the request on the merits. 4|| Plaintiff has attempted to plead a cause of action under both 12 U.S.C. § 2605 and 12 5|| C.F.R. § 1024.36, and the alleged violation relates to Defendant’s failure to provide || records. (Doc. 1 at 5—6.) However, it is possible that Plaintiff could provide facts to || properly plead a claim. The Court declines to comment on whether such a claim would be 8 || meritorious; however, given the liberality with which district courts must construe motions to amend, amendment is not frivolous. 10 CONCLUSION 11 Because Plaintiff's written correspondence exceeds the scope of RESPA, it does not qualify as an RFI pursuant to 12 U.S.C. § 2605 (e)(1)(B) and 12 C.F.R. § 1024.36 . 13 || Therefore, Plaintiff has failed to state a claim, and Defendant’s Motion is granted. || However, at this time the Court cannot determine that amendment is futile. Accordingly, 15 IT IS HEREBY ORDERED granting Defendant’s Motion to Dismiss (Doc. 17). 16 IT IS FURTHER ORDERED that Plaintiff has 30 days from the date of this order || to file an Amended Complaint. 18 IT IS FURTHER ORDERED that if Plaintiff fails to file an Amended Complaint || within 30 days from the date of this order, the Clerk of Court must, without further notice, 20 || enter judgment of dismissal of this action with prejudice on or after April 11, 2022. 21 Dated this 10th day of March, 2022. Whirs ) 33 A Whacrsay Sooo) 4 Chief United States District Judge [28] -9-