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Thomas v. Flagstar Bank, N.A.

United States District Court, W.D. Washington, Seattle

March 26, 2018



          Robert S. Lasnik, United States District Judge.

         This matter comes before the Court on “Green Tree Servicing LLC's Motions for Summary Judgment.” Dkt. # 38. The Court has considered the parties' filings, memoranda, and exhibits. For the following reasons, the motion is DENIED.

         I. BACKGROUND

         This lawsuit stems from a mortgage dispute between Michael Thomas and his loan servicer, Green Tree Servicing LLC (hereinafter “Green Tree”). Green Tree took over servicing Thomas's home loan in January 2014. The Federal Home Loan Mortgage Corporation (“Freddie Mac”) owned the loan, and Green Tree was its servicer. Servicers collect fees and other income for handling a loan's day-to-day account-maintenance activities like tracking balances and collecting payments. Servicers also handle defaulted loans and prosecute foreclosures. When Green Tree took over the loan, Mr. Thomas was in foreclosure mediation with his previous servicer. Mediation continued with Green Tree, and while it was underway the parties sought to modify the loan under the federal Home Affordable Modification Program (“HAMP”).

         HAMP is a program that the Secretary of the Treasury introduced in 2009 to encourage loan modifications for struggling homeowners and allow them to avoid foreclosure. HAMP's modification process proceeds in several steps. See Corvello v. Wells Fargo Bank, NA, 728 F.3d 878, 880 (9th Cir. 2013), as amended (Sep. 23, 2013). First, struggling borrowers submit loan and financial information to determine their eligibility. Once the servicer determines that a homeowner is eligible, it offers them a Trial Period Plan (“TPP”) agreement. The TPP agreement allows the homeowner to make reduced or modified payments while the parties work toward a permanent modification. To do so, the homeowner and servicer must verify that the homeowner satisfies the conditions for a permanently modified loan. For Freddie Mac loans, one of those conditions is ensuring the mortgage will retain first lien priority compared to any other liens against the property. 2 Freddie Mac, Single-Family Seller/Servicer Guide § B65.20(1)(b) (Jun. 24, 2014).[1]If the borrower satisfies all the relevant conditions, including making the trial payments, the parties execute a permanently modified loan.

         On August 6, 2014, Green Tree extended Mr. Thomas an offer to enter into a TPP agreement. The offer included the following language:

You must contact us . . . to indicate your intent to accept this offer no later than August 20, 2014. If you contact us by August 20, 2014 to indicate your intent to accept this offer, we will not refer your account to foreclosure or if your account has been referred to foreclosure, we will suspend the next legal action in the foreclosure proceedings.
However, if you do not respond by August 20, 2014, foreclosure proceedings may continue, and a foreclosure sale may occur, even if such sale is scheduled prior to the first payment due date set forth below. If a foreclosure sale occurs prior to your making your first payment and you failed to respond by August 20, 2014, this offer has been revoked.

         Dkt. # 39-2. (bold in original). Under the heading “To Accept This Offer, ” the letter stated Mr. Thomas should notify Green Tree of his intent to accept the offer and he should make his first TPP payment by September 1, 2014. Id.

         Mr. Thomas timely notified Green Tree that he intended to accept the offer and he started making payments, thus beginning the process of moving toward a permanently modified loan. The final foreclosure mediation was scheduled for January 21, 2015. The parties do not dispute that Mr. Thomas properly made, and Green Tree accepted, three TPP payments and two additional monthly payments before the final mediation session.

         On January 16, 2015, Green Tree received a report from First American Title showing three federal tax liens recorded against Mr. Thomas's home between 2009 and 2013. Those three liens were in the amounts of $6, 155.01 (recorded January 6, 2009), $594.51 (recorded February 6, 2009), and $98, 666.70 (recorded May 3, 2013). Green Tree had previously received reports with title information about the property. When the previous servicer transferred Mr. Thomas's loan to Green Tree, the transfer included a March 2013 title report that included information about the two 2009 liens. Dkt. # 42 at 17. A title report ordered sometime in October 2014 showed those two liens as well. Dkt. # 42 at 32.[2]

         At the final mediation session on January 21, Green Tree informed Mr. Thomas of the liens, and informed him that he was not eligible for a modification because the liens prevented Green Tree from obtaining title insurance. Dkt. # 38 at 8. Two days later, Green Tree notified Mr. Thomas that he was not eligible for a HAMP modification (or for any other modification) because “[Mr. Thomas's] account did not meet one or more of the basic eligibility criteria of the program.” Dkt. # 39-4.

         The parties dispute several items in the facts leading up to that denial. Importantly, the parties do not agree on when, or the extent to which, Green Tree knew of the property's title issues. They also ...

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