Rozich v. MTC Financial Incorporated

1 WO [5] 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA [8] 9 Robert Rozich, No. CV-23-00210-PHX-DWL 10 Plaintiff, ORDER 11 v. 12 MTC Financial Incorporated; First Citizens Bank & Trust Company; Loan 13 Care, LLC 14 Defendants. [15] 16 Robert Rozich (“Plaintiff”) alleges that he contacted his loan servicer, LoanCare, 17 LLC (“LoanCare”), to express concerns regarding his ability to make future payments on 18 a home equity line of credit. In response, LoanCare told Plaintiff that he would have to be 19 delinquent for three months before he could apply for hardship relief. However, after 20 Plaintiff went into delinquency based on that advice and then submitted a loan modification 21 application, LoanCare denied relief. In the denial letters, LoanCare stated that Plaintiff 22 was ineligible for modification because his loan was a secondary lien. 23 In this action, Plaintiff has sued LoanCare (and other defendants) under an array of 24 legal theories. Now pending before the Court is LoanCare’s motion to dismiss all of 25 Plaintiff’s claims against it. (Doc. 25.) For the following reasons, the motion is granted 26 but Plaintiff is granted leave to amend. 27 … 28 … 1 BACKGROUND 2 I. Factual Allegations 3 The following facts, presumed true, are derived from Plaintiff’s operative pleading, 4 the First Amended Complaint (“FAC”). (Doc. 21.) 5 Former Defendant MTC Financial Incorporated (“MTC”) is a California 6 corporation that operates in Arizona. (Id. ¶ 2.) Defendant First Citizens Bank and Trust 7 Company (“CIT”) is a bank that operates in Arizona. (Id. ¶ 3.) Defendant LoanCare is a 8 company that services loans, including in Arizona. (Id. ¶ 4.) 9 On July 31, 2007, Plaintiff obtained a $150,000 home equity line of credit (“the 10 HELOC”). (Id. ¶¶ 8, 11.) The HELOC is secured by a deed of trust (“DOT”) on Plaintiff’s 11 home in Phoenix. (Id.) In 2010, the DOT was assigned to CIT. (Id. ¶ 10.) “The DOT was 12 a Secondary Lien, with a Wells Fargo-Home Mortgage having a secured loan in first 13 position.” (Id. ¶ 12.) 14 The “monthly payment for the Wells Fargo-Home Mortgage loan was . . . $1,377.” 15 (Id. ¶ 13.) The “monthly mortgage payment under the HELOC would fluctuate based on 16 the amount of the interest only payments,” with an “estimated average per month paid by 17 Plaintiff” of “$1,093.75.” (Id. ¶ 14.) 18 In 2007, “[u]pon obtaining the HELOC, the entire line of credit under the HELOC 19 . . . was placed in Plaintiff’s bank account without his permission or knowledge[,] which 20 would require him to pay interest on the entire amount of the HELOC.” (Id. ¶ 15.) Plaintiff 21 “immediately returned the funds to the lender, but already having the interest assessed on 22 the entire amount of the HELOC Plaintiff transferred all of the funds in the HELOC to his 23 account.” (Id. ¶ 16.) “Defendants” then “close[d] the credit line within one . . . year of 24 funding the loan, for reasons not having to do with Plaintiff.” (Id. ¶ 17.)1 25 “On or before July of 2018 Plaintiff contacted LoanCare because he foresaw [26] 1 The Court notes that the allegations in paragraph 16 appear to be contradictory, as 27 the FAC does not explain how Plaintiff could have both immediately returned the funds and kept the funds. The Court also notes that the vague reference to “Defendants” in 28 paragraph 17 does not identify which of the three Defendants in this action (one of which has since been dismissed) took the alleged action. 1 difficulties in making future payments on the HELOC.” (Id. ¶ 18.) “LoanCare informed 2 Plaintiff that he would have to be delinquent three . . . or so months before hardship relief 3 would be granted.” (Id. ¶ 19.) “LoanCare did not discuss with Plaintiff other options 4 available, including refinance, so that Plaintiff could remain in good standing and continue 5 his monthly payments without issue.” (Id. ¶ 21.) “Plaintiff never had been delinquent on 6 the payments for the HELOC.” (Id. ¶ 20.) “Around this time LoanCare removed Plaintiff’s 7 access to the online HELOC account,” which meant “Plaintiff could not make or review 8 payments and balances online as he always had before.” (Id. ¶¶ 22-23.) “LoanCare also 9 would charge, at times, a . . . $10 . . . service/processing fee to make payments prior to 10 LoanCare removing Plaintiff’s access to the online account.” (Id. ¶ 24.) 11 “In September of 2018, Plaintiff submitted his Borrower Response Package/Loss 12 Mitigation Application . . . based on the previous instructions from LoanCare to first allow 13 the HELOC payments to become delinquent and apply for relief.” (Id. ¶ 25.) 14 On September 21, 2018, LoanCare responded that Plaintiff’s application was 15 incomplete. (Id. ¶ 26.) Plaintiff then provided additional information. (Id. ¶ 27.) 16 On or around October 30, 2018, LoanCare confirmed in a letter to Plaintiff that the 17 application was complete but also noted that it “encourage[d] [Plaintiff] to consider 18 contacting servicers of any other mortgage loans secured by the same property to discuss 19 available loss mitigation options.” (Id. ¶¶ 27, 30.) 20 On or around November 13, 2018, LoanCare told Plaintiff in a letter that “although 21 [he] may have a hardship, [he] d[id] not qualify for a loan modification.” (Id. ¶ 32.) The 22 letter stated Plaintiff “was not eligible for a repayment plan, unemployment forbearance, 23 or traditional modification trial, because the HELOC was not a first lien.” (Id. ¶ 35, internal 24 quotation marks omitted.) Before this letter, “LoanCare had never informed Plaintiff that 25 because the HELOC was not a first lien, Plaintiff would not qualify under any plan,” 26 although it “knew at all times the HELOC was in second position.” (Id. ¶¶ 36-37.) 27 In March 2019, Plaintiff submitted a second mitigation application. (Id. ¶ 38.) On 28 or around April 15, 2019, he received a second rejection letter, which provided the same 1 explanation that was provided in the first rejection letter. (Id. ¶¶ 39, 42.) 2 In November 2019 and April 2020, LoanCare rejected successive applications from 3 Plaintiff for the same reason. (Id. ¶¶ 44-45, 48, 52-53, 56.) 4 In September 2021, Plaintiff enlisted the help of an individual named Charles M. 5 Bartkiewicz to assist him with his fifth application. (Id. ¶¶ 59-62.) In an October 15, 2021 6 letter, LoanCare informed Bartkiewicz that it “does not offer refinancing,” so “the only 7 options for Plaintiff were to reinstate the account . . . , a short sale, or a discounted pay 8 off.” (Id. ¶¶ 62-63.) The October 15, 2021 letter “also for the first time, invite[d] Plaintiff 9 to make a settlement offer for a lien release.” (Id. ¶ 64.) Bartkiewicz then made three 10 settlement offers on Plaintiff’s behalf, but none were accepted. (Id. ¶¶ 65-66.) 11 In a May 6, 2022 letter rejecting the second settlement offer, LoanCare stated “that 12 the account remains due for the January 6, 2019, payment and the unpaid principal balance 13 is . . . $126,407.70.” (Id. ¶ 66.) In other words, “LoanCare was taking the position that 14 from July 2007 through December 2018, Plaintiff had only paid . . . $23,592.30 . . . towards 15 the principal.” (Id. ¶¶ 66-68.) “After Plaintiff’s online access to his account was revoked 16 by Defendants, Plaintiff has never been provided an accounting showing the basis of the 17 unpaid principal balance as . . . $126,407.70.” (Id. ¶ 70.) 18 Plaintiff alleges that “LoanCare and CIT purposely prolonged the period that 19 Plaintiff negotiated with the Defendants so that the Plaintiff would be in considerable 20 arrears which would make his ability to obtain new financing from any institution 21 increasingly difficult to impossible.” (Id. ¶ 71.) “During the entirety of this process, 22 Defendants negatively reported each late payment destroying Plaintiff’s good credit 23 rating.” (Id. ¶ 72, internal quotation marks omitted.) Plaintiff further alleges that “[h]ad 24 LoanCare and/or CIT initially told Plaintiff to offer an amount for a discounted payoff and 25 release of lien instead of advising [him] to resubmit multiple applications, then either a 26 settlement could have been reached or Plaintiff would still have been in a position to obtain 27 new financing with CIT or [an]other lender based on his then good credit and equity.” (Id. 28 ¶ 73.) 1 II. Procedural History 2 On December 13, 2022, Plaintiff commenced this action in Maricopa County 3 Superior Court. (Doc. 1 ¶ 1.) 4 On January 31, 2023, LoanCare removed the action to this Court. (Doc. 1.) 5 On March 9, 2023, after Plaintiff and MTC announced they had reached a settlement 6 (Doc. 16), the Court dismissed all of Plaintiff’s claims against MTC. (Doc. 18.) 7 On April 7, 2023, Plaintiff filed the FAC. (Doc. 21.) The FAC asserts five claims 8 against LoanCare and CIT: (1) breach of contract; (2) breach of the implied covenant of 9 good faith and fair dealing; (3) violation of the Arizona Consumer Fraud Act (“ACFA”); 10 (4) violation of the Real Estate Settlement Procedures Act (“RESPA”); and (5) violation 11 of the Truth in Lending Act (“TILA”). (Id. ¶¶ 74-106.) 12 On May 22, 2023, LoanCare moved to dismiss the FAC. (Doc. 25.) 13 On June 6, 2023, Plaintiff responded to LoanCare’s motion. (Doc. 26.)2 14 LoanCare did not file a reply brief and neither side requested oral argument. 15 DISCUSSION 16 I. Legal Standard 17 Under Rule 12(b)(6), “to survive a motion to dismiss, a party must allege sufficient 18 factual matter, accepted as true, to state a claim to relief that is plausible on its face.” In re 19 Fitness Holdings Int’l, Inc., 714 F.3d 1141, 1144 (9th Cir. 2013) (internal quotation marks 20 omitted). “A claim has facial plausibility when the plaintiff pleads factual content that 21 allows the court to draw the reasonable inference that the defendant is liable for the 22 misconduct alleged.” Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). “[A]ll 23 well-pleaded allegations of material fact in the complaint are accepted as true and are 24 construed in the light most favorable to the non-moving party.” Id. at 1444-45 (citation 25 omitted). However, the Court need not accept legal conclusions couched as factual [26] 27 2 Although this filing was one day late, LRCiv 7.2(c), LoanCare has not objected. The Court will deem it filed. Cf. Burnett v. Bottoms, 2006 WL 753159 , n.1 (D. Ariz. 2006) 28 (“Since Defendant . . . apparently has no objection to the untimely Response because no written objection has been filed, the Court will consider it.”). 1 allegations. Iqbal, 556 U.S. at 678-80 . Moreover, “[t]hreadbare recitals of the elements of 2 a cause of action, supported by mere conclusory statements, do not suffice.” Id. at 678 . 3 The court also may dismiss due to “a lack of a cognizable legal theory.” Mollett v. Netflix, 4 Inc., 795 F.3d 1062, 1065 (9th Cir. 2015) (citation omitted). 5 II. Counts One And Two 6 A. The Parties’ Arguments 7 LoanCare seeks the dismissal of Count One (breach of contract) and Count Two 8 (breach of the implied covenant of good faith and fair dealing) because the underlying 9 contract (the DOT) was between Plaintiff and CIT, with LoanCare simply acting as “an 10 agent of CIT,” and thus “Plaintiff fails to allege the existence of a contract between Plaintiff 11 and [LoanCare].” (Doc. 25 at 3, 4.) Separately, LoanCare argues that Plaintiff fails to 12 allege any damages arising from the alleged breaches. (Id.) 13 In response, Plaintiff acknowledges that he cannot assert any contract-based claims 14 against LoanCare (or, at least, cannot do so absent evidence that CIT assigned the DOT to 15 LoanCare) and suggests that he did not intend for the FAC to be understood as asserting 16 Counts One and Two against LoanCare: “Plaintiff understands he could have been clearer 17 by putting which Defendant the claim is being asserted [against] in the caption as to each 18 count. Plaintiff apologizes for any confusion.” (Doc. 26 at 4.) 19 B. Analysis 20 Given Plaintiff’s concessions and clarifications as to Counts One and Two, 21 LoanCare’s motion to dismiss those counts is granted. 22 III. Count Three 23 A. The Parties’ Arguments 24 LoanCare argues that Count Three (ACFA violation) must be dismissed because the 25 “advisements” that “Plaintiff . . . go into default” and then “fill out multiple applications” 26 were “not made in connection with the sale or advertisement of merchandise.” (Doc. 25 at 27 4-5, internal quotation marks omitted.) Alternatively, LoanCare argues that “Plaintiff fails 28 to allege that he actually relied on such advisements . . . that he suffered any alleged injury 1 as a proximate cause of such advisements, and . . . fails to allege the injuries that he suffered 2 with specificity.” (Id.) Finally, LoanCare argues that Plaintiff’s claim that the $10 service 3 fees violated A.R.S. § 6-635 “fails because [§ 6-635] does not apply to the HELOC loan in 4 question pursuant to A.R.S. 6-602(B).” (Id.) 5 Plaintiff responds that “Arizona courts have long held that money is merchandise as 6 defined in A.R.S. § 44-1521(5), and a loan is the sale of the present use of money as defined 7 [in] A.R.S. § 44-1521(7).” (Doc. 26 at 4.) Next, Plaintiff argues that he properly alleged 8 reliance by alleging that he “stop[ped] making his monthly payment based on LoanCare’s 9 advisements, filed multiple applications based on LoanCare’s advisements, and made three 10 . . . settlement offers based on LoanCare’s advisements.” (Id. at 5.) Finally, Plaintiff argues 11 the $10 fee is not exempted by A.R.S. § 6-602(B)(3) because Defendants closed the 12 HELOC “within one . . . year of funding the loan (sometime in 2008)” and “[o]nce the 13 revolving line of credit was closed . . . , it was no longer exempt under [this provision].” 14 (Id. at 5-6.) 15 B. Analysis 16 ACFA “provides an injured consumer with an implied private cause of action 17 against a violator of the act.” Dunlap v. Jimmy GMC of Tucson, Inc., 666 P.2d 83 , 87 18 (Ariz. Ct. App. 1983). The elements of an ACFA claim “are a false promise or 19 misrepresentation made in connection with the sale or advertisement of merchandise and 20 the hearer’s consequent and proximate injury.” Id. 21 As Plaintiff correctly notes, Arizona courts have held that money qualifies as 22 “merchandise” for purposes of ACFA and that a loan qualifies as a “sale” for purposes of 23 ACFA. Villegas v. Transamerica Fin. Servs., Inc., 708 P.2d 781, 783 (Ariz. Ct. App. 24 1985). However, the conduct at issue here was not the solicitation of a loan by LoanCare. 25 Rather, Plaintiff approached LoanCare about the possibility of modifying an existing loan. 26 Although there is no published authority from an Arizona appellate court on this issue, 27 several state and federal courts have concluded in recent non-precedential decisions that 28 an ACFA claim will not lie in this circumstance. See, e.g., Thomas v. Ally Bank, 2017 WL 1 6616620, *2 (Ariz. Ct. App. 2017) (“Thomas did not allege fraud in connection with a sale 2 or advertisement of merchandise, but rather in modifying the payment schedule of an 3 existing loan. Accordingly, Thomas’s allegations did not state a claim under § 44– 4 1522(A).”); Zoldessy v. MUFG Union Bank, N.A., 2021 WL 1733398 , *3 (D. Ariz. 2021) 5 (“[H]ere there was no sale or advertisement of merchandise . . . [because] Plaintiff 6 contacted his loan servicer regarding forbearance options on an already existing loan. 7 Thus, this Court finds the communications between Plaintiff and Defendant did not 8 constitute a sale or advertisement under the ACFA and cannot form the basis of Plaintiff’s 9 ACFA claim. The ACFA claim will therefore be dismissed.”) (citation omitted); Jahn v. 10 Caliber Home Loans Inc., 2019 WL 7049105 , *3 (D. Ariz. 2019), aff’d, 840 F. App’x 975 11 (9th Cir. 2021) (“Because any alleged misrepresentations by Defendants were not made in 12 connection with the sale or advertisement of merchandise, but rather the modification of a 13 preexisting loan, Plaintiffs’ fourth claim for relief fails as a matter of law.”); Rich v. BAC 14 Home Loans Servicing LP, 2014 WL 7671615 , *10 (D. Ariz. 2014) (“Money lending is 15 merchandise for purposes of the ACFA. This case, however, does not involve an offer for 16 a new loan. Instead, the conduct Plaintiffs complain of concerns communications 17 surrounding potential offers to modify an already existing debt. BANA’s communications 18 with Plaintiffs, therefore, did not concern the sale or advertisement of merchandise, but 19 instead concerned discussions about modifying the payment schedule for merchandise 20 previously purchased. Plaintiffs have proffered no evidence of a sale or advertisement of 21 merchandise and therefore have failed to articulate a triable ACFA claim.”) (citation 22 omitted). Although some courts have admittedly come out the other way on this issue, see, 23 e.g., Myrick v. Bank of Am. Corp., 2013 WL 12097453 , *3 (D. Ariz. 2013), the Court agrees 24 with the analysis set forth in Thomas, Zoldessy, Jahn, and Rich and thus concludes that 25 Count Three is, in the main, subject to dismissal. 26 Finally, to the extent Count Three is also premised on LoanCare’s imposition of 27 certain $10 service/processing fees, the claim fails for at least two reasons. First, although 28 the FAC alleges (Doc. 21 ¶¶ 91-92) that the challenged $10 fees violate A.R.S. § 6-635, 1 which sets forth a list of “allowable fees,” A.R.S. § 6-602(B) specifies that the limitations 2 set forth in § 6-635 “do not apply to” various types of loans. One of the exempted 3 categories of loans is “[a]dvances on open end revolving loans that are secured by the 4 consumer’s principal residence with an agreed on credit limit of more than $10,000.” Id. 5 § 6-602(B)(3). In his response brief, Plaintiff acknowledges that his HELOC was initially 6 the sort of loan that would fall within this exemption but argues that because his line of 7 credit was closed in 2008, before LoanCare took over as the servicer, it stopped falling 8 within the § 6-602(B)(3) exemption at that time and “became a simple loan for a fixed 9 amount.” (Doc. 26 at 5-6.) The problem with this argument is that, even if the HELOC 10 stopped qualifying as a § 6-602(B)(3) loan once the line of credit was closed, the best way 11 to characterize the HELOC after the closure would be as a “[c]losed end loan[] of more 12 than $10,000.” Such loans are identified in § 6-602(B)(1) as a different category of loans 13 that are exempted from § 6-635’s limitations. Thus, either way, Plaintiff’s reliance on § 614 635 is misplaced. 15 Second, and alternatively, even assuming the challenged $10 service/processing 16 fees were somehow improper under § 6-635, Plaintiff does not explain (nor can the Court 17 discern) how this would entitle Plaintiff to assert a claim against LoanCare under ACFA. 18 As noted, a claim under ACFA requires “a false promise or misrepresentation made in 19 connection with the sale or advertisement of merchandise and the hearer’s consequent and 20 proximate injury.” Dunlap, 666 P.2d at 87 . A fee charged in violation of regulatory 21 requirements is not a false promise or representation, made in connection with the sale or 22 advertisement of merchandise, that induces reliance. 23 IV. Count Four 24 A. The Parties’ Arguments 25 As noted, Count Four is a claim against LoanCare and CIT for violating RESPA. 26 (Doc. 21 ¶¶ 95-101.) More specifically, the FAC identifies two regulatory provisions that 27 LoanCare and CIT allegedly violated: 12 C.F.R. § 1024.39 (b) and 12 C.F.R. § 1024.41 (d). [28] 1 (Doc. 21 ¶¶ 96, 98.) 2 LoanCare asserts that Plaintiff’s claim under 12 C.F.R. § 1024.39 should be 3 dismissed for three reasons: (1) the regulation “does not confer upon borrowers a private 4 right of action against lenders”; (2) the regulation “only applies to delinquent borrowers, 5 and Plaintiff has failed to allege that he is a delinquent borrower”; and (3) “Plaintiff fails 6 to allege . . . what damages he suffered as a result of the alleged violation.” (Doc. 25 at 57 6.) As for the claim under 12 C.F.R. § 1024.41 , LoanCare argues it should be dismissed 8 for two reasons: (1) Plaintiff admits that LoanCare identified the reason why each 9 modification application was denied (i.e., his loan “was not a first lien”), and thus 10 LoanCare satisfied § 1024.41’s requirement of stating the specific reasons for the servicer’s 11 determination; and (2) “Plaintiff fails to allege . . . what damages he suffered as a result of 12 the alleged violation.” (Id. at 6.) 13 In response, Plaintiff argues that § 1024.39(b) provides a private right of action and 14 that because he was eligible for a loan modification under RESPA, LoanCare was required 15 under § 1024.41(d) to “identify the owner or assignee of the mortgage loan and the specific 16 criteria that the borrower failed to satisfy” but failed to do so. (Doc. 26 at 6-7, emphasis 17 omitted.) Plaintiff conspicuously does not address LoanCare’s arguments regarding the 18 absence of damages arising from the alleged RESPA violations. (Id.) 19 B. Analysis 20 One of LoanCare’s dismissal arguments is that, to the extent Count Four is premised 21 on alleged violations of 12 C.F.R. § 1024.39 , the claim fails because there is no private 22 right of action to enforce violations of that regulatory provision. This argument raises a 23 complicated question that has never been addressed by the Ninth Circuit and has divided 24 other courts. Some courts agree with LoanCare that no private right of action exists in this 25 circumstance. See, e.g., Cilien v. U.S. Bank Nat’l Ass’n, 687 F. App’x 789 , 792 n.2 (11th 26 Cir. 2017) (“We also note that—unlike 12 C.F.R. § 1024 .41—the regulations set forth in 27 sections 1024.39 and 1024.40 provide no private cause of action.”); Bryant v. Hope Credit 28 Union, 2020 WL 3103974 , *2 (S.D. Miss. 2020) (“Plaintiffs invoke 12 C.F.R. 1 §§ 1024.39(a)-(b) and 1024.40(a)-(b) [but] . . . [t]here is no private cause of action for 2 alleged violations of the RESPA regulations cited by Plaintiffs. As a result, Plaintiff’s 3 RESPA actions against Dovenmuehle and Hope must be dismissed.”); Brown v. Bank of 4 New York Mellon, 2016 WL 2726645 , *2 (E.D. Va. 2016) (“With respect to plaintiff’s 5 Regulation X claims in Counts II-V, defendants correctly argue that 12 C.F.R. §§ 1024.35 , 6 1024.39, and 1024.40 do not explicitly provide a cause of action to private individuals.”). 7 Others courts have reached the opposite conclusion. See, e.g., Canizales v. Wolf Firm, [8] 2022 WL 1585180 , *3 (C.D. Cal. 2022) (acknowledging that “the majority of courts to 9 consider this question have concluded that § 1024.39 does not provide a right of action” 10 but concluding that “there was clear intent to create a private right of action to enforce § 11 1024.39, and thus declin[ing] to follow the nonbinding decisions of those prior courts”); 12 Vance v. Wells Fargo Bank, N.A., 291 F. Supp. 3d 769, 773 (W.D. Va. 2018) (“Because 13 the Bureau promulgated Section 1024.39 under the authority of RESPA Section 6 and 14 Section 6 confers a private right of action, Section 1024.39 authorizes a private right of 15 action. Thus, Wells Fargo’s Motion to Dismiss the Vances’ Section 1024.39 violation 16 claim will be denied.”). 17 The Court finds it unnecessary to wade into this debate because, even assuming 18 there is a private right of action, Plaintiff’s § 1024.39 claim is subject to dismissal due to a 19 failure to plead damages. Under RESPA (which is the statute that, according to the 20 decisions in Canizales and Vance, provides the foundation for implying a private right of 21 action for violations of § 1024.39), Plaintiff must plead “actual damages.” 12 U.S.C. 22 § 2605(f)(1). See generally Sitanggang v. Countrywide Home Loans, Inc., 419 F. App’x 23 756, 757 (9th Cir. 2011) (“Sitanggang’s [RESPA] claim was properly dismissed because 24 she did not allege facts suggesting that she suffered any actual damages.”). To plead actual 25 damages, Plaintiff must allege “concrete harms caused by the RESPA violation itself, not 26 harms generally resulting from a plaintiff’s default.” Edge-Wilson v. Wells Fargo Bank, 27 N.A., 2018 WL 4491138 , *4 (N.D. Cal. 2018) (citation omitted). Here, Plaintiff’s theory 28 of why a regulatory violation occurred is that § 1024.39(b) requires servicers to “send a 1 borrower a written notice within forty-five . . . days after the borrower becomes delinquent 2 and again no later than forty-five . . . days after each payment due date so long as the 3 borrower remains delinquent” but “LoanCare failed to provide these notices timely, or at 4 all.” (Doc. 21 ¶¶ 96-97.) However, the FAC does not allege (and Plaintiff does not attempt 5 to explain in his response brief) why these alleged regulatory violations were harmful to 6 him. Indeed, the FAC acknowledges that Plaintiff knew he was delinquent (id. ¶ 25) and 7 the thrust of some of Plaintiff’s other claims is that LoanCare engaged in misconduct by 8 inducing him to become delinquent. Therefore, any alleged failure by LoanCare to provide 9 written notice of Plaintiff’s resulting delinquency status could not have resulted in any 10 independent harm, as RESPA requires. It follows that any portion of Count Four premised 11 on violations of § 1024.39 must be dismissed. Gresham v. Wells Fargo Bank, N.A., 642 F. 12 App’x 355, 359 (5th Cir. 2016) (declining to resolve whether § 1024.39 is enforceable 13 through a private right of action because “[e]ven [if] it [is], Gresham failed to plead 14 sufficient facts or offer any evidence in support of such claim”). 15 Turning to § 1024.41(d), LoanCare does not question the existence of a private right 16 of action, so the analysis turns on whether Plaintiff has stated a valid claim for relief. 17 Section 1024.41(d), which is entitled “Denial of loan modification options,” provides that 18 “[i]f a borrower’s complete loss mitigation application is denied for any trial or permanent 19 loan modification option available to the borrower pursuant to paragraph (c) of this section, 20 a servicer shall state in the notice sent to the borrower . . . the specific reason or reasons for 21 the servicer’s determination . . . and, if applicable, that the borrower was not evaluated on 22 other criteria.” Id. A servicer need not comply with these requirements more than once if 23 a borrower submits multiple applications while remaining delinquent. Id. § 1024.41(i). 24 Here, the FAC alleges that Plaintiff remained delinquent throughout the period in 25 which he submitted successive modification applications (Doc. 21 ¶¶ 25-58), so Plaintiff 26 must plead that LoanCare’s initial denial letter in November 2018 failed to provide the 27 “specific reason or reasons” that § 1024.41(d) requires. Plaintiff has not done so. The 28 FAC acknowledges that the November 2018 letter provided a specific reason for the denial 1 of Plaintiff’s modification request: “The November 13, 2018, letter also informed Plaintiff 2 he was not eligible . . . because the HELOC ‘was not a first lien.’” (Id. ¶ 35.) This is a 3 specific reason. Although a vague assertion that an application was denied due to 4 unspecified “rules” or “guidelines” is insufficient, Chau v. Select Portfolio Servicing, Inc., [5] 2020 WL 5810439 , *3 (D. Mass. 2020), an explanation as simple as that an application 6 was denied due to the “Plaintiff’s monthly income” is sufficiently specific to comply with 7 § 1024.41(d). Ramirez v. Wells Fargo Bank, N.A., 2021 WL 9564023 , *9 (E.D.N.Y. 2021). 8 Such is the case here. 9 Plaintiff’s arguments to the contrary are unavailing. Plaintiff contends that 10 LoanCare’s proffered reason was inadequate because RESPA in fact “includes the 11 modification of secondary liens.” (Doc. 26 at 6-7.) But this misses the point. Section 12 1024.41 is a procedural regulation that simply creates a right to an explanation. 12 C.F.R. 13 § 1024.41(a) (“Nothing in § 1024.41 imposes a duty on a servicer to provide any borrower 14 with any specific loss mitigation option. Nothing in § 1024.41 should be construed to 15 create a right for a borrower to enforce the terms of any agreement between a servicer and 16 the owner or assignee of a mortgage loan, including with respect to the evaluation for, or 17 offer of, any loss mitigation option or to eliminate any such right that may exist pursuant 18 to applicable law.”). Thus, a servicer complies with § 1024.41(d) by providing the reason 19 for a denial decision. Whether the reason was valid is irrelevant. See, e.g., Ehrenfeld v. 20 Wells Fargo, N.A., 2019 WL 4933631 , *3 (E.D.N.Y. 2019) (“[R]egardless of whether 21 plaintiff agrees with defendant’s calculation of her income, defendant complied with 12 22 C.F.R. § 1024.41 (d) by providing a reason for denying plaintiff’s request for loan 23 modification.”); Sutton v. CitiMortgage, Inc., 228 F. Supp. 3d 254, 274 (S.D.N.Y. 2017) 24 (“RESPA . . . regulates many aspects of loss mitigation practices, but does not regulate the 25 correctness of a loss mitigation decision.”). 26 Finally, and alternatively, Plaintiff has also failed to allege facts that plausibly 27 suggest he suffered any damages as a result of the alleged violation of § 1024.41(d). In 28 November 2018, Plaintiff was told categorically that his loan did not qualify for 1 modification because it was a secondary lien. This explanation in no way suggested that 2 Plaintiff would get a different answer by applying again. (Doc. 21 ¶¶ 32-36.) Nevertheless, 3 Plaintiff proceeded to apply over and over again for modification of the same loan, only to 4 receive similar rejections. (Id. ¶¶ 38-58.) Although Plaintiff alleges that he disagrees with 5 LoanCare’s decision to reject his modification requests and that the decision harmed him, 6 the relevant question here is whether any alleged violation of § 1024.41(d) caused Plaintiff 7 to suffer damages. Edge-Wilson, 2018 WL 4491138 at *4. The best Plaintiff has done on 8 this issue is to assert that the lack of sufficient explanation “allowed Plaintiff to blindly 9 apply multiple more times,” but this conclusory assertion is implausible. (Doc. 26 at 7). 10 The explanation Plaintiff received in November 2018 explicitly informed him that his loan 11 did not qualify for modification. It makes no sense that this explanation prompted him to 12 keep applying. 13 V. Count Five 14 A. The Parties’ Arguments 15 LoanCare asserts that “Plaintiff fails to allege that [LoanCare] violated any specific 16 provision of TILA, and fails to allege any specific damages that he suffered as a result of 17 an alleged violation of TILA by [LoanCare]. Therefore, his claim for violations [of] TILA 18 must be dismissed.” (Doc. 25 at 6, internal quotation marks omitted.) 19 Plaintiff responds that he “has alleged LoanCare was required to implement [a] 20 qualified loss mitigation plan based on standard industry practice as set forth by the 21 guidelines issued by the Secretary of the Treasury under the Emergency Economic 22 Stabilization Act of 2008,” and more specifically that “a qualified loss mitigation plan 23 includes a residential loan modification, workout, or other loss mitigation plan, a loan sale, 24 real property disposition, trial modification, pre-foreclosure sale, and deed in lieu of 25 foreclosure, and a refinancing of a mortgage.” (Doc. 26 at 7.) Plaintiff contends that “only 26 after three . . . years of dealings . . . did LoanCare inform Plaintiff . . . that refinancing was 27 not an available option because it was a servicer,” and “[t]his new information . . . is 28 contrary to the requirements under guidelines issued by the Secretary of the Treasury under 1 the Emergency Economic Stabilization Act of 2008, and if it was part of the CIT 2 requirements should have been made known years prior.” (Id. at 7-8.) 3 B. Analysis 4 It is helpful to begin the analysis of Count Five with some background. 5 “Congress enacted the Emergency Economic Stabilization Act in the midst of the 6 financial crisis of 2008.” Markle v. HSBC Mortg. Corp., 844 F. Supp. 2d 172, 176 (D. 7 Mass. 2011 ). “The centerpiece of the statute, the Troubled Asset Relief Program (‘TARP’), 8 delegated to the Secretary of the Treasury broad powers to mitigate the impact of the 9 foreclosure crisis and preserve homeownership. . . . Acting under this authority, the 10 Secretary introduced the ‘Making Home Affordable Program’ in February 2009. Within 11 this initiative is the ‘Home Affordable Modification Program’ (‘HAMP’), which . . . aims 12 to provide relief to borrowers who have defaulted on their mortgage payments or who are 13 likely to default by reducing mortgage payments to sustainable levels. Under HAMP, loan 14 servicers receive incentive payments for each permanent loan modification completed.” [15] Id. (citations omitted). “The Department of the Treasury and Fannie Mae have issued a 16 series of directives that provide guidance to mortgage servicers implementing HAMP. 17 Under the guidelines, servicers may identify and solicit borrowers who are in default on 18 their mortgage payments, or soon will be, and evaluate their eligibility to participate in 19 HAMP.” Id. at 177 . 20 Meanwhile, pursuant to “the Helping Families Save Their Homes Act of 2009,” 21 Congress “concluded that mortgage servicers must be authorized to modify loans 22 consistent with . . . the HAMP guidelines and objectives.” Id. at 184 . To that end, “section 23 201 of the Act amended the Truth in Lending Act to prescribe that, to the extent that a 24 mortgage servicer owes a duty to investors to maximize the value of residential mortgages, 25 the duty is satisfied when the servicer modifies such mortgages consistent with HAMP 26 criteria.” Id. at 184-85 (citations omitted). Additionally, and as relevant here, § 201 of the 27 Helping Families Save Their Homes Act of 2009 also added the following proviso: “The 28 qualified loss mitigation plan guidelines issued by the Secretary of the Treasury under the 1 Emergency Economic Stabilization Act of 2008 constitute standard industry practice for 2 purposes of all Federal and State laws.” Id. at 185 (quoting 15 U.S.C. § 1639a(c)). 3 Plaintiff’s theory of liability in Count Five appears to be that LoanCare violated this 4 statutory provision—that is, the provision of the Helping Families Save Their Homes Act 5 of 2009 that is codified at 15 U.S.C. § 1639a(c)—by not adopting a qualified loss 6 mitigation plan based on standard industry practices. According to Plaintiff, if LoanCare 7 had done so, it would have approved his modification request. The problem with Plaintiff’s 8 theory is that § 1639a(c) does not create a legal duty “to comply with HAMP guidelines, 9 or else face lawsuits.” Markle, 844 F. Supp. 2d at 1184-85 . Indeed, contrary to Plaintiff’s 10 assertion that “a servicer” not providing “refinancing . . . is contrary to the requirements,” 11 § 1639a does not require loan servicers to provide loss mitigation. Jones v. Premier One 12 Funding, Inc., 2010 WL 841277 , *3 (N.D. Cal. 2010) (“15 U.S.C. § 1639a . . . authorizes 13 loan servicers to modify mortgage loans and engage in other loss mitigation activities, and 14 it establishes a safe harbor to enable such servicers to exercise these authorities. It does 15 not compel servicers to provide modification assistance to Plaintiffs.”) (cleaned up). In 16 fact, TILA does not even authorize liability against loan servicers like LoanCare, absent 17 circumstances not present here. Robinson v. WMC Mortg. Corp., 649 F. App’x 636 , 637 18 (9th Cir. 2016) (“The district court also correctly dismissed Plaintiffs’ TILA claim against 19 Wells Fargo. The amended complaint . . . alleged that Wells Fargo acted as a loan servicer 20 and did not hold the promissory note. Accordingly, Plaintiffs failed to state a claim under 21 TILA, which limits civil liability to creditors and, in certain circumstances, their 22 assignees.”). 23 VI. Leave to Amend 24 LoanCare argues that Plaintiff’s claims should be dismissed without leave to amend 25 because any amendment attempt would be futile. (Doc. 25 at 6-7.) Plaintiff responds that 26 “[n]othing suggested by LoanCare suggests actual futility, other than not being a party to 27 the DOT, which is no longer applicable as explained above. As such, Plaintiff requests 28 this Court allow for amendment to his First Amended Complaint because the procedural 1 issues addressed by LoanCare, if granted, can easily be overcome with an amendment. 2 Additionally, the remaining claims at issue in LoanCare’s Motion under the ACFA, 3 RESPA, and TILA, were plead[ed] specifically for the first time in Plaintiff’s First 4 Amended Complaint when undersigned counsel replaced prior counsel for Plaintiff.” 5 (Doc. 26 at 9.) 6 Rule 15(a) of the Federal Rules of Civil Procedure “advises the court that ‘leave [to 7 amend] shall be freely given when justice so requires.’” Eminence Cap., LLC v. Aspeon, 8 Inc., 316 F.3d 1048, 1051 (9th Cir. 2003) (citation omitted). “This policy is ‘to be applied 9 with extreme liberality.’” Id. (citation omitted). Thus, leave to amend should be granted 10 unless “the amendment: (1) prejudices the opposing party; (2) is sought in bad faith; (3) 11 produces an undue delay in litigation; or (4) is futile.” AmerisourceBergen Corp. v. 12 Dialysist W., Inc., 465 F.3d 946, 951 (9th Cir. 2006). 13 Applying these standards, Plaintiff’s request for leave to amend is granted. 14 Although LoanCare may be correct that any amendment attempt would be futile, as 15 Plaintiff’s claims against LoanCare are being dismissed based on legal deficiencies that, as 16 far as the Court can tell, could not be cured through the pleading of additional facts, the 17 policy of extreme liberality underlying Rule 15(a) counsels in favor of giving Plaintiff one 18 more chance at amendment. 19 … 20 … 21 … 22 … 23 … 24 … 25 … 26 … 27 … 28 … 1 Accordingly, 2 IT IS ORDERED that LoanCare’s motion to dismiss (Doc. 25) is granted. All of Plaintiffs claims against LoanCare are dismissed. 4 IT IS FURTHER ORDERED that Plaintiff may file a Second Amended 5 || Complaint within 14 days of the issuance of this order. Any changes shall be limited to 6 || attempting to cure the deficiencies raised in this order and Plaintiff shall, consistent with 7\| LRCiv 15.1(a), attach a redlined version of the pleading as an exhibit. 8 IT IS FURTHER ORDERED that if Plaintiff does not file a Second Amended || Complaint within 14 days of the issuance of this order, the Clerk shall dismiss LoanCare 10 || as a Defendant. 11 Dated this 26th day of October, 2023. [12] 13 Lm 14 f : _o——— Dominic W. Lanza 15 United States District Judge [28] -18-