Freeman v. Ocwen Loan Servicing, LLC

Decision Date21 December 2020
Docket NumberCase No. 1:18-cv-03844-TWP-DLP
PartiesDEMONA FREEMAN, Plaintiff, v. OCWEN LOAN SERVICING, LLC, and BANK OF NEW YORK MELLON f/k/a THE BANK OF NEW YORK as successor in interest to JPMorgan Chase Bank, N.A., as Trustee for C-BASS Mortgage Loan Asset-Backed Certificates, Series, 2005-RPI, a/k/a BANK OF NEW YORK, Defendants.
CourtU.S. District Court — Southern District of Indiana

This matter is before the Court on Motions to Dismiss filed pursuant to Federal Rule of Civil Procedure 12(b)(6) by Defendants Ocwen Loan Servicing, LLC ("Ocwen") (Filing No. 86), and Bank of New York Mellon ("BONY") (Filing No. 88), (collectively, "Defendants"). Plaintiff Demona Freeman ("Freeman") initiated this action against the Defendants alleging violation of numerous federal statutes—the Real Estate Settlement Procedures Act, Truth in Lending Act, Fair Debt Collection Practices Act, Telephone Consumer Protection Act, and Fair Credit Reporting Act—as well as for breach of contract and other state law claims. The Defendants separately filed Motions asking the Court to dismiss the claims asserted in Freeman's Second Amended Complaint. For reasons explained below, the Court grants in part and denies in part the Motions.


The following facts are not necessarily objectively true, but as required when reviewing a motion to dismiss, the Court accepts as true all factual allegations in the complaint and draws all inferences in favor of Freeman as the non-moving party. See Bielanski v. County of Kane, 550 F.3d 632, 633 (7th Cir. 2008).

Freeman is the owner of real property and improvements located in Westfield, Indiana. In December 2003, she financed the purchase of a home with a loan, evidenced by a note and a mortgage on the home that secures the note. The loan was originated by Sun Mortgage Company, LLC ("Sun Mortgage") and subsequently placed in a mortgage-backed security guaranteed by Fannie Mae1. Thereafter, ownership of the note was transferred to Defendant BONY. Defendant Ocwen acts as the agent of and loan servicer for BONY (Filing No. 84 at 2). Ocwen obtained servicing rights from Litton Loan Servicing around September 1, 2011, a time when Freeman's loan was in default, and began servicing Freeman's loan.

Ocwen employs hundreds of individuals at various call centers throughout the country. These calling centers use automatic telephone dialing systems and computerized account information to track, record, and maintain the hundreds of thousands of debts collected by the company. A significant portion of Ocwen's business operations are dedicated to servicing consumer loans that are in default or foreclosure or were involved in bankruptcy proceedings. Id. at 6-7.

Ocwen's regular business practices include making repeated telephone calls, as well as sending notices, statements, bills, and other written correspondence to individuals like Freeman who it believes are responsible for paying past due amounts. To service consumer loans, Ocwen uses automatic telephone dialing systems ("ATDS") and automated/pre-recorded voices ("Robocalls"). Ocwen uses ATDS equipment and software that has the capacity to store or producetelephone numbers to be called, including auto-dialers and predictive dialers. Ocwen has made calls using an ATDS and Robocalls to Freeman's cellular telephone even though she did not provide prior express consent to receive such calls, or Freeman revoked any consent thereafter. Id. at 7. Ocwen regularly and in the ordinary course of business furnished information to one or more consumer reporting agencies about Freeman's transactions. Any improper reporting of a mortgage tradeline has a particularly adverse effect on a consumer's credit score (such as Freeman) as it represents the largest and longest active debt obligation in a person's credit history. Id. at 9-10.

Freeman began having financial difficulties in 2008 as a result of the financial collapse brought on by the mortgage industry. On April 13, 2009, BONY filed a foreclosure action against Freeman in the Hamilton County (Indiana) Superior Court (the "First Foreclosure Case"). Because of ongoing financial difficulties, Freeman sought to stop the foreclosure and forced sale of her home by filing for bankruptcy. She filed bankruptcy under Chapter 13 of the United States Bankruptcy Code on April 23, 2012, in the United States Bankruptcy Court for the Southern District of Indiana (the "Bankruptcy Case"). The Bankruptcy Case had the effect of staying the First Foreclosure Case. Freeman filed the Bankruptcy Case to cure all pre-petition defaults on her home loan. Id. at 10.

Freeman's proposed Chapter 13 bankruptcy Plan was confirmed on April 10, 2013, and later modified by court order pursuant to 11 U.S.C. § 1329 on March 15, 2016. Under the Chapter 13 Plan, she was to make regular monthly payments of $1,740.00 to the Chapter 13 Trustee, from which Ocwen would receive approximately $1,029.00 per month to maintain the monthly payments it was owed plus an additional sum to address all arrearages, which was originally estimated by Freeman to be $15,000.00 (Filing No. 84 at 10-11).

Ocwen appeared in the Bankruptcy Case and participated in those proceedings by filing a Proof of Claim on behalf of BONY. The Proof of Claim asserted a secured claim in the amount of $133,064.46 and an arrearage claim of $22,668.03, which included escrow charges of $6,649.43, a transfer fee balance of $2,328.05, property valuation fees of $121.00 (listed twice for a total of $242.00), foreclosure fees of $225.00, foreclosure costs of $695.36, and a proof of claim fee of $150.00. On September 13, 2012, the United States Trustee filed an Objection to Claim, which detailed approximately three pages of errors in Ocwen's Proof of Claim, including unsubstantiated and objectionable charges. Ocwen did not respond to the Objection. On October 26, 2012, the Bankruptcy Court entered an order on the United States Trustee's Objection to Claim and disallowed the objected to and unsubstantiated fees, expenses, and charges totaling $10,289.84 as well as any fees for preparation of the Proof of Claim or amendments. The Bankruptcy Court's order allowed the balance of Ocwen's Proof of Claim, which was an arrearage in the amount of $12,378.10. Id. at 11-12.

On February 22, 2013, Ocwen filed a Notice of Post-petition Fees, Expenses, and Charges to supplement its original Proof of Claim, a portion of which had been disallowed. In this Fee Notice, Ocwen listed a "Bankruptcy Fee," dated January 17, 2013, in the amount of $300.00. Attached to the Fee Notice was an invoice that provided further detail regarding the "Bankruptcy Fee." The invoice indicated the fee (which was to be assessed to Freeman's account) related to a "Response to Objection to Claim - (Rec from Brwr)." In response to the Fee Notice, the United States Trustee filed a motion and explained that Ocwen failed to respond to the Claim Objection, so any fees for a "Response to Objection to Claim" were improper and should be disallowed entirely. Again, Ocwen did not file a response to the Trustee's motion. The Bankruptcy Court set the motion for a hearing, and proper notice of the hearing was issued to Ocwen. However, Ocwenfailed to appear at the hearing. On April 8, 2013, the Bankruptcy Court entered an order granting the Trustee's motion and disallowing the $300.00 fee requested by Ocwen, explaining that all fees relating to the Proof of Claim filed by Ocwen, amendments to the Proof of Claim, and any litigation related to the Proof of Claim or future matters that related to the Trustee's litigation in the case were disallowed and could not be charged to Freeman's mortgage account. Id. at 12-13.

On April 12, 2017, the Chapter 13 Trustee filed a Notice of Final Cure Payment, stating the amount to cure the pre-petition default ($12,378.19 in arrearage) had been paid in full and that Freeman had completed all payments required under the Chapter 13 Plan. Soon thereafter, Ocwen filed a Response to Notice of Final Cure Payment, agreeing that Freeman had paid in full the amount required to cure the pre-petition default on Ocwen's claim. Ocwen affirmed Freeman was current with all post-petition payments consistent with §1322(b)(5) of the Bankruptcy Code including all fees, charges, expenses, escrow, and costs. According to Ocwen's Response to Notice of Final Cure Payment, Freeman was to make her next post-petition payment directly to Ocwen on May 1, 2017. Beginning in May 2017, Freeman began making timely and adequate monthly installment payments on the home loan to Ocwen by a series of ACH debits. On November 21, 2017, Freeman obtained an Order of Discharge from the Bankruptcy court. Id. at 13-14.

On February 21, 2018, BONY filed a Notice of Relief from Stay and Abandonment in the First Foreclosure Case. This Notice was filed because of information provided to BONY from Ocwen. BONY explained in its Notice that the property at issue had been abandoned from the bankruptcy estate. In reality, the property had not been abandoned from the bankruptcy estate. The filing of the Notice had the effect of restarting the First Foreclosure Case. On March 6, 2018, after receiving messages from Freeman's bankruptcy counsel, BONY acknowledged that the FirstForeclosure Case should be closed. On May 2, 2018, BONY filed a motion to vacate the judgment and to dismiss the case, and on May 5, 2018, the First Foreclosure Case was dismissed. Id. at 15.

In June 2018, Freeman obtained a copy of the life of loan mortgage transactional history for her home loan. A review of this document revealed a myriad of unexplainable and errant servicing conduct. During the course of the Bankruptcy Case, Ocwen assessed fees and expenses, some of which were applied to Freeman's mortgage account as a debit and others that were applied and then reversed. Ocwen did not provide notice of the charging of these fees and expenses to ...

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