Bradford v. HSBC Mortg. Corp.

• Decision Date: 08 December 2011
• Docket Number: Case No. 1:09cv1226.
• Parties: Norman BRADFORD, Plaintiff, v. HSBC MORTGAGE CORPORATION, Ally Bank, and Residential Funding Company, LLC, Defendants.
• Court: U.S. District Court — Eastern District of Virginia

829 F.Supp.2d 340

Norman BRADFORD, Plaintiff,

v.HSBC MORTGAGE CORPORATION, Ally Bank, and Residential Funding Company, LLC, Defendants.

Case No. 1:09cv1226.

United States District Court, E.D. Virginia,Alexandria Division.

Dec. 8, 2011.

Gregory Nicholas Bryl, Law Office of Gregory Nicholas Bryl, Washington, DC, for Plaintiff.

Robert Ryan Michael, Bierman Geesing & Ward LLC, Robert Ryland Musick, William Woodul Tunner, Thompson McMullan PC, Richmond, VA, for Defendants.

MEMORANDUM OPINION

T.S. ELLIS, III, District Judge.

This dispute between a borrower and several mortgage lenders is yet another case in the flood of litigation spawned by the collapse of the housing market. At issue here on summary judgment is whether any of the remaining lenders is a “debt collector” under the Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692 et seq. (“FDCPA”). Also at issue is whether the borrower's claims pursuant to the Truth in Lending Act, 15 U.S.C. §§ 1601 et seq. (“TILA”), are time-barred or otherwise fail as a matter of law. For the reasons that follow:

(1) Defendants HSBC Mortgage Corporation (“HSBC”) and Ally Bank (“Ally”) are entitled to summary judgment on the FDCPA claim because neither is a debt collector;

(2) Defendant Residential Funding Company, LLC (“RFC”) is entitled to summary judgment on the FDCPA claim because the undisputed material facts show that it did not violate the statute;

(3) Defendant Ally is entitled to summary judgment on the TILA claim because the undisputed material facts show that it did not violate the statute; but,

(4) Defendants HSBC and RFC are not entitled to summary judgment on the TILA claims because those claims are neither time-barred nor fail as a matter of law.

I.

A. The Parties

Over its long history, this action has involved only a single plaintiff but a large number of defendants. Plaintiff Norman Bradford (“Bradford”) is a Virginia resident living at 43543 Barley Court in Ashburn, Virginia (the “Ashburn loan”). Six corporate defendants and one individual defendant have been parties to this action at some point, namely, (i) HSBC, (ii) Ally, (iii) RFC, (iv) Professional Foreclosure Corporation of Virginia (“PFCVA”), (v) Home Advantage Funding Group (“Home Advantage”), (vi) Mortgage Electronic Registration Systems (“MERS”), and (vii) Amir Mirza.¹ Mirza was a loan officer for Home Advantage. Bradford worked with Mirza and Home Advantage to obtain a refinancing loan (the “Ashburn loan”), which was secured by a deed of trust that named HSBC as the lender and MERS as the beneficiary with the power to enforce the deed. On March 4, 2011, Bradford moved to join Ally as a defendant, believing Ally was the holder of Bradford's promissory note and thus a necessary and indispensable party. That motion was granted on March 11, 2011. See Bradford v. HSBC Mortg. Corp., No. 1:09cv1226 (E.D.Va. Mar. 11, 2011) (Order). Subsequently, HSBC submitted an affidavit from an employee of Ally representing that, in fact, RFC was the true holder of Bradford's promissory note, and accordingly, Bradford was granted leave to join RFC as a defendant.² See Bradford v. HSBC Mortg. Corp., No. 1:09 cv1226 (E.D.Va. May 25, 2011) (Order).

Of the seven defendants that have at one point been named as parties in this action, only three now remain, namely, HSBC, Ally, and RFC. PFCVA was originally a defendant on Bradford's initial Verified Complaint, but Bradford's claims against PFCVA were voluntarily dismissed on January 26, 2011. See Bradford v. HSBC Mortg. Corp., No. 1:09cv1226 (E.D.Va. Jan. 26, 2011) (Consent Order). Mirza has not been served nor has he entered an appearance in this case. Home Advantage was served, but because it did not file a responsive pleading, default was entered against it. See Bradford v. HSBC Mortg. Corp., No. 1:09cv1226 (E.D.Va. Sept. 21, 2010) (Entry of Default); Rule 55(a), Fed.R.Civ.P. (authorizing the clerk to enter default against any party that fails to plead or otherwise to defend a claim). By Order dated July 22, 2011, MERS was dismissed as a party. See Bradford v. HSBC Mortg. Corp., 799 F.Supp.2d 625 (E.D.Va.2011) (Order). The remaining defendants are HSBC, Ally, and RFC; Bradford continues to be the sole plaintiff.

B. Undisputed Facts

With one exception, see Subpart I.C, the undisputed facts can be briefly summarized.³ Bradford sought to refinance an existing loan on his Ashburn home so that he could purchase a beach house in Ocean City, Maryland. He successfully obtained refinancing from HSBC, which loaned Bradford $571,000 in exchange for Bradford's promise to pay that principal amount in monthly installments, with an interest rate of 6.25%, over a thirty-year period. Bradford executed a promissory note to this effect on September 20, 2006 (the “Note”). HSBC was the original loan provider and the original noteholder. Contemporaneous with the Note's execution, Bradford also executed a deed of trust encumbering the Ashburn home (the “Deed of Trust”) to secure payment of the Note. At all times, HSBC retained servicing rights and remained Bradford's primary point of contact on the Note. But ownership of the Note and the Deed of Trust changed on several occasions in the years that followed the closing of the Note. Unaware of any of these changes, Bradford addressed all payments on the Note to HSBC, which processed and disbursed those payments to the noteholder.

Bradford ceased making payments on the Note in October 2008 and has made no payments since then. Although foreclosure efforts commenced at various times, defendants voluntarily discontinued all such efforts—ostensibly because of the instant litigation. Thus, Bradford, who has made no payments on the Note since October 2008, has been living in the Ashburn home for over three years without having made a single payment during that time.

On May 4, 2009, the law firm Shapiro & Burson, LLP (“S & B”) sent a letter to Bradford on PFCVA's behalf. The letter stated that the Note was in default, raised the possibility of foreclosure on the Ashburn home, and also mentioned several options available to Bradford to avoid foreclosure. This letter did not disclose the identity of the Note's owner. Bradford responded to S & B's letter on June 2, 2009 and therein disputed whether the Note was in default and requested various documents, including the Note itself. On June 30, 2009, S & B sent a letter to Bradford that enclosed the payment history of the Ashburn loan and a copy of the original Note, which bore an endorsement to Ally. The letter also notified Bradford that the foreclosure sale that had been scheduled for July 7, 2009 was cancelled per the lender's instructions. S & B sent another letter to Bradford on October 6, 2009, that appears to be identical to the original May 4 letter in all but one respect, namely the October 6 letter identified HSBC as “the creditor.”

C. Disputed Facts

Resolution of the pending summary-judgment motions requires determining whether a genuine issue of material fact exists as to the chain of ownership of the Note. The parties agree that HSBC was the holder and the original obligee of the Note at the time the Note was executed in September 2006. The parties also agree that RFC currently owns the Note. What the parties dispute is the chain of the Note's ownership. Bradford contends that the ownership chain proceeded quite simply as follows: HSBC sold the loan directly to RFC in November 2006.⁴ Defendants' account of the loan's ownership involves more links in the chain. Defendants contend that HSBC sold the Note to Ally, not RFC, in November 2006 and continued to possess rights to service the loan as a sub-servicer thereafter. Defendants further contend that Ally sold the Note to RFC in December 2009.

The record evidence establishes that, as a matter of undisputed material fact, defendants' account is correct. The Note includes a notarized endorsement from “HSBC Mortgage Corporation (USA)” to “GMAC Bank” (now known as Ally Bank).⁵ Note at 7 (Doc. 218–2). Michael Goeller, the Director of Mortgage Acquisitions at Ally, testified by affidavit that “Ally Bank ... purchased the Note from HSBC on or about November 9, 2006 for the sum of $575,131.95.” Goeller Aff. ¶ 4 (Doc. 218–2).⁶ Nor is this the end of the chain; the Note also contains an allonge that, “For Purposes of Further Endorsement” of the Note, “is affixed and becomes a Permanent Part of said Note.” Note at 9 (Doc. 218–2). This allonge purports to endorse the Note from “Ally Bank fka GMAC Bank” to “Residential Funding Company LLC.” Id. In Goeller's affidavit, he avers that “[o]n or about December 30, 2009, Ally Bank ... sold the Note to Residential Funding Company, LLC for $234,393.22.” Goeller Aff. ¶ 7. In addition to relying upon the Note and the allonge, Goeller also relied on documentation of “the sale transaction” from Ally to RFC. Id. ¶ 2. Specifically, these documents include a series of executed notices, each purporting to transfer ownership of a group of mortgage loans that includes this Note.⁷ (Docs. 245–2, 245–3, 245–4, 245–5).⁸

Bradford's effort to dispute this substantial evidence fails to create a genuine issue of material fact as to the ownership chain of the Note. First, Bradford points to the MERS report indicating that a transfer of “flow servicing rights” and “beneficial rights” to RFC took place in November 2006 (Doc. 176–2 at 22). But “beneficial rights” clearly refers to the right to enforce the Deed of Trust, not the Note.⁹ Second, Bradford notes that HSBC initially averred that it had sold the Note to RFC in November 2006. See HSBC Interrog. Responses 4 (Doc. 176–2). But HSBC concedes that this representation “was an error” as suggested by “all available evidence[.]” HSBC Summ. J. Br. 2 & n. 1. Bradford cites no authority—and none has been found—stating that a party's change of position with respect to a material fact creates a triable issue on that fact. Third, Bradford contends that the allonge never...