Richards v. Newrez LLC

• Decision Date: 18 March 2021
• Docket Number: Civil Action No. ELH-20-1282
• Parties: MANDA RICHARDS and MATTHEW MALDONADO, Plaintiffs, v. NEWREZ LLC d/b/a SHELLPOINT MORTGAGE SERVICING, Defendant.
• Court: U.S. District Court — District of Maryland

MANDA RICHARDS and MATTHEW MALDONADO, Plaintiffs,
v.
NEWREZ LLC d/b/a SHELLPOINT MORTGAGE SERVICING, Defendant.

Civil Action No. ELH-20-1282

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

March 18, 2021

MEMORANDUM OPINION

This putative class action, lodged by plaintiffs Manda Richards and Matthew Maldonado, concerns the allegedly deceptive mortgage service practices of defendant NewRez, LLC ("NewRez"), f/k/a New Penn Financial, LLC, d/b/a Shellpoint Mortgage Servicing ("Shellpoint").¹ Richards is domiciled in Maryland and Maldonado is domiciled in California. They are homeowners whose mortgages were transferred to Shellpoint.

Richards originally filed suit in the Circuit Court for Anne Arundel County. ECF 2. Thereafter, both Richards and Maldonado filed an Amended Complaint (ECF 3) in State court. Defendant subsequently removed the case to federal court (ECF 1, Notice of Removal), asserting subject matter jurisdiction under the Class Action Fairness Act of 2005 ("CAFA"), 28 U.S.C. § 1337; diversity jurisdiction, pursuant to 28 U.S.C. § 1332; and federal question jurisdiction, pursuant to 28 U.S.C. § 1331. Id.

The Amended Complaint (ECF 3) contains three counts. Plaintiffs allege violations of the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. §§ 2601 et seq. (Count I); the Fair

Page 2

Debt Collection Practices Act ("FDCPA" or the "Act"), 15 U.S.C. §§ 1692 et seq. (Count II); the Maryland Consumer Debt Collection Act ("MCDCA"), Md. Code (2013 Repl. Vol., 2014 Suppl.) §§ 14-204 et seq. of the Commercial Law Article ("C.L.") (Count III), and the Maryland Consumer Protection Act ("MCPA"), C.L. §§ 13-301 et seq. (Count III).

With respect to the putative classes, plaintiffs identify three groups. Plaintiffs assert Count I on behalf of themselves and the "Untimely Hello Letter Class." It is defined, id. ¶ 73(a), as:

All residential mortgage loan borrowers in California and Maryland for whom Shellpoint has not timely provided a 12 U.S.C.A. § 2605(c) notice in the three years proceeding [sic] the filing of this action.

Count II is asserted on behalf of both named plaintiffs and the "Untimely Notice Class." It is defined, id. ¶ 73(b), as:

All individuals in California and Maryland who within one year of commencement of this action Shellpoint (i) did not timely provided [sic] timely periodic statement [sic] as required by 15 U.S.C.A. § 1638(f) and 12 C.F.R. § 1026.41 related to those individual's residential mortgage debts or did not timely provide a notice pursuant to 12 U.S.C.A. § 2605(c) and (ii) where Shellpoint's records indicate that the debt had not been current for 30 or more consecutive days at the time Shellpoint began servicing it.

In addition, Count II is asserted on behalf of Maldonado and the "COVID-19 Class." It is defined, id. ¶ 73(c), as:

All individuals in the United States who within one year of commencement of this action Shellpoint (i) agreed to a COVID-19 forbearance agreement for April through June 2020 related to those individual's residential mortgage debts and (ii) Shellpoint imposed or collected fees and charges beyond the contractual payments due on the individual's account and (iii) where Shellpoint's records indicate that the debt had not been current for 30 or more consecutive days at the time Shellpoint began servicing it.

Count III, based only on Maryland law, is asserted solely by Richards.

Page 3

Shellpoint has moved to dismiss plaintiffs' Amended Complaint, pursuant to Fed. R. Civ. P. 12(b)(1), 12(b)(2), and 12(b)(6). ECF 13. Defendant contends that the Court lacks personal jurisdiction over Shellpoint as to Maldonado's claims and the related out-of-state class members. Further, it asserts that plaintiffs lack standing to pursue their claims in Count I and Count II. Shellpoint also moves to strike plaintiffs' proposed class definitions and Maldonado's jury prayer, pursuant to Rules 12(f) and 23(d)(1)(D). And, it moves for a more definite statement, pursuant to Fed. R. Civ. P. 12(e), as to Richards's individual claims in Count III. Finally, Shellpoint requests a transfer of the case to the Southern Division of this District. The motion is supported by a memorandum of law (ECF 13-1) (collectively, the "Motion") and five exhibits. ECF 13-3 to ECF 13-7. Plaintiffs oppose the Motion. ECF 16. Defendant has replied. ECF 19.

No hearing is necessary to resolve the motions. See Local Rule 105.6. For the reasons that follow, I shall grant defendant's Motion in part and deny it in part.

I. FACTUAL SUMMARY² A. Background

Shellpoint is a Delaware limited liability company with its principal place of business in Greenville, South Carolina. ECF 13-3, ¶ 3; ECF 3, ¶ 14. Shellpoint Partners, LLC is the sole member of Shellpoint. ECF 13-3, ¶ 3. Shellpoint Partners, LLC; its owners, NRM Acquisition, LLC and NRM Acquisition II, LLC; their owner, New Residential Mortgage, LLC; and its

Page 4

owner, New Residential Investment Corporation ("NRZ"), each have a principal place of business in New York. Id. ¶ 4; see also ECF 3, ¶ 14.³

Shellpoint is both a mortgage servicer and a debt collector, according to plaintiffs. ECF 3, ¶¶ 3, 4, 14. They state: "Shellpoint makes more money on behalf of NRZ by churning fees and making advances related to borrowers it believes are delinquent or in foreclosure and there is 'limited risk' that those sums will not be reimbursed to it—even if it has no right to impose the fees and charges in the first instance." Id. ¶ 14.

Richards is a borrower with respect to a mortgage loan for her property in Bethesda, Maryland. Id. ¶ 12. Maldonado is a borrower as to a mortgage loan for his home in Chino, California. Id. ¶ 13. On November 1, 2019 and February 1, 2020, respectively, Shellpoint acquired the servicing rights to plaintiffs' loans from other servicing companies. Id. ¶¶ 29, 30. At the time of transfer, Shellpoint allegedly believed that the loans of both plaintiffs were in default. Id. ¶¶ 42, 60.

Plaintiffs allege that "as a matter of standard policy and practice, Shellpoint disregards the express requirements" of its statutory and regulatory obligations to borrowers. Id. ¶ 6. In particular, plaintiffs complain about Shellpoint's (i) "fail[ure] to timely and reasonably identify itself to federally related mortgage borrowers"; (ii) "utilizing knowingly incorrect loan data transferred to it without making . . . any reasonable investigation to correct the inaccuracies"; and (iii) "imposing loan charges and fees to the borrowers in secret." Id.

Further, plaintiffs claim that they were harmed by defendant's (i) "utilization of knowingly incorrect loan data obtained by its predecessor(s) servicers while imposing and collecting improper fees and charges to the Named Plaintiff's [sic] and the putative class

Page 5

members' loan accounts with no proper notice to them; (ii) reporting of same derogatory information to the credit reporting agencies while not disclosing the information to the borrowers; and (iii) concealment of material loan information to Named Plaintiffs and class members." Id. ¶ 7. Further, plaintiffs contend that Shellpoint "knows that the information transferred to it by its predecessor servicers is infected and prone to multiple errors but takes no reasonable steps to correct those errors but simply compounds the errors by utilizing the flawed data as part of its business practice and routine." Id. ¶ 6.

According to plaintiffs, "as part of its routine business practice," Shellpoint "imposes, churns, and collects a varied of [sic] collection fees related to the Plaintiffs' and class members' mortgage accounts including late fees, property valuation fees, property inspection fees, breach letter fees, etc." Id. ¶ 31. Plaintiffs maintain, among other things, that such fees are not permitted under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), Public Law No. 116-136. Id.

B. Allegations as to Plaintiff Richards

Richards acquired her property in Bethesda on August 31, 2005, for the sum of $169,500.00. Id. ¶ 32. To accomplish the purchase, Richards borrowed $159,030.00 from American Home Mortgage Acceptance, Inc. (the "Richards Loan"). Id. According to plaintiffs, this loan qualified at origination as a "federally related mortgage." Id.

On April 4, 2014, the Richards Loan was sold and assigned to Wilmington Savings Fund Society, FSB, as trustee for the PrimeStar-H Fund I Trust ("Primestar"). Id. ¶ 33. At this time, Primestar's loan servicer was Statebridge Company LLC. Id. When Primestar owned the Richards Loan, "it agreed to the Primestar Settlement," which was approved by the Circuit Court for Anne Arundel County in July 2016. Id. ¶ 34. Pursuant to this settlement, Primestar "agreed

Page 6

that it was not entitled to attempt to collect from Richards any deficiency sums related to the Richard's [sic] loan and it was limited to in rem relief only." Id.

Thereafter, on October 26, 2016, Primestar sold the Richards Loan to Wilmington Savings Fund Society, FSB, as trustee for the Brougham Fund I Trust ("Brougham"). Id. ¶ 35. From October 13, 2016 to about November 1, 2019, Servis One, Inc. d/b/a BSI Financial Services ("BSI"), acted as the mortgage servicer on behalf of Primestar and then Brougham. Id. ¶ 37. Then, on October 8, 2019, the Richards Loan was sold to Morgan Stanley Mortgage Capital Holdings LLC ("Morgan Stanley"). Id. Richards was never notified of Morgan Stanley's acquisition of her loan. Id.

In the meantime, in 2015 Richards had filed for bankruptcy under Chapter 7 of the Bankruptcy Code. Id. ¶ 39.⁴ On May 31, 2017, Richards "received a discharge of her personal liability from the Richards Loan pursuant to 11 U.S.C. § 727." Id.; see Case No. 15-25605, ECF 55 (D. Md.).

Then, in 2018, Richards sought protection under Chapter 13 of the Bankruptcy Code. ECF 3, ¶ 39; see Case No. 18-15772 (D. Md.). In that case, Richards "received an order confirming her proposed bankruptcy plan"; "notified BSI and all her other creditors of...