Bennett v. Bank of Am., N.A.

• Decision Date: 26 August 2015
• Docket Number: Civil No. 15–30–ART
• Citation: 126 F.Supp.3d 871
• Parties: Christine Bennett, et al., Plaintiffs, v. Bank of America, N.A., et al., Defendants.
• Court: U.S. District Court — Eastern District of Kentucky

126 F.Supp.3d 871

Christine Bennett, et al., Plaintiffs,

v.Bank of America, N.A., et al., Defendants.

Civil No. 15–30–ART

United States District Court, E.D. Kentucky, Covington.

Signed August 26, 2015

Brian D. Flick, Mills, Mills, Fiely and Lucas, LLC, Cincinnati, OH, for Plaintiffs.

Joshua J. Phillips, Bradley Arant Boult Cummings LLP, Nashville, TN, William Lawrence Purtell, Lerner, Sampson & Rothfuss, Cincinnati, OH, for Defendants.

MEMORANDUM OPINION AND ORDER

Amul R. Thapar, United States District Judge

Christine and Earl Bennett bought their home at the height of the housing bubble. Like thousands of other Americans, the Bennetts thought they were getting a great deal on the home of their dreams. But shortly after they signed their mortgage contract, the Bennetts found themselves unable to keep up with the monthly payments. Bank of America, their loan servicer at the time, instituted foreclosure proceedings against the Bennetts, and the state court placed the Bennetts' home in foreclosure. Since the foreclosure judgment, the Bennetts have desperately tried to keep their home, sending numerous applications for loan modifications to both Bank of America and Rushmore, the new servicer of the loan. But the Bennetts believe that Bank of America and Rushmore wrongfully denied them certain loss mitigation options that would have helped them keep their home. The Bennetts reached out to the Kentucky Attorney General's Office for help, but the Bennetts allege that Bank of America and Rushmore still refused to provide them with the information they needed to pursue their loan modification options effectively. So the Bennetts resorted to the only option they have left: they brought suit in federal court. Unfortunately for the Bennetts, they fail to allege sufficient facts to state most of their claims against the defendants.

BACKGROUND

The Bennetts allege the following facts in their amended complaint, R. 28: On July 25, 2007, the Bennetts entered a mortgage contract for $115,090 with Taylor, Bean & Whitaker Mortgage Corporation ("TBW"). R. 29–1 at 1 (mortgage contract). The Bennetts quickly began struggling to make their monthly mortgage payments. TBW offered the Bennetts a forbearance agreement to help them make their payments. R. 28 ¶ 19. But the Bennetts continued to struggle, and, in May 2009, they started to default on their loan. R. 29–4 at 2 (state court foreclosure judgment). By the end of the year, the Bennetts' loan was in default because they were still unable to make a complete mortgage payment. See id. at 3. So Bank of America ("BANA"), which became the servicer of the loan earlier that year, initiated a foreclosure proceeding against the Bennetts in Kentucky state court. R. 28 ¶ 13; see also R. 29–3 (state court complaint). On September 27, 2010, the state court ordered the property foreclosed and issued an order of sale. See R. 29–4. The Bennetts' loan has been in foreclosure since the state court decision, but the property has not been sold. R. 28 ¶¶ 14–15. In 2013, BANA transferred the servicing of the Bennetts' loan to defendant Rushmore Loan Management Services LLC ("Rushmore"). Id. ¶ 16. BANA sold the ownership of the Bennetts' loan to defendant MTGLQ Investors, LP ("MTGLQ"). Id. ¶ 17. BANA notified the Bennetts of the transfers in servicing and ownership. Id. ¶¶ 16–17.

The Bennetts have been attempting to get loan modifications to help them keep their house since the foreclosure action began. Id. ¶ 18. In 2010, BANA reached out to the Bennetts about their possible eligibility in the Home Affordable Modification Program ("HAMP"), a government loan modification program in which BANA participates. Id. ¶ 19. From 2010 to early 2013, the Bennetts sent BANA "various" loss mitigation applications that were "either misplaced or never fully responded to." Id. ¶ 20. BANA sent the Bennetts a letter in April 2013 stating that they had been declined for a loan modification, R. 28–3 at 1 (subsequent letter referencing April 2013 declination letter), but the Bennetts never received the declination letter. R. 28 ¶¶ 21, 58. Shortly thereafter, the Bennetts engaged Emery Law ("Emery") for assistance with loss mitigation. Id. ¶ 22. From November 2013 to July 2014, Emery or its subcontractor Friedman Law ("Friedman") submitted four loss mitigation applications to Rushmore. Id. ¶ 24. Two of these applications were approved for a forbearance agreement, one was not processed, and one was declined for lack of documentation. Id. The Bennetts claim that neither Emery nor Friedman were notified of the declination or the reasons for it. Id.

On June 25, 2014, Rushmore approved the Bennetts for their second forbearance agreement. Id. ¶ 25; R. 28–1 (forbearance agreement). The agreement required the Bennetts to pay a lump sum of $12,500 followed by six monthly payments of $1250 before their loan would be reviewed for a final loss mitigation plan. R. 28 ¶ 25; R. 28–1 at 4. The Bennetts received this offer from Emery in July, and the Bennetts claim it was the same forbearance offer they had received from Rushmore six months earlier. R. 28 ¶ 26. The Bennetts told Emery to reject the offer and to request that Rushmore review their loan for additional loan modification options. Id.

At this point, the Bennetts were desperate to get a loan modification that would help them keep their home. So they submitted a written complaint to the Kentucky Attorney General's Office ("AG") seeking an inquiry and evaluation on the Bennetts' behalf. Id. ¶ 27. Specifically, the Bennetts asked the AG to inquire into the status of their loan modification applications with Rushmore and the servicing practices of BANA. Id. The AG sent letters to BANA and Rushmore on the Bennetts' behalf, asking for the information the Bennetts requested. Id. ¶ 28. These letters contained the Bennetts' name, address, account number, and specific inquiries related to the loan account. Id. Both BANA and Rushmore responded to these letters. Id. ¶¶ 29, 32, 34; R. 28–2 (letter from Rushmore); R. 28–3 (first letter from BANA); R. 28–4 (second letter from BANA). The Bennetts argue that the responses from BANA and Rushmore were insufficient and contained misrepresentations. R. 28 ¶¶ 45–50, 78–80.

The Bennetts were unable to obtain a loan modification from Rushmore despite the involvement of the AG. R. 28 ¶¶ 35–36. Out of options, Christine Bennett filed a petition for relief under Chapter 13, Title 11 of the Bankruptcy Code on January 30, 2015. Id. ¶ 37. The bankruptcy case was dismissed a month later for failure to file documents. Id. ¶ 38. A week after the dismissal of the bankruptcy case, the Bennetts filed the instant complaint against BANA, Rushmore, and MTGLQ. See R. 1; R. 28 (amended complaint). Defendants BANA, Rushmore, and MTGLQ each moved to dismiss the claims against them for failure to state a claim upon which relief can be granted, Fed.R.Civ.P. 12(b)(6). See R. 29–31.

STANDARD OF REVIEW

Under Federal Rule of Civil Procedure 12(b)(6), the Court reviews whether the Bennetts' complaint alleges sufficient facts to state a claim that is "plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). To meet this standard, the Bennetts must plead enough facts that the court can draw a reasonable inference that the defendants are liable for the alleged misconduct. Id. (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955 ). At this stage, the Court construes factual allegations "in the light most favorable to the plaintiff" and draws "all reasonable inferences in favor of the plaintiff." Watson Carpet & Floor Covering, Inc. v. Mohawk Indus., Inc., 648 F.3d 452, 456 (6th Cir.2011) (quoting In re Travel Agent Comm'n Antitrust Litig., 583 F.3d 896, 903 (6th Cir.2009) ).

DISCUSSION

I. BANA'S MOTION TO DISMISS

The Bennetts allege BANA: (1) violated the Real Estate Settlement Procedures Act ("RESPA"), 12 C.F.R. § 1024.36, by failing to respond reasonably to the Bennetts' qualified written requests; (2) breached the mortgage contract; and (3) breached the HAMP guidelines. R. 28, Counts I–III. BANA moved to dismiss all three counts for failure to state a claim upon which relief may be granted. See R. 29–5. Only the Bennetts' RESPA claim survives.

a. Count I: The Bennetts stated a claim under RESPA.

BANA contends that the plaintiffs' RESPA claim fails for two reasons: First, the letters came from the Attorney General's office, not the Bennetts, so the letters did not qualify as Qualified Written Requests ("QWRs") under RESPA. Second, BANA argues that the Bennetts' claim fails because they cannot show damages. Both of these arguments fail.

The Bennetts pled sufficient facts to state a claim under RESPA. BANA is correct that 12 C.F.R. § 1024.36 seems only to require services to respond to QWRs that come directly from borrowers. See § 1024.36(a) ("A servicer shall comply with the requirements of this section for any written request for information from a borrower...."). And the Bennetts admit that they did not send any letters directly to BANA. R. 47 at 3. However, 12 C.F.R. § 1024.36 is a section of Regulation X, which is a set of regulations issued by the Bureau of Consumer Financial Protection to implement RESPA, 12 U.S.C. § 2601 et seq.12 C.F.R. § 1024.1. RESPA's definition of whose letters qualify as QWRs is broader than the definition in Regulation X. Compare 12 U.S.C. § 2605(e)(1)(A), with 12 C.F.R. § 1024.1. Section 2605 requires a servicer to respond to QWRs "from the borrower (or an agent of the borrower)." 12 U.S.C. § 2605(e)(1)(A). Admittedly, the Bennetts do not cite to section 2605 in their complaint. See R. 1. They only cite to Regulation X to refer to RESPA. Id. However, the failure to cite to the correct statute is not sufficient for dismissal. Johnson v. City of Shelby, Miss., ––– U.S. ––––, 135 S.Ct. 346, 346, 190 L.Ed.2d 309 (2014) ("Federal pleading...