Sutton v. CitiMortgage, Inc., 16 Civ. 1778 (KPF)

• Court: United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
• Writing for the Court: KATHERINE POLK FAILLA, District Judge
• Citation: 228 F.Supp.3d 254
• Parties: Chantal SUTTON, Plaintiff, v. CITIMORTGAGE, INC., Defendant.
• Docket Number: 16 Civ. 1778 (KPF)
• Decision Date: 12 January 2017

228 F.Supp.3d 254

Chantal SUTTON, Plaintiff,
v.
CITIMORTGAGE, INC., Defendant.

16 Civ. 1778 (KPF)

United States District Court, S.D. New York.

Signed January 12, 2017

228 F.Supp.3d 256

Elizabeth Mary Lynch, Joseph Rebella, Christopher Anthony Fasano, MFY Legal Services, Inc., New York, NY, for Plaintiff.

Jennifer Marie Rosa, Mayer Brown LLP, New York, NY, Chad Matthew Clamage, Debra Bogo–Ernst, Mayer Brown LLP, Chicago, IL, for Defendant.

OPINION AND ORDER

KATHERINE POLK FAILLA, District Judge:

Like many Americans in the recent past, Plaintiff Chantal Sutton found herself unable to make her mortgage payments in 2012 and applied for a mortgage loan modification.

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In October 2013, she received a permanent modification, which lessened her monthly payments but left her with a balloon payment due at the mortgage's termination in March 2019. Dissatisfied with the modification, Plaintiff sent various written requests to her mortgage servicer, Defendant CitiMortgage, Inc.; dissatisfied with the responses to those requests, Plaintiff brought this action in March 2016, alleging violations of the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. §§ 2601 –2617, and its implementing regulations, known as Regulation X, 12 C.F.R. §§ 1024.1 –1024.41, as well as Section 349 of New York's General Business Law.

Defendant has moved to dismiss Plaintiff's First Amended Complaint (the "FAC") in its entirety. For the reasons set forth in the remainder of this Opinion, Plaintiff has failed to allege a viable claim under RESPA. Accordingly, the Court grants Defendant's motion to dismiss with respect to Plaintiff's RESPA claim, and declines to exercise jurisdiction over the pendent state-law claim.

BACKGROUND¹

A. Factual Background

1. The October 2013 Loan Modification

A substantial portion of Plaintiff's pleading concerns events that predate Defendant's putative RESPA violations; the significance of these earlier events is a point of contention between the parties. Plaintiff explains that she and her husband took out a 30–year mortgage to purchase their home in 2001, and refinanced that mortgage to reduce its length to 15 years in 2004. (FAC ¶¶ 19–21). The latter mortgage was, in turn, securitized by the mortgage lender. (Id. at ¶ 21). Plaintiff's communications regarding the mortgage have been with the mortgage servicer, rather than the mortgage lender; since at least 2012, the mortgage has been serviced by Defendant. (Id. at ¶¶ 22, 25).

Mr. Sutton's business began to falter in 2010, and no later than June 2012, the Suttons were unable to make their monthly mortgage payments. (FAC ¶¶ 26–27).²

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In consequence, Plaintiff applied for, and received, a permanent loan modification in October 2013. (Id. at ¶ 29; see alsoid. at ¶ 30 (noting that Defendant's correspondence recited that the modification was made pursuant to the Home Affordable Modification Program, or "HAMP")).³ As Plaintiff alleges, however, the application process was fraught because, contrary to her repeated requests, Defendant "amortized the modified loan over an extended term, but did not actually extend the term of the loan, creating a balloon payment due at the original maturity date." (Id. at ¶ 42). Concerned about the prospect of foreclosure of her family home, Plaintiff signed the permanent loan modification documentation on October 9, 2013. (Id. at ¶¶ 57–58 & Ltr. Ex. B).

2. Plaintiff's Post–Modification Requests and Defendant's Responses

Plaintiff observes that, at the time she entered into the permanent loan modification, there was no mechanism under HAMP or RESPA to appeal the terms of that modification. (See FAC ¶¶ 50–51). Having failed to obtain a term extension from Defendant before signing the modification paperwork—and experiencing a form of buyer's remorse over the balloon payment to which she had agreed—Plaintiff sought to obtain a term extension after the fact. Specifically, Plaintiff submitted at least three written letters seeking information concerning her account; the parties dispute whether these communications constitute "Qualified Written Requests" or other inquiries that would precipitate disclosure or correction obligations under RESPA.

a. The February 2014 Request

A mere six months after agreeing to the loan modification, in February 2014, Plaintiff submitted a letter to Defendant in which she (i) advised Defendant of her belief that her account was in error because Defendant had rejected her requests for a term extension and (ii) requested the identity of the owner of the mortgage. (FAC ¶ 62). Defendant responded on February 28, 2014, that the mortgage owner was SASCO (short for Structured Asset Securities Corporation), and that SASCO's guidelines prohibited Defendant from extending the term of Plaintiff's loan. (Id. at ¶ 63 & Ltr. Ex. C (noting that "[p]er [SASCO's] guidelines we cannot extend the maturity date on your loan. Any balloon amount or deferred amounts are due at the original maturity date. This private investor voluntarily participates in HAMP, but per their own guidelines.")).

b. The May 2014 Request

Plaintiff submitted a supplemental request for information in May 2014, seeking contact information for SASCO, as well as the specific language in the SASCO servicing agreement that governed the granting

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of extensions. (FAC ¶ 64). Defendant responded, at least in part, on May 29, 2014; it provided additional information, including contact information,⁴ for the mortgage owner; distinguished and delimited its obligations as servicer of the mortgage; and advised that a copy of Plaintiff's payment history would be sent under separate cover. (Id. at ¶ 65 & Ltr. Ex. D).⁵

c. The August 2014 Request

Plaintiff's third request for information was sent by her counsel on August 1, 2014. (FAC ¶ 70 & Ex. A). Counsel began by asserting that the letter was a "qualified written request" under RESPA, and that Plaintiff's account was in error because Defendant had "failed to grant [a] term extension in connection with her HAMP modification and, instead, wrongly asserted that its Servicing Agreement bars it from changing the maturity date of the loan." (FAC Ex. A at 1). Counsel then briefly restated Plaintiff's prior two written requests, before arguing in several paragraphs why Plaintiff believed that SASCO's servicing agreement with Defendant did not prohibit term extensions. (Id. at 1–3). The letter ended with Plaintiff's request that Defendant offer a new permanent modification that included a term extension. (Id. at 3).

Defendant responded by letter dated August 27, 2014. (FAC ¶ 71 & Ex. B). With respect to Plaintiff's request for a new modification, Defendant responded that it was "unable to alter agreed upon terms to a loan modification already in place once it's past our discretionary period," and that if Plaintiff believed she was "unable to afford the ... balloon payment, ... a new loan modification can be explored to determine if an alternative would be more suitable." (Id. Ex. B at 1). There is no indication in the FAC that Plaintiff took Defendant up on this offer.

B. Procedural History

Plaintiff filed her complaint in this matter on March 10, 2016. (Dkt. # 1). In broad summary, Plaintiff claimed that under RESPA, Defendant had obligations both to substantiate SASCO's refusal to extend the term of her mortgage and, ultimately, to extend that term. (FAC ¶¶ 76–86). Defendant's failures on both counts amounted to a RESPA violation for which Plaintiff suffered actual damages; separately, Plaintiff alleged that Defendant's conduct in responding to her 2014 submissions was part of a "pattern or practice of improper loan modification denials." (Id. at ¶¶ 87–90). Finally, Plaintiff alleged that Defendant's conduct amounted to a violation of N.Y. Gen. Bus. Law § 349, which prohibits consumer-oriented deceptive conduct. (Id. at ¶¶ 91–96).

In May 2016, Defendant announced its intention to file a motion to dismiss the complaint; Plaintiff responded to Defendant's pre-motion submission, and the Court held a conference on the matter on June 1, 2016. (Dkt. # 10, 13, 14; see also Dkt. # 20 (transcript of June 1, 2016 conference)). After the conference, Plaintiff filed a letter motion for leave to file an amended complaint on June 3, 2016; the Court endorsed the motion that day, and

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accepted the FAC for filing. (Dkt. # 18–19). Defendant filed its motion to dismiss on July 5, 2016 (Dkt. # 22–23); Plaintiff filed her opposition memorandum on August 4, 2016 (Dkt. # 24); and briefing was concluded with the submission of Defendant's reply brief on August 25, 2016 (Dkt. # 30).

DISCUSSION

A. Applicable Law

1. Motions to Dismiss Under Fed. R. Civ. P....