Medrano v. Flagstar Bank, FSB

• Decision Date: 11 December 2012
• Docket Number: No. 11–55412.,11–55412.
• Citation: 704 F.3d 661
• Parties: Jaime MEDRANO and Maribel Medrano, husband and wife, Plaintiffs–Appellants, v. FLAGSTAR BANK, FSB, a Federal Savings Bank; Exodus Financial Corporation, a Nevada corporation formerly known as Doe 1; Jane Fowler Kelleher, formerly known as Doe 2; Stratham Montecito West, a California corporation; Strategic Sales and Marketing Group, a California corporation; Janis Kim Randazzo, individually and responsible managing officer of Strategic Sales and Marketing Group; Fernando Cordero, individually and responsible managing officer of Exodus Financial Corporation; and Dora Senaida Cordero, Defendants–Appellees, and Protofund Mortgage Corporation, a California corporation, Defendant.
• Court: U.S. Court of Appeals — Ninth Circuit

704 F.3d 661

Jaime MEDRANO and Maribel Medrano, husband and wife, Plaintiffs–Appellants,

v.FLAGSTAR BANK, FSB, a Federal Savings Bank; Exodus Financial Corporation, a Nevada corporation formerly known as Doe 1; Jane Fowler Kelleher, formerly known as Doe 2; Stratham Montecito West, a California corporation; Strategic Sales and Marketing Group, a California corporation; Janis Kim Randazzo, individually and responsible managing officer of Strategic Sales and Marketing Group; Fernando Cordero, individually and responsible managing officer of Exodus Financial Corporation; and Dora Senaida Cordero, Defendants–Appellees,andProtofund Mortgage Corporation, a California corporation, Defendant.

No. 11–55412.

United States Court of Appeals,Ninth Circuit.

Argued and Submitted Nov. 6, 2012.

Filed Dec. 11, 2012.

Jerome Zamos, Law Offices of Jerome Zamos, Woodland Hills, CA, for Plaintiffs–Appellants.

Roland P. Reynolds and Frederick A. Haist, Palmer, Lombardi & Donohue LLP, Los Angeles, CA; Dale A. Arakawa and Lisa P. Gruen, Ericksen Arbuthnot, Los Angeles, CA; and Carol L. Vallely, Law Office of Carol L. Vallely, Verdugo City, CA, for Defendants–Appellees.

Appeal from the United States District Court for the Central District of California, Jacqueline H. Nguyen, District Judge, Presiding. D.C. No. 2:10–cv–07285–JHN–PLA.

Before: SUSAN P. GRABER, SANDRA S. IKUTA, and ANDREW D. HURWITZ, Circuit Judges.

OPINION

GRABER, Circuit Judge:

The Real Estate Settlement Procedures Act (“RESPA”) provides an action for damages against mortgage-loan servicers who fail to respond to certain types of inquiries from borrowers. Plaintiffs Jaime and Maribel Medrano allege that Defendant Flagstar Bank, FSB, the servicer of their home loan, violated 12 U.S.C. § 2605 because it did not respond adequately to three letters in which they challenged the monthly payment due on their loan. The district court granted Flagstar's motion to dismiss the claim because a servicer must receive a valid “qualified written request” to incur the duty to respond under § 2605, and it determined that the letters were not qualified written requests that triggered that statutory duty. Reviewing de novo, Colony Cove Props., LLC v. City of Carson, 640 F.3d 948, 955 (9th Cir.), cert. denied,––– U.S. ––––, 132 S.Ct. 456, 181 L.Ed.2d 308 (2011), we hold that the letters did not trigger the statutory duty to respond and therefore affirm.¹

In 2009, Plaintiffs entered into a home loan agreement and purchased a house in Los Angeles County. The loan was secured by a deed of trust and, at all times relevant to this action, was serviced by Flagstar.

The loan documents provided for an escrow account into which Plaintiffs would make monthly payments to cover taxes, insurance, interest, and principal. In February 2010, Flagstar notified Plaintiffs that the escrow account would have insufficient funds over the following 12–month period and that they would be required either to increase their monthly payment from $1,917.68 to $2,676.08 or to contribute a one-time lump sum of $4,938.53 to cover the deficiency.

Plaintiffs retained a lawyer who, between March 19, 2010, and August 10, 2010, sent three letters disputing any obligation to make the increased payments. The first letter, which was sent to Flagstar directly, asserted, in relevant part, that the loan documents did not “accurately reflect ... the proper payment schedule represented by the loan broker.” The letter went on to explain that, when Plaintiffs bought the house, the broker assured them that their maximum monthly payments would not exceed $1,900. The letter demanded that Flagstar “revise all documentation concerning the current loan” to reflect the “original terms” of the agreement and limit Plaintiffs' monthly payments accordingly.

The second letter, which also was sent to Flagstar directly, made similar claims. It also told Flagstar that Plaintiffs would continue to make payments of only $1,917.68, as allegedly agreed, and that they expected Flagstar “to apply that amount in full satisfaction of their obligation.”

The third letter went to Flagstar's legal counsel. It repeated the assertion that Flagstar's demand for increased payments was invalid, even though it was consistent with the loan and mortgage documents, because Plaintiffs had been advised when they purchased their home that their payments would not exceed $1,900 per month.

Although Flagstar received Plaintiffs' letters, it made no changes to their account and—although the record is not clear on this point—may have failed to respond at all.²

Plaintiffs commenced this action in California state court, alleging that Flagstar violated state law. After Plaintiffs added federal claims under RESPA, Flagstar removed the action to federal court. The district court dismissed the federal claims and remanded the action to the state court. Plaintiffs timely appeal.

RESPA requires the servicer of a federally related mortgage loan to provide a timely written response to inquiries from borrowers regarding the servicing of their loans. 12 U.S.C. § 2605(e)(1)(A), (e)(2). If the servicer fails to respond properly to such a request, the statute entitles the borrower to recover actual damages and, if there is a “pattern or practice of noncompliance,” statutory damages of up to $1,000. Id. § 2605(f). Here, Flagstar argues that, regardless of how it responded to Plaintiffs' letters, ³ it is not liable under the statute because the letters were not qualified written requests and therefore did not require a response.

To decide whether Plaintiffs' letters triggered § 2605(e)'s duty to respond, we begin by turning to the text of the statute, as well as its object and policy, to discern congressional intent. United States v. $493,850 in U.S. Currency, 518 F.3d 1159, 1166–67 (9th Cir.2008). RESPA defines a “qualified written request” as follows:

For purposes of this subsection, a qualified written request shall be a written correspondence, other than notice on a payment coupon or other payment medium supplied by the servicer, that—

(i) includes, or otherwise enables the servicer to identify, the name and account of the borrower; and

(ii) includes a statement of the reasons for the belief of the borrower, to the extent applicable, that the account is in error or provides sufficient detail to the servicer regarding other information sought by the borrower.

12 U.S.C. § 2605(e)(1)(B). Under § 2605(e)(1)(A), a servicer must respond to such a letter if it requests or challenges “information relating to the servicing of such loan.” Id. § 2605(e)(1)(A), (e)(2).

Congress intended RESPA to serve consumer-protection purposes. The statute's first section, which is entitled “Congressional findings and purpose,” expresses Congress' determination that “significant reforms in the real estate settlement process are needed to insure that consumers throughout the Nation are provided with greater and more timely information on the nature and costs of the settlement process and are protected from unnecessarily high settlement charges caused by certain abusive practices.” Id. § 2601(a); see also Schuetz v. Banc One Mortg. Corp., 292 F.3d 1004, 1008–09 (9th Cir.2002) (discussing the enactment and congressional purpose of RESPA). Although the “settlement process” targeted by the statute was originally limited to the negotiation and execution of mortgage contracts, Greenpoint Mortg. Funding, Inc. v. Herrera (In re Herrera), 422 B.R. 698, 711 (9th Cir. BAP 2010), aff'd sub nom. Home Funds Direct v. Monroy (In re Monroy), 650 F.3d 1300, 1301 (9th Cir.2011) (order), the scope of the statute's provisions was expanded in 1990 to encompass loan servicing, Pub. L. No. 101–625, tit. IX, subtit. C, § 941, 104 Stat. 4405 (1990). Accordingly, RESPA's provisions relating to loan servicing procedures should be “construed liberally”to serve the statute's remedial purpose. Herrera, 422 B.R. at 711–12.

We have had no occasion to apply those principles to interpretation of § 2605(e), and few other courts have done so. In Catalan v. GMAC Mortgage Corp., 629 F.3d 676 (7th Cir.2011), however, the Seventh Circuit recently considered the scope of § 2605(e). Specifically, in deciding whether a qualified written request must identify specific reasons for a borrower's belief that his or her account is in error, the court held:

RESPA does not require any magic language before a servicer must construe a written communication from a borrower as a qualified written request and respond accordingly. The language of the provision is broad and clear. To be a qualified written request, a written correspondence must reasonably identify the borrower and account and must “include a statement of the reasons for the belief of the borrower, to the extent applicable, that the account is in error or provides sufficient detail to the servicer regarding other information sought by the borrower.” 12 U.S.C. § 2605(e)(1)(B) (emphasis added). Any reasonably stated written request for account information can be a qualified written request. To the extent that a borrower is able to provide reasons for a belief that the account is in error, the borrower should provide them, but any request for information made with sufficient detail is enough under RESPA to be a qualified written request and thus to trigger the servicer's obligations to respond.

Catalan, 629 F.3d at 687. We agree and adopt the Seventh Circuit's general approach to defining what qualifies as a qualified written request that will trigger § 2605(e)'s duty to respond. The statute does not explicitly require any “magic” words, and an interpretation according to which it did so implicitly would be inconsistent with Congress' intent that the statute serve a broad remedial purpose. Instead, under § 2605(e), a borrower's written inquiry requires a response as long as it (1) reasonably identifies the borrower's name and account, (2) either states the borrower's “reasons for the belief ......