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Diffley v. Nationstar Mortgage, LLC

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

April 11, 2018

NATIONSTAR MORTGAGE, LLC, et al., Defendants.




         This matter comes before the Court on Defendants' Nationstar Mortgage, LLC (“Nationstar”) and Wells Fargo Bank, N.A. (“Wells Fargo”) Motion to Dismiss Plaintiff's First Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). Dkt. #24. Defendants seek dismissal of all claims against them with prejudice with respect to alleged violations of the Real Estate Settlement Procedures Act (“RESPA”), Washington State's Consumer Protection Act (“CPA”), and negligence under Washington State law. Id. Plaintiff opposes the motion. Dkt. #26. For reasons discussed herein, this Court GRANTS IN PART and DENIES IN PART Defendants' motion.


         On September 11, 2017, Plaintiff filed a ten-count Complaint against Defendants Nationstar, Wells Fargo, and Quality Loan Service (“QLS”). Dkt. #1. On October 16, 2017, Defendants Nationstar and Wells Fargo filed a Motion to Dismiss. Dkt. #11. On October 27, 2017, Defendant QLS joined that Motion.

         On December 6, 2017, this Court issued an Order, granting in part and denying in part Defendants Nationstar and Wells Fargo's Motion to Dismiss; denying QLS's Motion; and granting Plaintiff leave to amend his Complaint. Dkt. #22. Specifically, the Court dismissed in part Count 1, dismissed Counts 2, 5, 7, and 9 with leave to amend, and dismissed Counts 3, 4, and 6, with prejudice. Dkt. #22.

         On December 20, 2017, Plaintiff filed a First Amended Complaint (“FAC”). Dkt. #23. Plaintiff alleges the following factual background to his amended claims:

10. The Loan was originated by First Independent Mortgage Company, which is now defunct. It was serviced by BAC Home Loans, Bank of America, and then Specialized Loan Servicing (“SLS”). As of the present, the servicing of the Loan is with Nationstar. The Loan is a subprime, high interest, adjustable rate loan.
11. Acting as agent of Nationstar, QLS issued a Notice of Default to Plaintiff by posting it at the Property and mailing it via certified mail (“Second NOD”) (Exhibit A, NOD issued by QLS). In this document, Nationstar declared that Wells Fargo, acting as trustee, is “the owner of the Note secured by the Deed of Trust.” However, QLS failed to furnish Plaintiff with a copy of the signed Note or the Deed of Trust referenced in the Second NOD. Other than the naked disclosure by Nationstar and QLS regarding the ownership of the Note, none of the named defendants has provided any documentary support that Plaintiff's Loan was in fact included in the Identified Securitized Trust, or that the Identified Securitized Trust actually owns the Note, or that Wells Fargo, or Nationstar, is the holder of the Note, or that Wells Fargo is the beneficiary under the Deed of Trust that Plaintiff executed at closing.
12. In fact, when Bank of America serviced the Loan in 2009, its foreclosing agent, Recontrust Company, previously issued another Notice of Default to Plaintiff (“First NOD”). Said Notice of Default made no mentioned of Wells Fargo or the Identified Securitized Trust's involvement. Rather, Plaintiff was informed by Bank of America/ReconTrust that “The creditor to whom the debt is owed: MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.” The serial loan servicers and inconsistent representations about who the lender, creditor, owner, and the lack of disclosure of who the note holder is all contribute to Plaintiff's feeling of frustration and insecurity about the entity he must talk to rein in his mortgage Loan (Exhibit B, First NOD).
13. In actuality, Plaintiff had no dealing whatsoever with either Wells Fargo, as trustee of the Identified Securitized Trust, the Identified Securitized Trust itself, or Mortgage Electronic Registration Systems, Inc. (“MERS”). He had never received a single phone call or written communication from any of these entities. To the best of his knowledge, the monies used to fund the Loan at closing did not come from Wells Fargo, MERS, the Identified Securitized Trust, or Nationstar.
14. For several years, Plaintiff tried desperately to obtain a loan modification with the prior loan servicer, Bank of America and Specialized Loan Servicing, to no avail. After Nationstar allegedly took over the servicing of the Loan, Plaintiff continued to seek a loan modification. All in all, Plaintiff has submitted approximately ten (10) application packages for loss mitigation, each time investing days gathering and updating financial information and documentation, and paying the costs for mailing, faxing, and shipping the information overnight.
15. Nationstar, like the previous servicers, continues to solicit Plaintiff to apply for loan modification and other loss mitigation options (Exhibit C, Composite of Nationstar's letters to Plaintiff regarding loss mitigation). Nationstar told Plaintiff that it has a “Foreclosure Prevention Department, ” dedicated to help struggling homeowners like Plaintiff. Nationstar uses impassioned language in its written inducement for Plaintiff to engage in loss mitigation including, including phrases like “To keep your account up to date, it would be very helpful if we could talk and explore your options, ” “We know the importance of homeownership and appreciate the opportunity to help you.” In July of 2017, Plaintiff was informed in writing that Nationstar has “partnered” with Urban League of Metropolitan Seattle to help Plaintiff “find solutions that could help avoid foreclosure, stay in your home, and continue to enjoy the benefits of homeownership.”
16. Ironically, during the same period of time during which Plaintiff actively responded to the described written solicitation and sought assistance from Nationstar to keep his home, Nationstar instructed QLS to advance nonjudicial foreclosure against him and the Property. To foreclose, QLS utilized a Foreclosure Loss Mitigation Form/Declaration Pursuant to RCW 61.24.031. In this document, Nationstar's Document Execution Specialist Chane Davis certifies under penalty of perjury that Nationstar “has exercised due diligence to contact the borrower as required in RCW 61.24.031(5) and the borrower did not respond.” (Exhibit D, Foreclosure Loss Mitigation Form). Nationstar's Declaration is simply not true in that Plaintiff has never stopped trying to obtain loss mitigation, regardless of who the loan servicer is.
17. In the process of servicing the Loan, Nationstar has imposed certain property inspection and property preservation fees onto the Loan. In his full-time occupancy of the Property during the relevant time period, Plaintiff had never witnessed any event of property inspection or property preservation. He was never given any notice that such services were occurring or that the fees for such services would be paid by Nationstar and then charged to the Loan. When Plaintiff asked for documentation in support of the necessity for such services and Nationstar's proof of payments for such services, Nationstar has been nonresponsive.
18. Nationstar's practice of imposing property inspection and property preservation upon properties which are occupied by consumers has been called into question in a class action lawsuit in Washington.2 Property inspection and preservation is the code word for Nationstar's invasion of homes which are continued to be occupied by consumers in violation of law is a pattern or business practice of Nationstar carried out in the State of Washington and beyond.
19. In the process of servicing the Loan, Nationstar has imposed approximately $6, 795.27 in “Legal Fees” without any explanations for how and when these legal fees were incurred. When Plaintiff inquired about the nature, extent, and invoices for the legal fees incurred, Nationstar refused to respond to his specific inquiry.
20. QLS and Nationstar have provided Plaintiff with certain “Payoff Quote” and Periodic Statements that represent inconsistent numbers which prevents Plaintiff from knowing the true balance of what is due and owing on the Loan in order to (1) payoff the Loan, or (2) exercise his loss mitigation options.
21. QLS issued a Payoff Quote dated August 10, 2017, announcing that it would require $907, 881.78 to pay off the Loan. Nationstar issued a Periodic Statement dated August 18, 2017, representing a total payoff of $924, 160.00 (Interest Bearing Principal Balance $571, 345.15 plus Total Amount Due $352, 814.85) (Exhibit E, Comparison of QLS Payoff dated August 10, 2017, Nationstar Mortgage Loan Periodic Statement dated August 18, 2017, and Nationstar Mortgage Payoff Statement dated August 18, 2017). There are discrepancies between the itemized amounts in the Payoff Quote and August Periodic Statement. In between the time that QLS issued the Payoff Quote, and Nationstar issued the August Periodic Statement-a mere eight days-the amount required to cure or to pay off the Loan increased by approximately $16, 278.22.22. Within the Periodic Statements dated July and August of 2017, Nationstar has charged Plaintiff “Legal Fees” in the total amount of $6, 795.27 even though no “legal” event has occurred, and fees related to nonjudicial foreclosure had already been included in the total amount due and owing by Nationstar. Meanwhile, the Payoff Quote issued by QLS in August of 2017 omits this substantial amount for Legal Fees (Exhibit F, Comparison of QLS Payoff Quote dated August 10, 2017, Nationstar Mortgage Loan Periodic Statement dated July 18, 2017, Nationstar Mortgage Loan Periodic Statement dated August 18, 2017, and Nationstar Mortgage Payoff Statement dated August 18, 2017).

23. Being unable to understand the defendants' blatant inaccurate accounting, Plaintiff issued a Request for Information (“RFI”) and Notice of Error (“NOE”) to Nationstar, pursuant to Regulation X, RESPA, dated August 11, 2017, inquiring specifically about any property inspection or property preservation that Nationstar had imposed on the Loan. In the RFI and NOE, Plaintiff specifically referenced the Periodic Statement sent by Nationstar which represents $923.50 in property inspection or preservation fees and requested the invoices backing the charges. Not until September 13, 2017, did Plaintiff receive a response from Nationstar, which is dated for August 21, 2017. The response however declines to provide Plaintiff with the specific information requested, stating “Some information you have requested does not pertain directly to the servicing of the loan, does not identify any specific servicing errors, and/or considered proprietary and confidential. Therefore, this information is considered outside the scope of information that must be provided.”

24. In the same RFI and NOE, Plaintiff requested invoices supporting Nationstar's imposition of fees relating to a “prior foreclosure sale.” Nationstar has refused to provide the information that Plaintiff specifically requested (Exhibit G, RFI, NOE sent by Diffley).

25. Being extremely worried about the impending nonjudicial foreclosure, and the various impermissible and suspect fees and charges, Plaintiff was compelled to hire the undersigned law firm to assist him. On August 25, 2017, plaintiff counsel wrote to Nationstar advising legal representation and requesting the “Opportunity to Meet and Confer” pursuant to the Washington Foreclosure Fairness Act (Exhibit H, Barraza Letter 08/25/2017). Even though Nationstar has set a nonjudicial foreclosure sale date of September 29, 2017, Nationstar refused to grant Plaintiff's request to meet and confer.

26. On September 1, 2017, staff from plaintiff counsel's office contacted Nationstar to inquire about the reason(s) for the Legal Fees imposed and was told that this was an “old item” and that Nationstar had taken the fees and depleted the Loan's “suspense account.” Given these various discrepancies, Plaintiff, through his counsel, asked Nationstar to postpone the nonjudicial foreclosure sale for further investigation. Nationstar's employee, Sandra, #956694, responded that Nationstar is not willing to do so.

27. Plaintiff submitted yet another application for assistance from Nationstar to keep his home. He received confirmation that Nationstar received his Request for Mortgage Assistance via fax (Exhibit I, Fax Confirmation of RMA).

28. Plaintiff counsel issued to Nationstar and QLS a letter via email detailing the discrepancies in the amount to cure the default and to reinstate the Loan and urging both defendants to continue the nonjudicial foreclosure sale for further investigation (Exhibit J, Barraza Letter dated September 5, 2017).

29. Within the years of 2016 and 2017, Plaintiff made dozens of calls to Nationstar's customer service line in order to get a handle on his Loan Account. Plaintiff has spent hours composing letters and requests and compiling supporting documents for these letters and requests to be sent to Nationstar in his relentless effort to obtain a full accounting of the Loan and to correct the errors committed by Nationstar to no avail. Despite his numerous attempts including the most recent contact with Nationstar through his counsel, Nationstar continues to ignore Plaintiff's requests and maintains that it is still trying to get a hold of Plaintiff for purpose of loss mitigation.

30. The amount of time that has taken Plaintiff to obtain a full accounting of the Loan is time that Plaintiff could have and would have devoted to his business whereupon he would earn a good income. The experience Plaintiff has with Nationstar has rendered him angry, frustrated, and despondent. Plaintiff has developed certain physical ailments or adverse conditions which coincide with the contacts he has made with Nationstar concerning his Loan account and his effort to obtain a loan modification.

31. Plaintiff has incurred expenses in trying to get Nationstar to respond to his requests concerning his Loan Account Status and Application for Loss Mitigation. These include office supply, copy and fax charges, delivery and mailing costs, mileage and parking. Plaintiff has also incurred attorney fees as he needed to consult with one or more lawyers about the Loan and what Nationstar has done.

32. Upon information and belief, in onboarding the Loan, Nationstar put the Loan and Plaintiff's information into its electronic database or system of record without verifying the accuracy of the information as maintained by the prior servicer whatsoever. By Nationstar's admission, the company charged the Loan with “old items” which were maintained in a non-existent suspense account. Thus, it is clear that where the data transferred by SLS has errors or inaccuracies, Nationstar has imported the errors or inaccuracies into its system without verifying or correcting them.

33. Acting in the capacity of an agent of Nationstar, and having access to the Loan's status, QLS has actual or constructive knowledge of Plaintiff's Loan based on numerous attempts he has made to ascertain the payoff information, to correct the inconsistencies in the numbers represented by Nationstar and QLS, and his continuing effort to seek loss mitigation. The fact that QLS issued the Payoff Quote and other figures to Plaintiff that are inconsistent with what Nationstar has conveyed in the same time period, including the omission of $6, 795.27 in Legal Fees, is evidence that QLS does not conduct even the most cursory task of verifying and updating the amount that Plaintiff needs to reinstate the Loan and prevent the foreclosure sale of his home.

34. Even though QLS has actual or constructive knowledge of Plaintiff's efforts to obtain loss mitigation, it continues to advance the nonjudicial foreclosure. The process by which Nationstar and QLS pursue foreclosure while pretending to engage in loss mitigation is known as “dual-tracking.” Dual-tracking is specifically prohibited under the Dodd-Frank Amendment as well as under the laws of several states. QLS' failure to verify and update payoff information or reinstatement amount before conveying such information to consumers, and QLS' participation in dual-tracking, is a pattern or business practice, meaning that other consumers have been harmed, or potentially will be harmed, in the same manner that QLS has harmed Plaintiff in this case.

Dkt. #23 at ¶ ¶ 10-34 (citations omitted; bold in original).

         Plaintiff now brings amended claims against Defendants Nationstar and Wells Fargo for violations of RESPA and Regulation X, violations of Washington's CPA, and negligence. Plaintiff also brings a claim against Defendant Wells Fargo for breach of negligence as ...

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