A Black borrower from Connecticut claimed her servicer allowed property inspectors to repeatedly harass her due to her race after she fell behind on her mortgage.
Paulette Davis sued the servicer, The Money Source Inc. (TMS), as well as inspecting companies ServiceLink Field Services, LLC (SLFS) and MMC Contracting Services Inc. (MMC), bringing claims under RESPA, in addition to alleged violations of the Fair Housing Act (FHA), trespass, negligent supervision of employees and the Connecticut Unfair Trade Practices Act.
TMS and SLFS filed motions to dismiss or, in the alternate, to stay the case until the state court foreclosure action was resolved.
The case is Paulette Davis v. The Money Source Inc. and ServiceLink Field Services, LLC and MMC Contracting Services Inc. (U.S. District Court, D. Connecticut, No. 21-CV-00047).
The facts
Davis is a resident of Waterbury, Conn. Prior to living in Waterbury, Davis was living in Bridgeport but wanted to move closer to her then-job. On the day she was to close on her new home in Waterbury, Davis was laid off. Davis decided to go through with the closing because she would lose her $5,000 deposit if she did not close.
However, Davis had trouble obtaining consistent income, was abandoned by her husband, and ultimately fell behind on her Federal Housing Administration-backed mortgage. During this time, she stayed in contact with TMS in hopes of obtaining a loan workout.
Shortly after Davis fell behind on her mortgage, TMS directed SLFS to send strangers to enter and inspect the property on its behalf. TMS paid SLFS an agreed-upon amount for each task and subsequently charged Davis for the amounts it paid to SLFS. In turn, SLFS contracted with MMC for an agreed-upon amount per task to conduct the inspections.
The Consumer Financial Protection Bureau (CFPB) issued a bulletin regarding mortgage servicers on Oct. 31, 2016. That bulletin obligated TMS to supervise “service providers,” like SLFS and MMC, and include in the contract with the service providers clear expectations about compliance, as well as enforceable consequences, internal controls and monitoring to ensure compliance. It also obligated TMS to take prompt action to address any problems identified through the monitoring process, including termination of the relationship where appropriate.
In early 2019, Davis was home alone when she saw a young man walking around outside her home. She rapped on the window and shouted to the man “you shouldn’t be doing that,” and the man scurried away. A month or two later, Davis saw another man on her property, peering through her windows. That man allegedly called her a racial epithet after telling her, “I don’t know why you’re here. Go back to Bridgeport.”
Davis said the man also pointed to the “No Trespassing” sign that was on the golf course just beyond her property line and stated the sign was there because the country club was concerned that she and her family would try to rob the golfers. Before the man left, Davis alleged he attempted to forcibly open her garage door and, in the process, broke it. Davis called TMS to complain. TMS confirmed it was sending inspectors to her property and stated it had to do so because she was behind on her mortgage payments. TMS allegedly refused to do anything differently.
A few months later, a different inspector entered Davis’s property and she confronted him. Davis asked if this individual intended to damage her property like the previous inspector. He responded that he did not blame the previous inspector because he may have thought that Davis was at the property stealing copper rather than living there, given the neighborhood and Davis’s complexion, according to the lawsuit.
The two previously mentioned inspectors, as well as others, continued to appear during the first part of each month for inspections. These people would often ignore Davis’s presence, and one gave her the middle finger. Davis contacted TMS many times to complain about strangers, as she was worried about them looking into her windows and scaring her grandson. Davis offered to set up regular appointments for the inspections, but TMS allegedly refused to accept the offer. In or around February 2020, Davis told TMS that she would call the police on any future intruder, and TMS advised her that such a call would only lead to her being arrested.
On or about June 1, 2020, another stranger drove up to Davis’s property and pointed something at her which she believed looked like a gun but turned out to be a camera.
Davis claimed in the suit that she is terrified and no longer feels safe in her own home. She lives in constant fear of having to confront another stranger on her property and worries that the situation will escalate to something more serious than a broken garage door.
Under the CARES Act, Davis was eligible to receive a forbearance because she had a federally-backed loan. She repeatedly requested a forbearance from TMS over the phone and in writing, but her request was denied each time. Three TMS employees told Davis over the phone that, even if she received a forbearance, she would have to make up any missed payments by making a lump sum payment at the end of the forbearance period. This information was incorrect, and such a requirement is prohibited by the FHA.
Davis also sent TMS a qualified written request (QWR) and notice of error (NOE) under RESPA on Sept. 4, 2020. In it, she specifically disputed the information the TMS employees had given her regarding a lump sum payment, and she reiterated her request for a forbearance pursuant to the CARES Act. TMS allegedly ignored Davis’s request for a forbearance, conducted no investigation, and did not provide any response regarding the erroneous information she had been given by TMS employees.
In the past three years, at least 11 borrowers have complained to the CFPB about poor servicing when they applied for a loan workout from TMS, five customers have complained since the implementation of the CARES Act about TMS’s failure to fulfill its obligations, and at least two others have brought claims against TMS based on its alleged failure to comply with its obligations under RESPA and Regulation X.
Davis now faces loss of the opportunity to keep her home, increased costs and fees, and potential foreclosure and eviction as a result of TMS’s refusal to grant her a forbearance.
The ruling
Judge Alvin Thompson denied the defendants’ motion to dismiss the RESPA allegations alleging TMS failed to properly respond to Davis’s complaints about property inspections and the QWR and NOE requests.
Davis alleged she sent TMS a QWR and NOE on Sept. 4, 2020, claiming she specifically disputed the information TMS employees gave her regarding lump sum repayment requirements, and reiterated her request for a forbearance pursuant to the CARES Act.
She also alleged her QWR concerned TMS’s ‘failure to provide accurate information to a borrower regarding loss mitigation options and foreclosure ...’ and ‘other error[s] relating to the servicing of a borrower’s mortgage loan.’ In addition, the borrower claimed, “TMS ignored her request for a forbearance – i.e., failed to correct its error – and conducted no investigation nor provided her with any response regarding the erroneous information that TMS had provided her and she had disputed.”
TMS argued Davis’s QWR did not identify any error with respect to the servicing of her loan as provided in 12 C.F.R. § 1024.35 (b) because she merely complained about TMS employees.
“RESPA defines the term ‘servicing’ as ‘receiving any scheduled periodic payments from a borrower pursuant to the terms of any loan and making the payments of principal and interest and such other payments with respect to the amounts received from the borrower as may be required pursuant to the terms of the loan,’” the judge noted in his opinion. “Davis’s qualified written request includes a complaint that TMS employees gave her incorrect information about the workout options available to her, and she requested a forbearance under the CARES Act. Thus, her request involved the servicing of her loan.”
The judge added Davis’ NOE explicitly requested a CARES Act forbearance, which is a loss mitigation option.
The CFPB’s April 3, 2020, Joint Statement on Supervisory and Enforcement Practices Regarding the Mortgage Servicing Rules in Response to the COVID-19 Emergency and the CARES Act stated, “Service providers must provide a CARES Act forbearance if the borrower makes this request and affirms that the borrower is experiencing a financial hardship during the COVID-19 emergency. Servicers may not require any additional information from the borrower before granting a CARES Act forbearance.”
The judge stated, “Because Davis had the option of requesting a CARES Act forbearance, requested the forbearance and advised TMS that the COVID-19 pandemic had adversely affected her income, TMS was required to grant that request and its failure to do so is remediable under RESPA, even though the CARES Act provides neither an express nor an implied right of action.
TMS also argued its letter to Davis referring to a “COVID-19 related special forbearance plan” of 90 days, followed by either a lump sum payment or [a enter a workout plan] was adequate.
“But, as the plaintiff explains in her opposition, it was not accurate,” the judge stated. “As the plaintiff alleges, the CARES Act contemplates that a forbearance period of up to 180 days, renewable for up to 360 days, will be offered. TMS contends that, in any event, it provided an adequate response to Davis’s request for information in her qualified written request. But, as explained by the plaintiff, while she did include a separate request for information in her qualified written request, TMS’s response to the request for information is not the subject of her RESPA claim nor even explicitly referenced in her complaint. Thus, the motions to dismiss are being denied with respect to the claim for a RESPA violation.”
Thompson also refused to dismiss the remaining claims except for one – the alleged FHA violation under Section 3604(c), which makes it unlawful for individuals “[t]o make, print, or publish, or cause to be made, printed, or published any notice, statement, or advertisement, with respect to the sale or rental of a dwelling that indicates any preference, limitation, or discrimination based on race ....”
Davis alleged the strangers sent by the three defendants to ‘inspect’ her home subjected her to discriminatory statements in violation of 42 U.S.C. § 3604(c), 3605, and 3617 by indicating a dispreference for Black residents like her in the city and neighborhood where she lives.
“TMS and SLFS argue that Davis fails to state a claim because § 3604(c) is only applicable to the sale or rental of a dwelling. They contend that this section is narrower than § 3604(b) because it does not include the clause ‘or in the provision of services or facilities in connection therewith.’ The court agrees,” the judge wrote in his opinion. “Here, the facts alleged show that the statements at issue were not made with respect to the sale or rental of a dwelling.”