An Indiana borrower claimed her servicer initiated foreclosure action against her after failing to respond to notice of errors regarding a false default status on her home loan.
She also alleged the servicer violated TILA by breaching its duty to send interest rate and payment change notices, failing to promptly credit payments, failing to send periodic mortgage statements and breaching its duty to provide a timely payoff statement.
The servicer argued the RESPA claim was “rambling and repetitive,” but a judge disagreed.
The case is Freeman v. Ocwen Loan Servicing, LLC, and Bank of New York Mellon (U.S. District Court, S.D. Indiana, Indianapolis Division, No. 18-cv-03844).
Plaintiff Demona Freeman is the owner of Westfield, Ind. property. Defendant Ocwen acts as the agent of and loan servicer for the Bank of New York Mellon (BONY).
The facts
Ocwen obtained servicing rights from Litton Loan Servicing in 2011, when Freeman’s loan was in default. Freeman filed for bankruptcy to cure all pre-petition defaults on her home loan.
In 2017, Ocwen affirmed Freeman had completed all payments required under the Chapter 13 plan. Beginning in May 2017, Freeman began making timely and adequate monthly installment payments on the home loan to Ocwen, and the foreclosure case was dismissed.
However, in June 2018, Freeman obtained a copy of the life of loan mortgage transactional history for her home loan that revealed “a myriad of unexplainable and errant servicing conduct.”
For instance, Ocwen assessed fees and expenses during her bankruptcy, including $6,649.43 in escrow charges specifically disallowed in the bankruptcy case. In addition, Ocwen maintained a large surplus balance in suspense rather than applying the funds to principal, interest and escrow.
Ocwen failed to provide Freeman with notice of the shortage or explanation for the activities underpinning the negative escrow balances. By maintaining a negative escrow balance, Ocwen caused Freeman to incur fees, penalties, and interest that she would not have otherwise incurred.
Around April 26, 2017, despite the notice of cure declaring Freeman current and requiring her to begin making payments directly to Ocwen starting in May 2017, Ocwen rejected Freeman’s attempt to make a payment, telling her she was eight months behind on her payments. Around Dec. 19, 2017, despite never having missed a payment or made an inadequate payment during or following her bankruptcy case, Freeman received a call from Ocwen in which an Ocwen representative alleged she was nine months behind on her mortgage payments.
On May 30, 2018, Freeman received a 30-day pre-foreclosure notice letter from Ocwen.
Within 45 days of the conclusion of the bankruptcy case, Ocwen began making weekly collection calls to Freeman, asking how she intended to cure an alleged default status on her mortgage. During these phone calls, Freeman notified Ocwen’s representatives, or their supervisor, that she was current, had made adequate and timely monthly payments as required, and any alleged delinquency was an error. Ocwen’s telephone calls, and Freeman’s attempts to notify Ocwen of its error in treating her as if she was in default, continued until late May 2018.
On Oct. 29, 2018, Freeman sent a letter via counsel to Ocwen, providing notice of its errors (NOEs) for failing to accept payments as contractually obligated and failing to provide an accurate payoff statement. The NOEs letter also asked Ocwen to provide all documents it relied upon if it determined that no error had occurred. Ocwen took no action to reasonably investigate or correct the errors identified and the false default status of the loan.
She filed the lawsuit after the servicer took no action to investigate or correct the errors.
The servicer argued an investigation proved no error occurred.
Ocwen’s response to a second NOE contradicted the escrow documents it provided and the payment history it referenced.
After refusing to accept and apply payments, and despite Freeman’s attempts to notify Ocwen of its errors, Ocwen and BONY declared Freeman to be in default, and filed a second foreclosure case against Freeman.
Freeman alleged she remains in a wrongful and false default status under her loan, and that Ocwen’s conduct has caused her to suffer harm to her credit.
The ruling
Judge Tanya Walton Pratt allowed the RESPA claim against Ocwen to proceed.
Ocwen argued Freeman’s RESPA claim should be dismissed because she has requested $2,000 in statutory damages for each violation even though RESPA caps statutory damages at $2,000 total. Ocwen also claimed Freeman has not sufficiently alleged factual assertions to support a “pattern and practice” claim under RESPA.
“Freeman responds that her notices of errors and requests for information sent to Ocwen complied with RESPA, and Ocwen’s assertion to the contrary is inaccurate and based on a mischaracterization of the correspondence,” the judge wrote. “The notices and requests pertained to Ocwen’s improper servicing of Freeman’s home loan, and thus, are proper under RESPA. Freeman asserts that ongoing litigation does not invalidate her written requests sent to Ocwen for purposes of RESPA. And Ocwen’s characterization of the correspondence as an attempt by lawyers to manufacture RESPA claims is inaccurate and legally irrelevant. Freeman requested information and provided notice of errors, and this is sufficient to support a RESPA claim.”
The judge added that the plain language of RESPA provides for $2,000 statutory damages for each failure to comply with RESPA count.
Pratt also noted that many other suits have been brought by other borrowers against Ocwen for similar allegations, which sufficiently alleges a pattern and practice for RESPA purposes.
Meanwhile, BONY argued Freeman’s TILA claim against it should be dismissed because BONY is not a “creditor” as defined by TILA, and the statute’s assignee liability does not extend to the acts alleged by Freeman. The judge agreed.
“BONY argues that it is an assignee, not a creditor, and none of the alleged theories of liability state a cause of action based on ‘a violation apparent on the face of the disclosure statement’ as required for assignee liability under TILA,” she wrote. “Each of the alleged violations concern conduct by a servicer after assignment and do not concern the disclosure made by the originating creditor. Thus, the TILA claim against BONY must be dismissed.”