Earley v. U.S. Dep't of Hous. & Urban Dev.

• Decision Date: 07 July 2022
• Docket Number: Civil Action 1:21-cv-1437 (RDA/TCB)
• Parties: MARLENE S. EARLEY, Plaintiff, v. U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, et al., Defendants.
• Court: U.S. District Court — Eastern District of Virginia

MARLENE S. EARLEY, Plaintiff,
v.
U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, et al., Defendants.

Civil Action No. 1:21-cv-1437 (RDA/TCB)

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

July 7, 2022

MEMORANDUM OPINION AND ORDER

Rossie D. Alston, United States District Judge.

This matter comes before this Court on Defendant Bank of America Corporate Center and Carrington Mortgage Service, LLC's (“Private Defendants”) Motion to Dismiss (Dkt. 25); Defendant Erie Insurance Group's (“Erie”) Motion to Dismiss (Dkt. Nos. 33; 38); Erie's Motion for Relief from Misjoinder (Dkt. Nos. 33; 40); Defendants Internal Revenue Service and the U.S. Department of Housing and Urban Development's Motion to Dismiss (Dkt. 60); and Plaintiff's Motion Objecting to this Court's Order Adopting the Magistrate Judge's Report and Recommendation (Dkt. 42). This Court has dispensed with oral argument as it would not aid in the decisional process. Fed.R.Civ.P. 78(b); Local Civil Rule 7(J). This matter has been fully briefed and is now ripe for disposition. Considering Private Defendants' brief in support of dismissal and its reply (Dkt. Nos. 26; 64); Erie's brief in support of its motions (Dkt. Nos. 34; 39; 41); Federal Defendants' brief in support of dismissal and its reply (Dkt. Nos. 61; 80); and Plaintiff's opposition briefs (Dkt. Nos. 53; 77); this Court GRANTS each of the Defendants' motions (Dkt. Nos. 25; 33; 38; 40; 60) and DENIES Plaintiff's motion (Dkt. 42) as MOOT for the reasons that follow.

1

I. BACKGROUND

A. Factual Background^[1]

This matter arises from the Amended Complaint Plaintiff filed before this Court alleging a litany of violations against both federal and private defendants related to Plaintiff's initial home purchase, home maintenance, and foreclosure proceedings. Dkt. 9 at 5-6.

Federal Defendants

Plaintiff alleges that she purchased her home in Warrenton, Virginia on March 26, 2010 after she obtained a U.S. Department of Housing and Urban Development (“HUD”) FHA 203K Loan. Prior to her settlement, however, Plaintiff alleges that the HUD FHA Appraiser identified water damage to the drywall as well as flooring deterioration but did not conduct a mold inspection. Id. at 7 ¶ 2. During this pre-close period, Plaintiff also allegedly hired a private home inspector who identified wood rot from prior water damage. Id. ¶ 3. Despite these inspection notes, Plaintiff elected to close on the house. Within the first year of living within the home, Plaintiff began noticing issues with her home and sought to address these problems by filing a claim with HUD. According to the Amended Complaint, HUD approved a $30,000 claim but did not address Plaintiff's discovery of mold in January of 2014. Id. ¶ 7. With her son's assistance, Plaintiff contacted HUD with respect to additional problems she was having with Private Defendants who were, at different points in time, the servicers of her mortgage. On October 5, 2017, Plaintiff filed for Chapter 13 bankruptcy, but the case was dismissed in June of 2019 because her attorney allegedly “quit on [her].” Id. at 8 ¶ 10. Plaintiff again allegedly contacted HUD in January of 2021 and received a new case number with respect to “the many issues she was having with her

2

home and with her [s]ervicers.” Id. ¶ 11. HUD allegedly closed the case on February 4, 2021. Id. ¶ 12. Plaintiff again allegedly sought assistance from HUD in connection with the impending foreclosure of her home but found the customer service unhelpful.^[2]

Plaintiff also brings claims against the Internal Revenue Service (“IRS”) for interest and penalties exceeding what is owed and attempting to collect on debts outside the 10-year recovery period. Id. at 21 ¶¶ 4-5. On October 2, 2014, the IRS allegedly placed a $69,167 lien on Plaintiff's home and a second lien of $14,905 on July 6, 2017. Id. ¶ 1. Despite Plaintiff's efforts to contest and remove the liens, her home remained encumbered and the IRS allegedly wrongfully garnished Plaintiff's social security wages for December of 2021. Id. ¶ 3.

Private Defendants

Immediately after closing, Plaintiff's mortgage transferred from Prospect Mortgage to Bank of America (“Bof A”) in March of 2010. Id. at 11 ¶ 1. In late 2012, Plaintiff allegedly notified BofA regarding issues in the house including, inter alia, mold and air conditioning problems and sought to refinance her home to fix these problems. Id. at 12 ¶ 7. But BofA allegedly denied Plaintiff's request and Plaintiff instead borrowed from another bank. When Plaintiff again contacted BofA for financial assistance to fix her home, BofA allegedly granted her a loan under the Federal Housing Administration's (“FHA”) Home Affordable Modification Program (“HAMP”) on August 4, 2015. Id. ¶ 10. After trading correspondence on multiple occasions due to “errors and omissions” identified by BofA in the documentation requested of Plaintiff, BofA allegedly elected not to issue a loan but rather deferred $30,000 of the current principal of the loan to be paid back upon the sale of Plaintiff's home as a reverse mortgage. Id. at 13 ¶¶ 11-13.

3

Plaintiff further alleges that BofA transferred her loan to another service provider on September 15, 2016 and notified Plaintiff after the fact on October 3, 2016 over email. Id. ¶ 14. As evidence of Bof A's alleged improper conduct as to her home in Warrenton, Plaintiff also describes a number of incidents surrounding Bof A's handling of her “retirement home” in Benson, North Carolina, including the fact that a court in Johnston County, North Carolina “threw out the initial foreclosure [of her retirement home] for improper conduct” by Bof A. Id. ¶¶ 15-16. She further alleges that she was unable to defend against the foreclosure of her retirement home in North Carolina due to her professional obligations as a nurse and caring for her primary home in Warrenton. Id. ¶ 17.

On September 16, 2016, BofA allegedly transferred the servicing of Plaintiff's loan for her Warrenton property to Carrington Mortgage Services, LLC (“CMS”) while retaining the loan itself. Id. at 14 ¶ 1. CMS allegedly requested that Plaintiff send it all payments going forward. Id. ¶ 3. When Plaintiff received her first bill from CMS, the amount allegedly exceeded the amount held in Plaintiff's escrow account by $100.00. Plaintiff alleges that CMS continued to bill this amount through January of 2017 and never refunded the excess payment. Id. ¶¶ 5-6. On August 11, 2017, Plaintiff alleges she attempted to pay her monthly mortgage payment from July of 2017 over the phone but CMS declined the payment because she was “90 days behind.” Id. ¶ 11. CMS also allegedly returned Plaintiff's checks for the months of May and June of 2017. Id. ¶¶ 11-12.

After having circumvented the foreclosure of her home by filing for Chapter 13 bankruptcy, Plaintiff alleges that after the dismissal of her bankruptcy case, she resumed making payments to CMS on May 6, 2019. Id. at 16 ¶ 15. Following a series of alleged financial setbacks, including limited work hours in July of 2019, Plaintiff struggled to make her mortgage payment. Id. ¶ 20. As a result, she requested a HAMP loan through CMS in August of 2019 and a trial

4

payment program began in the fall of that year at a reduced monthly payment amount compared to her current mortgage. Id. at 17 ¶ 22. But CMS allegedly forced Plaintiff to pay more than the HAMP amount. Id. ¶ 23. A CMS representative allegedly directed Plaintiff not to pay anything until she had received and submitted payment documents arranged in a “HAMP packet.” Id. at 17-18 ¶¶ 24-28. Due to a hectic work schedule, her health, and the holidays, Plaintiff was unable to complete the packet in time to keep her HAMP loan valid. Upon request from CMS, Plaintiff allegedly resubmitted her HAMP application on January 3, 2020. Id. ¶ 30. On February 4, 2020, CMS approved Plaintiff's partial claim for another HAMP trial payment reduction to begin on March 1, 2020. Id. ¶ 32. But that month, Plaintiff's health declined significantly and her employer ended her contract in March of 2020.

As a result, Plaintiff filed for a 180-day deferment on the payment of her mortgage under the CARES Act, which Congress enacted in response to the COVID-19 pandemic. It appears from the face of the Amended Complaint that CMS allegedly instigated a host of actions against Plaintiff, including making foreclosure threats and charging excessive interest, penalties, and other miscellaneous fees. Id. ¶¶ 34-35. Plaintiff alleges that during this period she was protected under the CARES Act from paying her monthly mortgage until August 31, 2021. Id. at 19 ¶ 37. In November and December of 2021, Plaintiff listed her home for sale and received an offer. Id. ¶ 40. Because Plaintiff owed more than she had borrowed coupled with the IRS liens on the property, Plaintiff informed CMS of her intent to clear her debts by selling the home. Id. ¶ 42. In response, CMS scheduled a foreclosure sale for December 30, 2021 after the Law Offices of Gerald Shapiro served a notice of intent to conduct a trustee sale on Plaintiff's property. Id.

5

Erie

In conjunction with her purchase of the Warrenton property, Plaintiff enrolled in a property insurance policy with Erie Insurance (“Erie”). Id. at 9 ¶ 1. As part of that policy, Plaintiff alleges Erie included a rider policy covering her “Dog Breeding, Showing and Grooming, Kennel and her piano.” Id. ¶¶ 1-2. In 2011, Plaintiff contacted Erie to file a claim for damages related to “shifting and cracking with[in] the frame and walls” and mold. Id. ¶¶ 3-4. After a claim adjuster examined the premises, Erie allegedly denied coverage because the issues were “pre-existing.” Id. at 10 ¶¶ 6-7. On November 7, 2012, Plaintiff filed a second claim with Erie related to pipe leaks, mold, and a faulty HVAC system. Id. ¶ 10. Following another visit from an Erie claim adjuster, Erie...