Schmidt v. Pennymac Loan Servs., LLC

• Decision Date: 20 May 2015
• Docket Number: Case No. 14–cv–14728.
• Citation: 106 F.Supp.3d 859
• Parties: Tamika SCHMIDT, Plaintiff, v. PENNYMAC LOAN SERVICES, LLC, and Bank of America, NA, Defendant.
• Court: U.S. District Court — Eastern District of Michigan

106 F.Supp.3d 859

Tamika SCHMIDT, Plaintiff,

v.PENNYMAC LOAN SERVICES, LLC, and Bank of America, NA, Defendant.

Case No. 14–cv–14728.

United States District Court, E.D. Michigan, Northern Division.

Signed May 20, 2015.

Joshua C. Castmore, Law Office of Joshua Castmore, PLLC, Southfield, MI, for Plaintiff.

Adam D. Grant, Aimee R. Gibbs, Dickinson Wright, Detroit, MI, Kathryn J. Miller, Dickinson Wright, Ann Arbor, MI, Amy Sabbota Gottlieb, Dickinson Wright PLLC, Troy, MI, for Defendant.

ORDER ADOPTING REPORT AND RECOMMENDATION, GRANTING DEFENDANT PENNYMAC'S MOTION TO DISMISS, DENYING DEFENDANT BANK OF AMERICA'S MOTION TO DISMISS, AND REMANDING THE CASE TO THE SAGINAW COUNTY CIRCUIT COURT

THOMAS L. LUDINGTON, District Judge.

On October 9, 2014, Plaintiff Tamika Schmidt filed suit against Defendants PennyMac Loan Services, LLC, and Bank of America, NA in connection with the foreclosure of her residence. Specifically, Schmidt claimed that PennyMac violated Regulation X's continuity of contract requirements, 12 C.F.R. § 1024.40 promulgated by the Consumer Financial Protection Bureau and that Bank of America committed the state law tort of silent fraud. PennyMac removed the case to this Court citing federal question jurisdiction.

On January 12, 2015, each Defendant filed a motion to dismiss Schmidt's claim against them. On May 1, 2015, Magistrate Judge Patricia T. Morris issued a report recommending that Defendant PennyMac's motion to dismiss be granted because Regulation X did not provide a private right of action. And because the alleged violation of Regulation X was the sole basis for federal jurisdiction, Judge Morris recommended denying Defendant Bank of America's motion to dismiss the state law claim and remanding the claim to the Saginaw County Circuit Court.

Although Magistrate Judge Morris's report explicitly stated that the parties to this action may object to and seek review of the recommendation within fourteen days of service of the report, neither Plaintiff nor Defendants filed any objections. The election not to file objections to the Magistrate Judge's report releases the Court from its duty to independently review the record. Thomas v. Arn, 474 U.S. 140, 149, 106 S.Ct. 466, 88 L.Ed.2d 435 (1985). The failure to file objections to the report and recommendation waives any further right to appeal.

Accordingly, it is ORDERED that the magistrate judge's report and recommendation (ECF No. 19) is ADOPTED.

It is further ORDERED that Defendant PennyMac's motion to dismiss (ECF No. 8) is GRANTED.

It is further ORDERED that Defendant Bank of America's motion to dismiss (ECF No. 9) is DENIED WITHOUT PREJUDICE.

It is further ORDERED that this case is REMANDED to the Saginaw County Circuit Court.

MAGISTRATE JUDGE'S REPORT AND RECOMMENDATION

PATRICIA T. MORRIS, United States Magistrate Judge.

I. Recommendation

Before the Court are Defendants PennyMac's and Bank of America's motions to dismiss (Docs. 8, 9.) Plaintiff Tamika Schmidt has brought separate claims against each Defendant, originally filing the case in the Saginaw County Circuit Court. (Doc. at Pg. ID 9–12.) She alleges that PennyMac violated Regulation X's continuity of contact requirements, 12 C.F.R. § 1024.40, promulgated by the Consumer Financial Protection Bureau ("CFPB") under the Real Estate Settlement Procedures Act of 1974, ("RESPA") 12 U.S.C. § 2601 et seq., and that Bank of America committed the state law tort of silent fraud. (Doc. 1 at Pg ID 14–18.) PennyMac removed the case to this Court citing the federal question raised by Schmidt's Regulation X claim and the supplemental jurisdiction covering the state claim. (Id. at Pg ID 1–3.) The motions have been fully briefed and are ready for Report & Recommendation without oral argument. I suggest that Schmidt lacks a private cause of action to enforce the federal regulation and that her state law claim should be remanded. Therefore, I recommend GRANTING PennyMac's motion (Doc. 8), DENYING Bank of America's motion (Doc. 9), and remanding the remaining claim to Saginaw County Circuit Court.

II. Introduction

Schmidt's case arises from an agreement she entered with Executive Mortgage of Michigan LLC in May 2010 in which she executed a promissory note for $41,047 and mortgaged her real property located in Saginaw Michigan. (Doc. 1 at Pg ID 12–13; Doc. 9, Exs. A–B.) In October 2011, Executive Mortgage of Michigan assigned the mortgage to Bank of America. (Doc. 9, Ex. C.) A year later, Bank of America and Schmidt agreed to a Home Affordable Modification Trial Period Plan requiring Schmidt to make payments on the first of the month from December 2012 through February 2013. (Id., Exs. C–D.) The Plan stated that "Time is of the Essence" in making the payments (id., Ex. C (emphasis omitted)), and the accompanying cover letter informed Schmidt that she could pay by mail or telephone. (Id., Ex. D.)

Schmidt asserts that she made the first payment on time and that in February, with the deadline impending, she attempted to make her payment at the local Bank of America branch. (Doc. 1 at Pg. ID 13–14.) According to Schmidt, the bank teller could not find any modified payment plan "in their system and ... [would] not accept anything less than the full payment amount." (Id. at Pg ID 14.) The following day she mailed the modified payment to Bank of America, "but it was returned as being one ... day late." (Id. ) Negotiations with Bank of America proved fruitless and she was told her only options were reinstating the original loan or applying for another modification. (Id. ) By January 2014, Bank of America had assigned the mortgage to PennyMac (Doc. 9, Ex. F), and Schmidt began calling its loss mitigation department. (Doc. 1 at Pg ID 14.) She contends that from December 2013 to February 2014 she "made numerous attempts" to contact that department "but was transferred from person to person" and "could never get through to a contact at Pennymac [sic] that could provide her any information or options." (Id. ) The mortgage contained a power of sale clause (Doc. 9, Ex. B), that PennyMac used in February 2014 to foreclose on Schmidt's property and purchase it at the subsequent sheriff's sale. (Doc. 8, Ex. 1.) The statutory redemption period expired six months later in August, Mich. Comp. Laws § 600.3240, without Schmidt redeeming the mortgage, (Doc. 1 at Pg ID 14; Doc. 9 at 3), and thus the deed vested in PennyMac. Mich. Comp. Laws § 600.3236.

In October 2014, Schmidt brought suit in Saginaw County Circuit Court against Bank of America and PennyMac, alleging separate claims against each. (Doc. 1.) She claims that Bank of America committed silent fraud by failing to disclose that her loan modification payments would not be accepted at the branch office. (Id. at Pg ID 15.) The silence was reasonably misleading because Schmidt had made multiple payments at the office prior to the modification agreement, and she "acted in reliance on the misimpression created by Defendant" that she could continue doing so. (Id. ) As for Bank of America, she contends that it violated the Consumer Finance Protection Bureau's ("CFPB") Regulation X dealing with mortgage servicing, specifically 12 C.F.R. § 1024.40 requiring servicers to establish policies that will make personnel available by telephone to assist delinquent borrowers. (Doc. 1 at Pg ID 16–17.) During her attempts to discuss those options with PennyMac in late 2013 and early 2014, she asserts that she "was unable to ever speak to the same person twice." (Id. at Pg ID 17.) Instead, PennyMac "transferred [her] from department to department to people who were supposed to ‘help’ her, but [she] was never given answers to her very simply questions," and PennyMac never received return calls despite promises that someone would contact with answers. (Id. )

PennyMac was served with the complaint on November 17, 2014, and within thirty days removed the case to this Court under 28 U.S.C. § 1441. (Id. at Pg ID 1–4, Ex. A.) The basis for removal was the Court's original federal question jurisdiction, 28 U.S.C. § 1331, over Schmidt's Regulation X claim. (Id. at Pg ID 2–3.) The state law claim against Bank of America came within the Court's supplemental jurisdiction, according to PennyMac's removal notice. (Id. at 3.) Bank of America apparently did not give explicit consent to removal, as the notice indicates by stating that "upon information and belief, co-defendant Bank of America, N.A. would agree to removal." (Id. ) Bank of America never subsequently filed written consent to the removal as required by 28 U.S.C. § 1446(b).

III. Analysis

A. Motion to Dismiss Standards

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests the sufficiency of the complaint and will be granted if the plaintiffs have failed "to state a claim upon which relief can be granted...." "The court must construe the complaint in the light most favorable to the plaintiff, accept all the factual allegations as true, and determine whether the plaintiff can prove a set of facts in support of its claims that would entitle it to relief." Bovee v. Coopers & Lybrand C.P.A., 272 F.3d 356, 360 (6th Cir.2001). But the plaintiff must plead "enough facts to state a claim to relief that is plausible on its face," otherwise the complaint will be dismissed. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). The plausibility standard requires the plaintiff to "raise a right to relief above the speculative level on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Id. at 555, 127 S.Ct. 1955. (citations omitted). The complaint must include more than "labels and conclusions" and "formulaic recitation[s] of the elements of a cause of action...." Id.

Because the dismissal standard scrutinizes the pleadings, the Federal Rules limit courts' consideration of extraneous materials at this stage. Rule 12(d) provides the operative language: "If, on a motion under Rule 12(b)(6...