Ording v. Bac Home Loans Servicing, LP

• Decision Date: 10 January 2010
• Docket Number: CIVIL ACTION NO. 10-10670-MBB
• Parties: EMMANUEL ORDING and MICHELLE STEWART, Husband and Wife, Plaintiffs, v. BAC HOME LOANS SERVICING, LP, Defendant.
• Court: U.S. District Court — District of Massachusetts

EMMANUEL ORDING and MICHELLE STEWART, Husband and Wife, Plaintiffs, v. BAC HOME LOANS SERVICING, LP, Defendant.

CIVIL ACTION NO. 10-10670-MBB

UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS

January 10, 2010

MEMORANDUM AND ORDER RE: DEFENDANT BAC HOME LOANS' MOTION TO DISMISS

(DOCKET ENTRY # 10)

BOWLER, U.S.M.J.

Pending before this court is a motion filed by defendant BAC Home Loans Servicing, LP ("defendant") to dismiss Count I and Count II of the complaint. (Docket Entry # 10). Plaintiffs Emmanuel Ording and Michelle Stewart ("plaintiffs"), husband and wife, oppose dismissal of the counts. (Docket Entry # 13). On August 17, 2010, this court held a hearing and took the motion (Docket Entry # 10) under advisement.

PROCEDURAL HISTORY

The two count complaint sets out the following claims against defendant: (1) a violation of the Truth in Lending Act, under 15 U.S.C. § 1641 ("section 1641" or "TILA") for failure to disclose required information (Count I); and (2) a violation of Massachusetts General Law chapter 93A, section nine ("chapter 93A") (Count II). (Docket Entry # 1). The motion seeks to dismiss both counts. (Docket Entry # 10).

Defendant argues that Count I is subject to dismissal because defendant is not a "creditor" under the statute and also that the claim is now moot. (Docket Entry # 11). Count II, defendant contends, is subject to dismissal because of the inadequacy of the TILA claim and because the federal Home Affordable Modification Program ("HAMP") does not provide a private right to recovery. Defendant additionally argues that recovery pursuant to chapter 93A would be incompatible with the objectives and enforcement mechanisms of HAMP. (Docket Entry # 11).

Plaintiffs submit that the complaint provides sufficient facts to demonstrate a viable TILA violation and a proper chapter 93A claim. (Docket Entry # 13). According to plaintiffs, the complaint adequately demonstrates that defendant is liable under TILA as either a creditor or an assignee of creditor. (Docket Entry # 13). Plaintiffs also contend that defendant is liable under chapter 93A for employing unfair or deceptive practices in violation of provisions set forth in TILA and HAMP. (Docket Entry # 13).

STANDARD OF REVIEW

The standard of review for a Rule 12(b)(6) motion is well established. To survive a motion to dismiss, the complaint must include factual allegations that when taken as true demonstrate a plausible claim for relief even if actual proof of the facts is improbable. Bell Atlantic v. Twombly, 550 U.S. 544, 555-558 (2007). While "not equivalent to a probability requirement, the plausibility standard asks for more than a sheer possibility that a defendant has acted unlawfully." Boroian v. Mueller, 616 F.3d 60, 65 (1^st Cir. 2010) (internal quotation marks omitted).

"[A]ccepting as true all well-pleaded facts in the complaint and making all reasonable inferences in the plaintiff's favor," Id. at 64, the "factual allegations 'must be enough to raise a right to relief above the speculative level.'" Gorelik v. Costin, 605 F.3d 118, 121 (1^st Cir. 2010). In considering the merits of a motion to dismiss, the court is limited in its review to the "facts alleged in the pleadings, documents attached as exhibits or incorporated by reference in the complaint, and matters of which judicial notice can be taken." Nollet v. Justices of the Trial Court of Mass., 83 F.Supp.2d 204, 208 (D.Mass. 2000). In certain circumstances a court may also "consider 'documents the authenticity of which are not disputed by the parties'" as well as "'documents central to the plaintiffs' claim'" and "'documents sufficiently referred to inthe complaint.'" Curran v. Cousins, 509 F.3d 36, 44 (1^st Cir. 2007). "Drawing reasonable inferences in plaintiffs' favor but eschewing reliance on "'bald assertions, . . . unsubstantiated conclusions,'" Fantini v. Salem State College, 557 F.3d 22, 26 (1^st Cir. 2009), and legal conclusions, see Dixon v. Shamrock Financial Corp., 522 F.3d 76, 79 (1^st Cir. 2008) (rejecting "'unsupported conclusions or interpretations of law'" in reviewing Rule 12(b)(6) dismissal), the complaint sets out the following facts.

FACTUAL BACKGROUND

Defendant, a subsidiary of Bank of America Corporation, N.A., is the mortgage servicer of two mortgages encumbering plaintiff's primary residence (the "mortgages"). (Docket Entry # 1). On October 26, 2009, plaintiffs sent a TILA request to defendant seeking the identity of the owner of the two mortgages. (Docket Entry # 1, Ex. A). Plaintiffs sought disclosure of this information in order to "pursue loan-modification and loss-mitigation assistance." (Docket Entry # 1). Defendant did not respond to the TILA request. (Docket Entry # 1). Without a response from defendant, plaintiffs were unable to explore loan modification and loss mitigation assistance. (Docket Entry # 1).

In the ordinary course of business, defendant regularly extended or offered to extend consumer credit. (Docket Entry #1). Defendant services the mortgages on plaintiffs' primary residence. (Docket Entry # 1). Defendant services mortgages, in accordance with a mortgage servicing contract (the "servicing contract"), on behalf of the Federal National Mortgage Association ("Fannie Mae"). (Docket Entry # 1).

Under the terms of the servicing contract, defendant "collects mortgage payments, sends monthly billing statements, manages homeowners' accounts, and conducts collection and foreclosure activity." (Docket Entry # 1). In accordance with the servicing contract, defendant follows the loan servicing instructions supplied by Fannie Mae. (Docket entry # 1). As the servicer of plaintiffs' mortgages, defendant knew which companies owned the mortgages. (Docket Entry # 1).

HAMP, a "foreclosure-prevention program," was created in order to assist homeowners and minimize foreclosures through modification of the terms of a mortgage. (Docket Entry # 1). HAMP provides a series of loan servicing instructions including "supplemental directives." (Docket Entry # 1). Fannie Mae incorporates these supplemental directives by reference into the terms of the servicing contract, thus binding defendant to follow them. (Docket Entry # 1).

On November 2, 2009, plaintiffs submitted an application package to defendant in order to be considered for a loan modification. (Docket Entry # 1). The application package wassent to "Bank of America, Office of the President." (Docket Entry # 1). Defendant failed to provide written acknowledgment of the application package within ten business days in accordance with supplemental directive 09-07. (Docket Entry # 1, Ex. B). Additionally, defendant, as servicer of the mortgages, failed to provide a written response to plaintiffs regarding the application for a loan modification within 30 days as required under supplemental directive 09-07. (Docket Entry # 1).

On March 10, 2010, plaintiffs sent defendant a chapter 93A demand letter which defendant received on March 15, 2010. (Docket Entry # 1, Ex. C & D). Defendant failed to respond to the letter within 30 days and to date has failed to respond. (Docket Entry # 1). Due to the lack of response from defendant, plaintiffs filed the present suit. On July 1, 2010, in conjunction with the motion to dismiss, defendant disclosed to plaintiffs the entities that own the mortgages pursuant to the plaintiffs' TILA request. (Docket Entry # 13, Ex. 4).

DISCUSSION

I. TILA Violation

Defendant argues that Count I is subject to Rule 12(b)(6) dismissal because only creditors may be held liable for TILA violations. (Docket Entry # 11). Defendant suggests it is merely the servicer of the mortgages and as such does not meetTILA's statutory definition of "creditor" or "assignee of creditor." (Docket Entry # 11). Additionally, defendant argues that Count I fails because the claim is now moot, as defendant has disclosed the necessary information to plaintiffs. (Docket Entry # 11).

"TILA requires creditors to disclose, clearly and accurately, all the material terms of consumer credit transactions." McKenna v. First Horizon Home Loan Corp., 475 F.3d 418, 421 (1^st Cir. 2007). Among the numerous disclosures required under TILA "the servicer" of a mortgage, upon written request, "shall provide the obligor, to the best knowledge of the servicer, with the name, address, and telephone number of the owner of the obligation." 15 U.S.C. § 1641(f). Section 1641(f) does not specify a period for compliance with this obligation. Id. Thus, the requested information must be disclosed within a reasonable time. See 12 C.F.R. § 226.36(c)(1)(iii).

While it is the servicer of the loan that has the obligation to provide the information to the borrower pursuant to section 1641(f), liability for violations of TILA rests squarely and solely with creditors. Horton v. Country Mortg. Services, Inc., 2010 WL 55902, *3 (N.D.Ill. Jan. 4, 2010). "TILA expressly disclaims any liability for mere servicers 'unless the servicer is or was the owner of the obligation.'" Id. (quoting 15 U.S.C. § 1641(f)(1)). "Moreover, a servicer is not to be treated as anassignee for purposes of liability under TILA 'on the basis of an assignment of [an] obligation from the creditor or another assignee to the servicer solely for the administrative convenience of the servicer in servicing the obligation.'" Id. (quoting 15 U.S.C. § 1641(f)(2)).

To be a creditor under TILA one must meet the requirements of a two prong test: (1) one must regularly extend consumer credit "which is payable by agreement in more than four installments or for which the payment of a finance charge is or may be required;" and (2) the creditor must be "the person to whom the debt arising from the consumer credit transaction is initially payable." Harris v. Option One Mortg. Corp., 261 F.R.D. 98, 105 (D.S.C. 2009); accord Roach v. Option One Mortg. Corp., 598 F.Supp.2d 741, 749 (E.D.Va. 2009).

Plaintiffs suggest that defendant meets the TILA definition of creditor because, as defendant's eventual...