Burton v. Nationstar Mortg. LLC

• Decision Date: 28 May 2013
• Docket Number: CASE NO. CV F 13-0307 LJO GSA
• Parties: DENNIS BURTON, Plaintiff, v. NATIONSTAR MORTGAGE LLC, Defendant.
• Court: U.S. District Court — Eastern District of California

DENNIS BURTON, Plaintiff,

v.NATIONSTAR MORTGAGE LLC, Defendant.

CASE NO. CV F 13-0307 LJO GSA

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF CALIFORNIA

Dated: May 28, 2013

ORDER ON DEFENDANT'S F.R.Civ.P. 12

MOTION TO DISMISS

(Doc. 8.)

PRELIMINARY STATEMENT TO THE PARTIES AND COUNSEL

Judges in the Eastern District of California carry the heaviest caseload in the nation, and this Court is unable to devote inordinate time and resources to individual cases and matters. This Court cannot address all arguments, evidence and matters raised by parties and addresses only the arguments, evidence and matters necessary to reach the decision in this order given the shortage of district judges and staff. The parties and counsel are encouraged to contact United States Senators Diane Feinstein and Barbara Boxer to address this Court's inability to accommodate the parties and this action. The parties are required to consider, and if necessary, to reconsider consent to a U.S. Magistrate Judge to conduct all further proceedings in that the Magistrate Judges' availability is far more realistic and accommodating to parties than that of U.S. District Judge Lawrence J. O'Neill who must prioritize criminal and older civil cases. A Magistrate Judge consent form is available on this Court's website.

Civil trials set before Judge O'Neill trail until he becomes available and are subject to suspensionmid-trial to accommodate criminal matters. Civil trials are no longer reset to a later date if Judge O'Neill is unavailable on the original date set for trial. If a trial trails, it may proceed with little advance notice, and the parties and counsel may be expected to proceed to trial with less than 24 hours notice. Moreover, this Court's Fresno Division randomly and without advance notice reassigns civil actions to U.S. District Judges throughout the nation to serve as visiting judges. This action is under consideration for such reassignment. In the absence of Magistrate Judge consent, this action is subject to reassignment to a U.S. District Judge from outside the Eastern District of California. Case management difficulties, including trial setting and interruption, are avoided if the parties consent to conduct of further proceedings by a U.S. Magistrate Judge.

INTRODUCTION

Defendant Nationstar Mortgage LLC ("Nationstar") seeks to dismiss as insufficiently pled plaintiff Dennis Burton's ("Mr. Burton's") contract and statutory claims arising from Nationstar's invalidating modification of a loan for Mr. Burton's Bakersfield property ("property"). Mr. Burton accuses Nationstar of dishonoring agreements to provide loan modifications and argues that his claims are factually and legally supported. This Court considered Nationstar's F.R.Civ.P. 12(b)(6) motion to dismiss on the record without a hearing. See Local Rule 230(g). For the reasons discussed below, this Court DISMISSES Mr. Burton's claims.

BACKGROUND¹

Summary

Nationstar serviced Mr. Burton's property loan and entered into an agreement with Mr. Burton to modify Mr. Burton's loan under the Home Affordable Modification Program ("HAMP"). Mr. Burton is a current Colorado citizen and formerly resided at the property. Nationstar determined that Mr. Burton's failure to reside on the property invalidated the loan modification and foreclosed on the property. Mr. Burton accuses Nationstar of wrongfully refusing to modify permanently Mr. Burton's and similarly situated borrowers' loans as required under HAMP although Mr. Burton and the other borrowers were qualified and satisfied HAMP requirements for permanent loan modification.

The Home Affordable Modification Program

The U.S. Department of Treasury ("DOT") established HAMP pursuant to the Emergency Economic Stabilization Act of 2008, which was amended in February 2009 by the American Recovery and Reinvestment Act of 2009, 12 U.S.C. §§ 5201, et seq. (collectively the "Act"). The Act directed DOT to protect home values and other assets of individuals, to preserve home ownership, to maximize returns to taxpayers, and to provide public accountability. HAMP was established pursuant to 12 U.S.C. §§ 5211 and 5219 and, as part of the Troubled Asset Relief Program ("TARP"), which authorizes DOT to purchase certain troubled assets. See 12 U.S.C. § 5211. To the extent DOT acquires mortgages, the Act directs DOT to maximize assistance of homeowners and to encourage mortgage servicers to take advantage of government programs to minimize foreclosures. See 12 U.S.C. § 5219. To further such goals, DOT, through Federal National Mortgage Association ("Fannie Mae"), entered into agreements with loan servicers. Nationwide and Fannie Mae entered into such an agreement in September 2009 and entitled "Amended and Restated Commitment to Purchase Financial Instrument and Servicer Participation Agreement," which committed Nationstar to perform certain loan modification and foreclosure prevention services for eligible loans.

Mr. Burton's HAMP Trial Period Plan

In December 2006, Mr. Burton obtained a nearly $300,000 property loan secured by a deed of trust on the property. By early 2009, Mr. Burton was in default and applied to Nationstar for a loan modification.

In April 2009, Mr. Burton and Nationstar entered into a Home Affordable Modification Trial Period Plan ("trial plan") under which Mr. Burton was to make three $1,921.58 monthly payments to remain eligible for a permanent loan modification. Mr. Burton made the trial plan payments for May through July 2009.

Modification Agreement

Nationstar sent Mr. Burton a Home Affordable Modification Agreement ("HAMA") to modify initially Mr. Burton's monthly payments to $1,915.20.

The HAMA initially states:

If my representations in Section 1 continue to be true in all material respects, thenthis Home Affordable Modification Agreement ("Agreement") will, as set forth in Section 3, amend and supplement (1) the Mortgage on the Property, and (2) the Note secured by the Mortgage.

Under the HAMA "My Representations" section 1, Mr. Burton certified and represented that "I live on the Property as my principal residence" ("residence certification").

The HAMA's section 2 addresses "Acknowledgements and Preconditions to Modification" ("preconditions provision") by which Mr. Burton noted his understanding and acknowledgement that:

B. If prior to the Modification Effective Date as set forth in Section 3 the Lender determines that my representations in Section 1 are no longer true and correct, the Loan Documents will not be modified and this Agreement will terminate. In this event, the Lender will have all of the rights and remedies provided by the Loan Documents;

C. I understand that the Loan Documents will not be modified unless and until (i) I receive from the Lender a copy of this Agreement signed by the Lender, and (ii) the Modification Effective Date (as defined in Section 3) has occurred.

The HAMA's section 3 addresses "The Modification" ("modification provision") and provides:

If my representations in Section 1 continue to be true in all material respects and all preconditions to the modification set forth in Section 2 have been met, the Loan Documents will automatically become modified on August 1, 2009 (the "Modification Effective Date") and all unpaid late charges that remain unpaid will be waived. (Bold added.)

Mr. Burton signed the HAMA on August 29, 2009 and returned it to Nationstar, which signed the HAMA on October 9, 2009 and returned it to Mr. Burton. Mr. Burton "telephoned Nationstar repeatedly, and was told that all the paperwork had been received and that Nationstar simply had to 'book' the modification." Mr. Burton continued to make $1,915.20 payments set forth in the trial plan. "During this time," Mr. Burton received a notice of trustee's sale that the property had been sold. Nationstar assured Mr. Burton "this was not an actual foreclosure and again, that the permanent modification simply needed to be 'booked.'"

HAMA Termination

After several months, Nationstar refused to honor the HAMA to modify Mr. Burton's loan documents. Nationstar's March 7, 2010 letter indicated that it was terminating the HAMA and dropping Mr. Burton from HAMP because the property was not "owner occupied" although Mr. Burton's wife and children resided full time at the property. Mr. Burton "was temporarily working in Colorado andwould return periodically to California and stay at the Bakersfield property when he visited." Mr. Burton "took such employment when it became evident that Nationstar was defaulting on the [HAMA] and Burton would need additional income to save his home."

Nationstar refused to reinstate the HAMA and foreclosed on the property.

Mr. Burton's Claims

The complaint alleges that Nationstar used non-owner occupation of the property "as a pretext" to not honor the HAMA although "Nationstar had no such authority to re-evaluate Burton's eligibility in March 2010, several months after his [HAMA's] Modification Effective Date." The complaint alleges contract and statutory claims (discussed below) for Mr. Burton and similarly situated borrowers for Nationstar's "intentional and systematic failure to provide permanent loan modifications to borrowers" who signed HAMAs under HAMP. The complaint further alleges that "Nationstar refuses to correct known errors, misrepresents to borrowers that they must be in default to participate in the HAMP, improperly reviews borrowers after their Modification Effective Dates, fails to provide approvals and denials within reasonable periods of time, fails to adequately hire and train staff to effectuate loan modifications, routinely loses borrower HAMP applications and related paperwork, and otherwise routinely disregards HAMP directives and guidelines."

DISCUSSION

F.R.Civ.P. 12(b)(6) Motion To Dismiss Standards

Nationstar contends that the complaint's claims fail given Nationstar's "contractually authorized reason for invalidating the HAMA."

A F.R.Civ.P. 12(b)(6) dismissal is proper where there is either a ...