Self v. Nationstar Mortg. LLC, 2:19-CV-3-D

CourtUnited States District Courts. 4th Circuit. Eastern District of North Carolina
Decision Date26 September 2019
Docket NumberNo. 2:19-CV-3-D,2:19-CV-3-D
PartiesJAMES H. SELF, and CAROLINE J. SELF, Plaintiffs, v. NATIONSTAR MORTGAGE LLC, d/b/a Mr. Cooper, et al., Defendants.

JAMES H. SELF, and CAROLINE J. SELF, Plaintiffs,
NATIONSTAR MORTGAGE LLC, d/b/a Mr. Cooper, et al., Defendants.

No. 2:19-CV-3-D


September 26, 2019


On November 19, 2018, James H. Self and Caroline J. Self ("the Selfs" or "plaintiffs") filed a complaint in Pasquotank County Superior Court against Nationstar Mortgage LLC, d/b/a Mr. Cooper ("Nationstar"), Wilmington Savings Fund Society ("FSB"), and U.S. Bank National Association ("U.S. Bank"; collectively, "defendants") [D.E. 1-1]. Plaintiffs allege breach of contract, defamation, and violations of the North Carolina Debt Collection Act ("NCDCA"), N.C. Gen. Stat. § 75-50 et seq., the North Carolina Unfair and Deceptive Trade Practices Act ("UDTPA"), N.C. Gen. Stat. § 75-1.1 et seq., the North Carolina Mortgage Debt Collection and Servicing Act ("MDCSA"), N.C. Gen. Stat. § 45-90 et seq., the Real Estate Settlement Procedures Act ("RESPA"), 12 C.F.R. §§ 1024.35, 1024.36, the Truth in Lending Act ("TILA"), 12 C.F.R. §§ 1026.41, 1026.36, and the Telephone Consumer Protection Act ("TCPA"), 47 U.S.C. § 227. See id. Plaintiffs seek a declaratory judgment, restraining order, and permanent injunction. See id.

On January 11, 2019, defendants removed the action to this court [D.E. 1]. On February 18, 2019, defendants moved to dismiss plaintiffs' complaint [D.E. 15] and filed a memorandum in support [D.E. 16]. See Fed. R. Civ. P. 12(b)(6). On April 5, 2019, plaintiffs responded in opposition

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[D.E. 21]. As explained below, the court grants in part and denies in part defendants' motion to dismiss and dismisses FSB and U.S. Bank as defendants.


The Selfs live at 664 Old Herford Highway, Elizabeth City, North Carolina (the "Property"). See Compl. [D.E. 1-1] ¶ 7. Nationstar is a loan servicer. See id. ¶¶ 8-9.

On April 21, 1997, the Selfs executed a note in favor of American General Finance ("American General"), Nationstar's predecessor-in-interest, with a principal amount of $36,000 and an interest rate of 12.18% ("the April 1997 Note"). See id. ¶¶ 26, 35. Under the terms of the April 1997 Note, the Selfs agreed to pay $519.89 on June 1, 1997, and $436.24 monthly for the following 179 months. See id. ¶ 26. The Selfs secured the April 1997 Note with a deed of trust, which gave American General a lien on the Property. See id. ¶ 27; Ex. C [D.E. 1-1] 3. The April 1997 Note and its deed of trust are no longer in effect Cf. Compl. [D.E. 1-1] ¶ 31.

On October 20, 1997, the Selfs refinanced the April 1997 Note. See id. ¶ 28; Ex. B [D.E. 1-1]. This note ("the October 1997 Note") had a principal amount of $46,466.80 and an interest rate of 12.03% annually. See Compl. [D.E. 1-1] ¶ 28. Under the terms of the October 1997 Note, the Selfs agreed to pay $619.80 on December 1, 1997, and $512.65 payments until November 1, 2017 ("the Maturity Date"). See Ex. B [D.E. 1-1] 1. The Selfs also secured the October 1997 Note with a deed of trust. See Compl. [D.E. 1-1] ¶ 30; Ex. C [D.E. 1-1] 3.

On October 1, 2002, the Selfs filed a voluntary petition for relief under Chapter 13 of the Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of North Carolina ("the Bankruptcy Court"). See Compl. [D.E. 1-1] ¶¶ 23, 34; Ex. A [D.E. 1-1]; Ex. D [D.E. 1-1]. American General, as a secured creditor, filed two secured claims arising from the October 1997 Note: (1) Claim #33 for $43,615.17 (i.e., the outstanding balance of the October 1997 Note); and

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(2) Claim #34 for $1,025.30 (i.e., prepetition arrearage). See Compl. [D.E. 1-1] ¶¶ 36, 40. On December 11, 2002, the Bankruptcy Court confirmed the Selfs' bankruptcy plan. See id. ¶ 43. Under the plan's terms, the Selfs would send the trustee $26,400.00 over 12 monthly installments of $800.00 and, consecutively, 24 monthly installments of $700.00. See id. ¶ 44; Ex. H [D.E. 1-1] 1. The plan also stated that the Selfs would make monthly installments to service the October 1997 Note under Claim #33 outside of the plan directly to American General, and that the trustee would pay the prepetition arrearage under Claim #34 as part of the plan itself. See Compl. [D.E. 1-1] ¶ 45; Ex. [D.E. 1-1]. Over the course of the plan, American General received $2050.60 for the prepetition arrearage. See Compl. [D.E. 1-1] ¶ 48; Ex. J [D.E. 1-1] 2.

On October 21, 2005, the Selfs completed all payments required under the plan and the Bankruptcy Court entered an order of discharge under section 1328(a). See Compl. [D.E. 1-1] ¶ 49; Ex. K [D.E. 1-1]. The order "discharged [the Selfs] from all debts provided for by the plan" and prohibited creditors "from attempting to collect any debt that has been discharged in this case." Ex. K [D.E. 1-1]; see Compl. [D.E. 1-1] ¶¶ 50-51. The Bankruptcy court then discharged the trustee and closed the case. See Compl. [D.E. 1-1] ¶ 53.

On October 9, 2015, Nationstar notified the Selfs that it was now their loan servicer. See Compl. [D.E. 1-1] ¶ 54; Ex. L [D.E. 1-1].1 In Nationstar's notice, it stated that the Selfs owed $1,025.30, which represented the prepetition arrearage amount that the Bankruptcy Court had discharged in October 2005. See Compl. [D.E. 1-1] ¶ 55; Ex. L [D.E. 1-1] 1. On June 3, 2017, Nationstar notified the Selfs that the loan would mature on November 1, 2017, and that the Selfs

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must pay the outstanding amount on or before that date. See Compl. [D.E. 1-1] ¶ 58; Ex. N [D.E. 1-2]. The Selfs spoke with a Nationstar agent, who "informed them . . . that the outstanding balance owed on the Loan, as of the Maturity Date, exceeded $10,000.00." Compl. [D.E. 1-1] ¶ 61. Over the following months, Nationstar sent the Selfs more notices stating that the outstanding balance on the loan exceeded $10,000.00. See id. ¶¶ 64-66, 69; Ex. O [D.E. 1-2]; Ex. P [D.E. 1-2]; Ex. Q [D.E. 1-2]. Nationstar also stated that there was "an escrow advance and disbursement" for payment of applicable county taxes "in the amount of either $523.61 or $520.99." Compl. [D.E. 1-1] ¶ 69. The Selfs allege that they paid all the monthly installments required under the October 1997 Note. See id. ¶ 57. The Selfs also allege that they never agreed to an escrow advance and that, in any event, they paid the taxes on the Property themselves. See id. ¶¶ 70-71.

In October 2017, Nationstar sent the Selfs two transaction histories at the Selfs' request. See Compl. [D.E. 1-1] ¶ 73. The first transaction history detailed the Selfs' payments to American General from October 1997 to October 1, 2014, and the second transaction history detailed the Selfs' payments to American General from October 7, 2014, to October 2, 2017. See id. ¶¶ 74-75; Ex. R [D.E. 1-2]; Ex. S [D.E. 1-2]. The Selfs allege that Nationstar did not properly credit loan payments on these histories, thereby attempting to collect a debt that Nationstar is not entitled to collect. See Compl. [D.E. 1-1] ¶¶ 76-77.

On November 1, 2017, the Selfs tried to make their final payment under the October 1997 Note, but Nationstar rejected the payment without explanation. See id. ¶ 78. Nationstar also terminated the Selfs' online account access, which prevented them from making payments online. See id. ¶ 80. On November 7, 2017, Nationstar notified the Selfs that the total outstanding balance was $11,094.67, of which $10,336.57 was unpaid principal and $204.49 was accrued interest. See id. ¶ 82; Ex. V [D.E. 1-2]. Nationstar also repeated its representations concerning the escrow

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advance and disbursement for payment of county taxes. See Compl. [D.E. 1-1] ¶ 84.

On December 5, 2017, the Selfs sent a Qualified Written Request ("QWR") to Nationstar. See id. ¶ 90; Ex. X [D.E. 1-2]. On December 12, 2017, Nationstar notified the Selfs' counsel that it knew they represented the Selfs. See Compl. [D.E. 1-1] ¶ 92; Ex. Z [D.E. 1-2]. On December 18, 2017, however, Nationstar notified the Selfs that the total outstanding balance was $11,200.33. See Compl. [D.E. 1-1] ¶ 94; Ex. AA [D.E. 1-2] 1. Nationstar also responded to the QWR, provided some documents, and stated that Nationstar's servicing of the loan complied with state and federal law. See Compl. [D.E. 1-1] ¶¶ 101-05; Ex. CC [D.E. 1-2] 5. The Selfs allege that Nationstar's response omitted requested documents and did not properly justify Nationstar's determination of its own compliance. See Compl. [D.E. 1-1] ¶¶ 105-10. In Nationstar's QWR response, it asserted that the omitted documents were confidential. See id. ¶ 109.

On January 16, 2018, the substitute trustee notified the Selfs, through counsel, that they were in default on the loan and that their Property would be foreclosed unless the Selfs disputed the debt within 30 days. See id. ¶¶ 112-13; Ex. EE [D.E. 1-2]; Ex. FF [D.E. 1-2]. The substitute trustee also stated that the outstanding balance, as of January 16, 2018, was $11,269.81. See Compl. [D.E. 1-1] ¶ 113. On February 9, 2018, the Selfs sent a dispute letter to the substitute trustee. See id. ¶ 115; Ex. GG [D.E. 1-2]. On February 21, 2018, Nationstar responded to the Selfs' dispute letter, provided more documents but withheld others it deemed confidential or irrelevant, and again stated that its servicing of the Selfs' loan complied with all federal and state "guidelines." See Compl. [D.E. 1-1] ¶ 119; Ex. II [D.E. 1-2] 1-3.

On March 6, 2018, the Selfs sent a Notice of Error ("NOE") stating that Nationstar had not properly credited loan payments and had improperly charged other fees. See Compl. [D.E. 1-1] ¶¶ 124-27; Ex. JJ [D.E. 1-2]. On March 23, 2018, Nationstar responded and stated that most payments

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were applied to interest, not to principal. See id. ¶ 134; Ex. LL [D.E. 1-2] 2. On April 13, 2018, Nationstar notified the Selfs that the outstanding balance was $11,703.55. See Compl. [D.E. 1-1] ¶¶ 137-39; Ex. MM [D.E. 1-2].

On April 13, 2018, the substitute trustee commenced foreclosure proceedings on the Property in Pasquotank...

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