Fitch v. Fed. Hous. Fin. Agency, C. A. 18-cv-214JJM

• Court: United States District Courts. 1st Circuit. United States District Courts. 1st Circuit. District of Rhode Island
• Writing for the Court: PATRICIA A. SULLIVAN, United States Magistrate Judge.
• Parties: KENNETH FITCH, ESTATE OF DIANNE L. FITCH, Plaintiffs, v. FEDERAL HOUSING FINANCE AGENCY, FEDERAL NATIONAL MORTGAGE ASSOCIATION, WELLS FARGO BANK, N.A., HARMON LAW OFFICES, P.C., 266 PUTNAM AVENUE, LLC, RUSHMORE LOAN MANAGEMENT SERVICES, LLC, U.S. BANK NATIONAL ASSOCIATION AS TRUSTEE FOR RMAC TRUST, SERIES 2016-CTT, Defendants.
• Docket Number: C. A. 18-cv-214JJM
• Decision Date: 21 October 2021

KENNETH FITCH, ESTATE OF DIANNE L. FITCH, Plaintiffs,
v.
FEDERAL HOUSING FINANCE AGENCY, FEDERAL NATIONAL MORTGAGE ASSOCIATION, WELLS FARGO BANK, N.A., HARMON LAW OFFICES, P.C., 266 PUTNAM AVENUE, LLC, RUSHMORE LOAN MANAGEMENT SERVICES, LLC, U.S. BANK NATIONAL ASSOCIATION AS TRUSTEE FOR RMAC TRUST, SERIES 2016-CTT, Defendants.

C. A. No. 18-cv-214JJM

United States District Court, D. Rhode Island

October 21, 2021

REPORT AND RECOMMENDATION

PATRICIA A. SULLIVAN, United States Magistrate Judge.

Now pending before the Court is the renewed motion to dismiss filed by Defendant Wells Fargo Bank, N.A. (“Wells Fargo”) for lack of subject matter jurisdiction pursuant to Fed.R.Civ.P. 12(b)(1) and/or for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6). ECF No. 102. The motion targets all claims against Wells Fargo - Counts VII through XIII^[1] of the Amended Complaint, ^[2] which are based on alleged violations by Wells Fargo of the duty of a mortgage servicer to respond to Notices of Error as required by the Real Estate Settlement Procedures Act,

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12 U.S.C. §§ 2601, et seq. (“RESPA”) and Regulation X, 12 C.F.R. § 1024.^[3] ECF No. 60 (“Compl.”). Wells Fargo's motion is premised on Plaintiff's failure plausibly^[4] to allege concrete injury or cognizable damages. The motion has been referred to me for report and recommendation. 28 U.S.C. 636(b)(1)(B). For the reasons that follow, I recommend that the motion be granted and that Counts VII through XIII be dismissed without prejudice based on lack of subject matter jurisdiction pursuant to TransUnion LLC v. Ramirez, 141 S.Ct. 2190 (2021) and Spokeo, Inc. v. Robins, 578 U.S. 330 (2016). Alternatively, I recommended that the Court grant Wells Fargo's motion and dismiss these Counts based on the Amended Complaint's failure to state a plausible claim.

I. BACKGROUND

Until a foreclosure sale on July 28, 2017, Kenneth Fitch and, until her death, Dianne Fitch (“Plaintiff”)^[5] owned 73 Kay Street, Cumberland, Rhode Island (“Real Estate”). Compl. ¶¶ 1-4. In 2009, Plaintiff borrowed $96, 648 from Wells Fargo secured by a mortgage on the Real Estate. Id. ¶¶ 66-67, Ex. A. On April 16, 2016, Wells Fargo sent Plaintiff a letter advising that the loan was in default and that Wells Fargo would accelerate if the arrearage was not cured. Id. Ex F. On June 22, 2016, a Rhode Island Housing mediation coordinator affirmed that Wells

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Fargo had fully complied with the pre-foreclosure mediation requirement in R.I. Gen. Laws § 34-27-3.2. Id. Ex. E at 13.

On March 22, 2017, Wells Fargo assigned the mortgage to Defendant Federal National Mortgage Association (“FNMA”) but continued to be the servicer on the account. Compl. ¶¶ 69, 254.^[6] Acting as the servicer for FNMA, Wells Fargo claims that it sent an acceleration letter on March 31, 2017, and a notice of sale letter on April 20, 2017. Id. Ex. F-1 at 3. After being advertised between May and July 2017, the foreclosure sale was scheduled for July 28, 2017. Id. Ex. E at 6. Two days before the foreclosure sale, on July 26, 2017, Defendant Rushmore Loan Management Service, LLC (“Rushmore”)^[7] became the owner of the loan, but no assignment of the mortgage was recorded. Compl. ¶¶ 71-72. The Amended Complaint alleges that FNMA transferred its interest in the mortgage by an unrecorded assignment on an unknown day prior to July 26, 2017.^[8] Id. ¶¶ 71-72. The foreclosure auction was conducted on July 28, 2017, by Wells Fargo as servicer for FNMA and the Real Estate was conveyed by a foreclosure deed given by FNMA to Defendant 266 Putnam Ave, LLC (“266 Putnam”) in consideration for payment of $188, 000. Id. ¶¶ 86, 92-93, 236; Ex. E. On October 1, 2017, Wells Fargo ceased to be the servicer for the account; that responsibility was switched to Rushmore. Id. Ex. F-1 at 2. On October 20, 2017, 266 Putnam initiated proceedings to evict Plaintiff from the Real Estate. Id. ¶

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98. Soon after, on October 26, 2017, Plaintiff began to send Wells Fargo the blizzard^[9] of letters that are the foundation for Plaintiff's RESPA/Regulation X claims. That is, all of Plaintiff's RESPA/Regulation X letters were written after the Real Estate had been sold at foreclosure and after Wells Fargo no longer was responsible for servicing or had any other interest in the Real Estate, the mortgage or the loan.

Six of the first set of letters, all dated October 26, 2017, were Regulation X requests for information (“October 2017 RFIs”).^[10] See 12 C.F.R. § 1024.36. The seventh letter, ^[11] also dated October 26, 2017, is the sole basis for the first and the foundation for the last of the Amended Complaint's Counts against Wells Fargo - Counts VII and XIII. Compl. Exs. G, O (“NOE-1”). NOE-1 was sent to Wells Fargo by Plaintiff's attorney and was designated as a Notice of Error “under 12 C.F.R. section 1024.35 of Regulation X of the Mortgage Servicing Act under RESPA.” Id. According to NOE-1, Wells Fargo had committed servicing errors, see 12 C.F.R. § 1024.35(b), in failing to send a default letter and an acceleration letter, in failing to comply with Rhode Island's mediation requirement (R.I. Gen. Laws § 34-27-3.2) and in allowing the foreclosure to proceed on behalf of FNMA after it had “no interest in the note or the mortgage.” Id. NOE-1 demanded that Wells Fargo correct the errors by removing all legal fees, costs, charges and expenses arising from the notice of sale and the foreclosure. Id. According to the

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Amended Complaint (but not mentioned in NOE-1), to comply with RESPA and Regulation X, NOE-1 required Wells Fargo to “void the foreclosure.” Compl. ¶ 273. Pursuant to 12 C.F.R. § 1024.35, Wells Fargo's written response to NOE-1 was due on December 20, 2017. Id. ¶¶ 267-68.

On November 15, 2017, Wells Fargo responded to Plaintiff's October 2017 RFIs by informing Plaintiff that Wells Fargo was working on gathering the information requested and advising Plaintiff that the “[s]ervicing and collection notes, inspection and legal fees, documents” had been sent to Rushmore (the new servicer). Compl. Exs. H, I, K, M. Soon after, on November 30, 2017, well in advance of the NOE-1 deadline, Wells Fargo responded to NOE-1 and further to the October 2017 RFIs with a substantive letter, which provided Plaintiff with a detailed “Customer Account Activity Statement” and purported to enclose^[12] a long list of documents that seemingly correspond to what had been sought by the six RFIs, coupled with the advisory that Wells Fargo had determined (as permitted by Regulation X, 12 C.F.R. § 1024.36(f)(1)(ii) and (iv)) that, apart from what was being provided, Plaintiff's letters were overbroad and sought confidential, privileged and/or proprietary material. Compl. Ex. F-1. This response appears to address all issues raised in NOE-1, including by supplying copies of the acceleration and default letter and the mediation compliance materials, as well as by advising that Wells Fargo had investigated Plaintiff's claim that FNMA should not have been the mortgagee at the foreclosure and concluded that the foreclosure had been conducted consistent with the mortgage and applicable law. Compl. Ex. F-1. The response reminds Plaintiff that Rushmore had become his loan servicer and supplied contact information for Rushmore. Id. In

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addition to providing this substantive information, all of Wells Fargo's response letters comply with RESPA's requirement that they include a name and contact information for a person designated to help if Plaintiff had questions. 12 U.S.C. § 2605(e)(2)(B)(ii), Compl. Exs. F-1, H through O.

Ignoring Wells Fargo's substantive response to NOE-1, Count VII alleges that Wells Fargo violated RESPA/Regulation X in that it “did not address any of the issues raised in the [NOE-1]” and that “[i]t refused to correct the error, ” refused to “remove any fees for the purported foreclosure” and “refused to void the foreclosure sale and remove any mortgage loans from the mortgage loan account.” Id. ¶¶ 272-73 (emphasis added). These conclusory allegations are contradicted by Exhibit F-1, which Plaintiff attached to the Amended Complaint and which specifically addresses every issue raised in NOE-1. For damages, the Amended Complaint alleges that this supposed violation harmed Plaintiff in that it required him to drive to visit his attorney at least five times (spending money for gasoline); to talk to his attorney by cell phone (spending electricity); to spend unspecified time away from work and other activities; to incur postage and copying costs in transmitting NOE-1; and to incur attorney's fees and costs “for the prosecution of this action.”^[13] Compl. ¶ 276.

Almost five months after receiving Wells Fargo's facially complete response, Plaintiff filed this case (on April 19, 2018). ECF No. 1. The original complaint accused Wells Fargo of violating RESPA solely because of Plaintiff's dissatisfaction with its response to NOE-1. It also asserted claims against FNMA, the Federal Housing Finance Agency, and 266 Putnam

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challenging the foreclosure, arguing that FNMA was constitutionally barred from using Rhode Island's non-judicial foreclosure procedure and seeking damages and injunctive relief because FNMA did not comply with Rhode Island's mediation requirement, had breached Paragraph 22 of the mortgage, and was not authorized to foreclose because it had executed an unrecorded assignment of the mortgage before the foreclosure. Plaintiff did not name Wells Fargo as a party to any of the claims for relief arising from the foreclosure.

After initiating the case, Plaintiff resumed sending RESPA/Regulation X letters to Wells Fargo. The second wave of letters, dated June 15, 2018, are premised on Wells Fargo's alleged failure to respond to NOE-1 and the six October 2017 RFIs (“June 2018 NOEs”). Largely ignoring Wells Fargo's facially complete response sent six months before, the seven June 2018 NOEs invoke 12 C.F.R. § 1024.35 and...