Sonderegger v. Specialized Loan Servicing LLC

Decision Date13 January 2022
Docket Number4:20-cv-1026-MTS
CourtU.S. District Court — Eastern District of Missouri


The matter before the Court is several Defendants' Motions to Dismiss, Doc. [76]; Doc. [79]; Doc. [82]; Doc. [89], the Second Amended Complaint, Doc. [68]. For the reasons set forth below, the Motions are granted in part and denied in part.

I. Background[1]

Plaintiff Kevin Sonderegger, a pro-se plaintiff, filed this lawsuit asserting claims against eight[2] Defendants relating to allegedly unlawful loans made to Plaintiff regarding his two mortgages and subsequent misrepresentations regarding modifications to the two loans.

On March 30, 2007, Defendant First Franklin Financial Corp. (“First Franklin”) entered two loan transactions for the purchase of certain real property. These two loan transactions are the subject of Plaintiff's claims against Defendants. In connection with the loans, Plaintiff executed a promissory note (the “Note”) and secured the second loan by a deed of trust (“DOT”). The Note states that the late fee is $40.00 (with a monthly contracted payment for $314.99) and would be billed after 10 days of non-payment. The accompanying DOT states that the loan cannot violate applicable law; the DOT requires that if interest or charges collected violates applicable law, the servicer is required to refund the excess amount collected to the borrower or apply the excess to the principal balance of the loan. Plaintiff alleges that these fees and charges were illegal from the outset.

Plaintiff alleges that “sometime around October of 2009, ” Defendant Home Retention Services Inc. (“HRS”) mispresented itself as the home retention department of First Franklin and made several misrepresentations that induced him to stop paying his mortgage payments in order to qualify for a Home Affordable Modification Program (“HAMP”) loan modification for both loans.[3] After purportedly relying on these representations, Plaintiff stopped making payments on both loans and began submitting trial period payments from May 2010 to July 2010. Doc. [68] ¶¶ 31-32. After completing the necessary trial payments to qualify for the HAMP modification, Plaintiff received the paperwork to finalize the modifications. Upon review, Plaintiff learned that the trial payment was for the first loan only. The modification team “re-assured” Plaintiff everything was fine and told him that the second loan was “discharged and would either be forgiven or modified under a new program being released” for the second loan. Id. ¶ 33. Relying on additional misrepresentations, Plaintiff entered into a HAMP Agreement (the “Agreement”) with “First Franklin Loan Services” in August 2010. Id. ¶¶ 31-36. Plaintiff alleges that at all times the agent and entity rendering the loan modification advice represented themselves as the Home Modification Department of First Franklin, not HRS.

From February 2010 to August 2010, Plaintiff did not receive any monthly statements for either loan. On August 26, 2010, Plaintiff received a financial statement showing $1, 257.60 in additional charges representing title work and foreclosure fees. Plaintiff allegedly was never informed of these fees or that he would be liable for the foreclosure transactions that accrued from the advised default. Id. ¶ 36. Plaintiff attempted to contact “the home retention department of First Franklin, ” however they never replied and shortly afterward its phone number stopped operating. Id. ¶ 37. Plaintiff then attempted to contact First Franklin; however, Defendant Bank of America, N.A. (“BOA”)[4] answered the phone and stated First Franklin had gone out of business. Plaintiff alleges that HRS and First Franklin misrepresented the costs and fees for a HAMP modification and HRS misrepresented its intention and ability to modify the loans.[5]

On September 15, 2010, Plaintiff received letters informing him that both loans were transferring to BOA. BOA informed Plaintiff that the first loan was modified but that the second loan was never modified; the second loan was delinquent from December 2009 and had accrued late fees.[6] The new total principal balance was now $5, 000 above closing. Plaintiff told BOA that he was instructed to quit paying, and BOA completely denied any part in First Franklin's instructions. Concerned with the inconsistencies, Plaintiff checked his credit score and discovered it was at 460 and that his loan had been reported into default. Id. ¶ 41. Plaintiff repeatedly called BOA for months, and it allegedly continued to assert that the late fees were legitimate and that nothing could be done to correct the credit score. Id. ¶ 41-44. BOA told Plaintiff that it could not assist with the second loan modification or late fees as First Franklin (and not BOA) was the servicer at that time. Instead of assisting, Plaintiff alleges BOA demanded that he pay the past due amounts on the second loan and denied liability for the second loan being in default due to First Franklin's instructions. Plaintiff alleges that in reality, BOA “had the ability and knowledge to remedy the Plaintiff[']s loan at any moment in a responsible manner” as it was the successors-in-interest to and the alter ego of First Franklin during the time in question. Id. ¶¶ 66-69, 156. Specifically, in January 2009, BOA allegedly acquired Defendant Merrill Lynch, Pierce, Fenner & Smith, Inc. (Merrill Lynch) and all of Merrill Lynch's operating subsidiaries and affiliates, which included First Franklin. Id. Thus, BOA and Merrill Lynch allegedly had the “ability and knowledge to remedy Plaintiff's loan at any moment in a responsible manner however it simply was not in their long term financial interest to do so . . .” Id. ¶ 156. Plaintiff alleges BOA and Merrill Lynch intentionally concealed their wrongdoing by “brushing all of their illegal and negligent conduct around the name of First Franklin and have made an attempt to move into the future with zero accountability for the damages they caused while retaining liens to reap full reward.” Id. ¶ 154.

Plaintiff alleges BOA offered to assist with a new modification application for the second loan. Plaintiff alleges BOA accepted the application, promised the modification was imminent, then informed him that his application was incomplete, and had him re-apply again. Without ever completing the modification for the second loan, BOA transferred servicing of the second loan to Defendant Carrington Mortgage Services, LLC (“Carrington”) in June 2011. At the time Carrington took over, the balance due on unpaid interest and late fees was now $7, 000. Id. ¶ 46. Plaintiff continued to reach out to BOA regarding the loan modification and late charges, but BOA allegedly refused to assist since the loan was now being serviced by Carrington and that the two were not affiliated. Plaintiff alleges that BOA was actually the “Master Servicer” of the entire trust. Id. ¶¶ 104-105. Plaintiff alleges BOA “concealed [its] role as [it] would continue to move loans into vendors that were not official servicers while telling borrowers that [it was] not able to assist as [it] no longer had ‘servicing” rights.'” Id. ¶ 156.[7] Also, BOA and Merrill Lynch allegedly worked with third party companies, allowing them to “conceal their identity and drive loans into default in order to contrive greater funding from the government sponsored modifications with no regard to the damage that it caused borrowers.” Id. ¶ 155.

In December 2014, Carrington transferred servicing of the second loan to Defendant Specialized Loan Servicing, LLC (“SLS”) and Defendant U.S. Bank National Association, as Trustee for First Franklin Mortgage Loan Trust, Mortgage Loan Asset-Backed Certificates, Series 2007-FFC (US Bank”) was listed as the creditor. SLS remains the current servicer on the second loan. Plaintiff repeated his request to SLS for a modification and “continued to be dismissed.” Doc. [78] ¶ 52. Plaintiff also tried calling U.S. Bank for “months.” attempting to “uncover the status of the loan and found no information and received no response.” Id. ¶ 53. As of July of 2015, Plaintiff realized that the parties he was attempting to communicate were never going to honor the promises of modification and remedy, yet [] Plaintiff had no means of identifying the parties responsible.” Id. From 2016 to 2018, Plaintiff continued to seek answers, and used every attempt to find the original creditor and successors of interests on the second loan to find who was responsible for the misrepresentations (ie: the failed modification and charges), but Plaintiff continued to be stonewalled. Id. ¶¶ 54-57. Plaintiff also alleges he asked SLS and U.S. Bank to review the terms and conditions of the second loan's Note and DOT, and that they never informed him of any violations, failed to investigate as requested by Plaintiff, and never refunded or adjusted the balance based on the alleged illegal fees charged. Despite Plaintiff's protestations that the loan amount is illegitimate, SLS sent Plaintiff a letter of Notice of Default and Notice of Intent to Foreclose on July 2, 2019. Plaintiff alleges that Defendants ignored the fee violations in order to force a foreclosure and redeem an illegal mortgage for full profit. Plaintiff alleges that since the July 2019 letter, SLS has also charged other improper fees of its own, at least six times. Plaintiff alleges he did not discover the existence of HRS until 2019.

In November 2019, Plaintiff filed his initial complaint against SLS. Doc. [6]. On June 30, 2020, Plaintiff filed his Second Amended Complaint (“Complaint”) naming...

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