Sandaler v. Wells Fargo Bank, N.A. et al

RESPONSE re Memorandum in opposition to Plaintiff's Motion for Partial Summary Judgment

M.D. Fla.December 5, 2017

1 UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA ORLANDO DIVISION JAMES A. SANDALER, Plaintiff, CASE NO. 6:16-cv-01919-CEM-GJK vs. WELLS FARGO BANK, N.A. F/K/A WELLS FARGO HOME MORTGAGE D/B/A AMERICA’S SERVICING COMPANY and OCWEN LOAN SERVICING, LLC, Defendant(s). ________________________________________/ PLAINTIFF’S REPLY TO DEFENDANT’S OPPOSITION TO MOTION FOR PARTIAL SUMMARY JUDGMENT [DE 83] Plaintiff’s RESPA claim hinges upon two primary issues: 1) Did the Plaintiff submit a complete Sixth Hamp Application; and 2) If the Plaintiff did not submit a complete Sixth HAMP Application, did the Defendant exercise reasonable diligence in obtaining a complete application? Plaintiff alleges that he ultimately completed his Sixth HAMP Application, triggering his review, decisioning and appeal rights before the underlying foreclosure could proceed to judgment or sale. Defendant claims Plaintiff’s Sixth HAMP Application was never complete, in which case, Plaintiff avers that Defendant failed to timely provide adequate notice of incompleteness and failed to exercise reasonable diligence in obtaining a complete Sixth HAMP Application. Did Plaintiff Submit a Complete Sixth HAMP Application? Application completeness depends upon whether the Defendant received all information required “from a borrower in evaluating applications for the loss mitigation options available to the borrower.” 12 C.F.R. § 1024.41(b)(1). Although servicers have flexibility in establishing Case 6:16-cv-01919-CEM-GJK Document 86 Filed 12/05/17 Page 1 of 9 PageID 3328 2 what documents and information it considers “necessary” for evaluating a loss mitigation application1, Fannie Mae outlines specific requirements.2 The MHA Handbook for Servicers of Non-GSE Mortgages, Version 4.5 (“MHA Handbook”), provided the operative guidance for Plaintiff’s Sixth HAMP Application.3 Servicers must pre-screen borrowers for HAMP eligibility, and “upon submission of an “Initial Package,” [the borrower] must be evaluated for the appropriate HAMP Tier based on their eligibility.” [Ex. A, MHA Handbook, Ch. II, Sec. 2.2, pg. 70]. Within 10 days after the servicer verifies the information contained in the Initial Package and determines the borrower’s HAMP eligibility, it must notify the borrower of the eligibility determination. [Ex. A, MHA Handbook V4.5, Ch. II, Sec. 6, pg. 96]. An “Initial Package” consists of 1) an RMA Form; 2) either an IRS Form 4506-T, 4506T-EZ, or a signed copy of the borrower’s most recent tax return; 3) evidence of income; and 4) a Dodd-Frank Certification. [Ex. A, MHA Handbook V4.5, Ch. II, Sec. 4, pg. 81-82]. Fannie Mae acknowledged that, although a “Loss Mitigation Application” as described in Regulation X consists of the Initial Package and “those other documents and information the servicer requires in order to evaluate the borrower for [non-HAMP options available to the borrower], …the first loss mitigation option considered by servicers for each borrower shall continue to be HAMP…” [Ex. A, MHA Handbook V4.5, pg. 82]. A servicer must review the borrower under HAMP even if the borrower fails to provide additional documents necessary for other programs. [Ex. A, MHA Handbook V4.5, pg. 87]. “Evidence of income” is the only requirement reasonably at issue in this Court’s determination of whether the Plaintiff submitted a complete Sixth HAMP application. Fannie 1 12 C.F.R. § 1024.41(b)(1) cmt. 1, 4 2 https://www.hmpadmin.com/portal/programs/guidance.jsp, accessed December 5, 2017. 3 https://www.hmpadmin.com//portal/programs/docs/hamp_servicer/mhahandbook_45.pdf, accessed December 5, 2017. Case 6:16-cv-01919-CEM-GJK Document 86 Filed 12/05/17 Page 2 of 9 PageID 3329 3 Mae describes the required income verification documentation and prohibits servicers from requesting additional documentation unless such necessary to resolve discrepancies, [Ex. A, MHA Handbook V4.5, Ch. II, Sec. 5.1, pg. 90], or unless the servicer maintains an alternative written Verification Policy and publicly communicates the alternative requirements to borrowers. The alternative requirements cannot be more onerous than those set forth in the MHA Handbook. [Ex. A, MHA Handbook V4.5, Ch. II, Sec. 5.1.11, pg. 95]. Specifically, the Plaintiff was required to provide the following income documentation to complete his Sixth HAMP Application: • Two recent paystubs, not more than 90 calendar days old for each wage-earning borrower [Ex. A, MHA Handbook V4.5, Ch. II, Sec. 5.1.1, pg. 91]; • Most recent quarterly or year-to-date profit and loss statement for each self-employed borrower or up to four consecutive months of bank statements, if the profit-loss statement is insufficient [Ex. A, MHA Handbook V4.5, Ch. II, Sec. 5.1.2, pg. 92]; • For other earned income, including bonuses, the borrower must provide “reliable third-party documentation describing the nature of the income [Ex. A, MHA Handbook V4.5, Ch. II, Sec. 5.1.3, pg. 92]; • For non-borrower income, the servicer must use the same income documentation standards, and must verify the occupancy of the non-borrower [Ex. A, MHA Handbook V4.5, Ch. II, Sec. 5.1.9, pg. 94]. To obtain proof of non-borrower occupancy, the servicer must obtain a credit report. [Ex. A, MHA Handbook V4.5, Ch. II, Sec. 5.3, pg. 95-96]; Defendant told Plaintiff it intended to evaluate Plaintiff’s eligibility for “a modification under the federal governments Home Affordable Modification Program. [DE 76, ¶ 4; DE 82-2, Bates Pg. 18, WF Bates 1750]. Plaintiff submitted the RMA Form containing the Dodd Frank Certification, an IRS Form 4506-T, 4506T-EZ, a copy of the borrower’s most recent tax return, three consecutive paystubs less than 90 days old for the non-borrower, and three months of consecutive bank statements on September 24, 2015. [DE 76, ¶ 5; DE 82-2, Bates Pg. 52-63, WF Bates 1216-1225, 2261-62; DE 82-3, Bates Pg. 93-102, WF Bates 1404-06; 1399-1402; Case 6:16-cv-01919-CEM-GJK Document 86 Filed 12/05/17 Page 3 of 9 PageID 3330 4 1457-59; DE 76-8, Bates Pg. 211-223; 226-268]. Defendant acknowledged receipt and completeness of these documents on September 25, 2015. [DE 76, ¶ 7; DE 82-4, Bates Pg. 107, WF Bates 1935]. Plaintiff submitted an executed Non-Borrower Occupant Certification Form containing the non-borrower’s social security number on October 9, 2015. [DE 76, ¶ 8; DE 82-4, Bates Pg. 116, WF Bates 1672]. Plaintiff submitted a signed letter of explanation regarding not preparing profit-loss statements on October 26, 2015. [DE 76, ¶ 10 [first instance]; DE 82-4, Bates Pg. 140, WF Bates 1490]. Despite Defendant’s assertion to the contrary, Defendant acknowledged receipt of a complete application on October 28, 2015, stating “[n]ow that we’ve received your documents, we’ll carefully review what you’ve submitted to determine if you’re eligible for mortgage payment assistance through a loan modification.” [DE 76, ¶ 10 [second instance]; DE 82-4, Bates Pg. 145-146, WF Bates 1927-1928]. Defendant’s internal account annotations corroborate this conclusion. [DE 76, ¶ 10 [second instance]; DE 82-5, Bates Pg. 166, 170, 181, WF Bates 987, 1060, 3581]. Although the MHA Handbook allowed Defendant to use bank statements to verify self-employment income, Plaintiff’s November 4, 2015 submission of a profit-loss statement, which Defendant acknowledged on November 5, 2015, is, in a light most favorable to Defendant, the last possible day Plaintiff’s Sixth HAMP Application became a “complete application” for purposes of a HAMP review. [DE 76, ¶ 10-11, 13; DE 82-4, Bates Pg. 148-150, WF Bates 1608, 1732-1733]. Servicers are not required to verify a borrower’s monthly gross expenses. [Ex. A, MHA Handbook V4.5, Ch. II, Sec. 5.4, pg. 96]. Thus, Defendant’s argument that Plaintiff’s application was incomplete because he failed to provide a written letter explaining whether the GL Insurance was for health or life insurance and whether the taxes were for state, local or Case 6:16-cv-01919-CEM-GJK Document 86 Filed 12/05/17 Page 4 of 9 PageID 3331 5 federal taxes, is unavailing. Defendant’s argument that Plaintiff did not complete his application because he failed to provide a letter explaining the non-borrower’s bonuses also fails because the paystubs are third-party documentation and clearly stated that the income was “bonus” income. Defendant failed to produce or proffer any evidence of objective loss mitigation application completeness standards that would substantiate information requests that exceeded the scope of the MHA Handbook V4.5 requirements. Did Defendant Exercise Reasonable Diligence in Obtaining a Complete Application? Plaintiff alleged that, although Defendant’s initial written incomplete notice was timely, the initial notice and each subsequent notice was inadequate to satisfy the substantive notice requirements within five (5) days after Defendant received the initial Sixth HAMP Application because each written incomplete application notice was inconsistent with Defendant’s internal account annotations and failed to identify all missing documents and information, each written notice identified documents or information already in Defendant’s possession, and each written notice was inconsistent with Defendant’s oral communications to Plaintiff regarding the necessity of requested information. Courts have determined that inconsistent, confusing or contradictory communications requesting additional information to complete a loss mitigation application violate 12 U.S.C. § 1024.41(b)(2). See Paz v. Seterus, Inc. No. 14-cv-62513, 2016 WL 3948053 (S.D. Fla. Apr. 28, 2016) (notice listed four documents in a table format under “documents we have received” but then stated later in the notice that these same documents were needed). Because a notice of incompleteness shifts the burden of compliance with the loss mitigation requirements to the borrower, the Defendant must have given both timely and substantively adequate notice of Case 6:16-cv-01919-CEM-GJK Document 86 Filed 12/05/17 Page 5 of 9 PageID 3332 6 application deficiencies to effect the burden shift. See generally Rodriguez v. Ocwen Fin. Corp. No. 17-cv-60574 (S.D. Fla. 2017). In Paz, a borrower submitted a loss mitigation application in July 2014. The Southern District of Florida found that the servicer's initial response to the application on July 8, 2014 was defective because while it stated that the borrower's application was incomplete, it failed to identify any documents that were missing. Paz v. Seterus, Inc., No. 14-cv-62513, 2016 WL 3948053, at *3 (S.D. Fla. Apr. 28, 2016). The court found that later letters sent on August 5, 6, and 22, 2014, failed to cure the deficiency in the initial notice. See id. at *3-4. In granting summary judgment to the borrower, the court held that "[b]ecause of these deficiencies . . . [defendant's] handling of [plaintiff's] application generally also fell far short of paragraph (b)(1)'s requirement that a servicer 'exercise reasonable diligence in obtaining documents and information to complete a loss mitigation application.'" Id. at *5. A servicer may fail to exercise “reasonable diligence in obtaining documents and information” if it requests documents that have already repeatedly been provided or requests documents after telling borrower nothing further was needed, Dionne v. Fed. Nat’l Mortg. Ass’n, No. 15-cv-056, 2016 WL 3264344 (D.N.H. June 14, 2016), or by referencing a website with a general list of documents all borrowers must submit, rather than identifying specific documents the individual borrower must submit based on his specific financial situation, Jackson v. Bank of Am., N.A., No. 16-cv-787 (W.D. N.Y. Nov. 21, 2017), or by requesting additional documents more than thirty days after the servicer’s deadline to complete the application review, Bennet v. Bank of America, NA, No. 16-cv-278 (M.D. Fla. May 6, 2016). Although Plaintiff submitted his third supplement to his Sixth HAMP Application on November 4, 2015. [DE 76, ¶ 13-14; DE 82-4, Bates Pg. 148-150; WF Bates 1608, 1732-33; DE Case 6:16-cv-01919-CEM-GJK Document 86 Filed 12/05/17 Page 6 of 9 PageID 3333 7 82-5, Bates Pg. 167, WF Bates 986]. Defendant did not give written notice that the application was still incomplete until November 17, 2015, more than five (5) business days after the third supplemental submission, and nine days after Defendant noted deficiencies in its internal records. [DE 76, ¶ 14-15; DE 82-5, Bates Pg. 167, 171, 183-84, WF Bates 986, 1059, 3578-79; DE 82-4; Bates Pg. 151-56; WF Bates 1921-26]. In any event, pursuant to Defendant’s initial notice of incomplete application, dated September 25, 2015, Plaintiff had until December 24, 2015 to complete his application. [DE 76, ¶ 7, DE 82-4, Bates Pg. 105, WF Bates 1933]. To the extent that Plaintiff’s Sixth HAMP Application remained materially defective after November 17, 2015, Defendant’s November 27, 2015 oral statement advising Plaintiff he did not need to update his profit-loss statement, [DE 76, ¶ 16, DE 82-5, Bates Pg. 185-88, WF Bates 3574-77], and Defendant’s failure to take any further action before December 25, 2015, was not reasonable diligence. Plaintiff Proved Entitlement to Damages Although Plaintiff abandoned his original ECOA and RESPA claims, he has repeatedly maintained that his factual allegations are relevant to establishing a pattern of practice with respect to Defendant’s loss mitigation practices. Defendant failed to file a response to Plaintiff’s Second Amended Complaint. Therefore, the allegations contained therein are deemed admitted. Fed. R. Civ. P. 8(b)(6). Although Plaintiff may not have yet proven the amount of damages to which he is entitled, he has certainly established injury. [DE 76, Pg. 19-21]. REQUEST FOR JUDICIAL NOTICE Pursuant to Federal Rules of Evidence section 201, Plaintiff requests the Court take judicial notice of the MHA Handbook for Servicers of Non-GSE Mortgages, Version 4.5. Plaintiff attaches excerpts from the MHA Handbook as Exhibit A. Case 6:16-cv-01919-CEM-GJK Document 86 Filed 12/05/17 Page 7 of 9 PageID 3334 8 Dated: December 5, 2017 /s/ Catherine J. Jones Attorney for Plaintiff CERTIFICATE OF SERVICE I HEREBY CERTIFY that on December 5, 2017, a copy of this document and its exhibits was served by electronic mail and electronic notice this day on all counsel of record, to: MICHELLE STOCKER Florida Bar No.: 044105 stockerm@gtlaw.com smith@gtlaw.com FLService@gtlaw.com GREENBERG TRAURIG, P.A. 401 East Las Olas Blvd., Ste. 2000 Fort Lauderdale, FL 33301 Telephone: 954.765.0500 Facsimile: 954.765.1477 BETH A. NORROW Florida Bar No.: 61497 norrowb@gtlaw.com daltonk@gtlaw.com FLService@gtlaw.com GREENBERG TRAURIG, P.A. 450 South Orange Ave., Ste. 650 Orlando, FL 32801 Telephone: 407.254.2643 Facsimile: 407.650.8428 LegalNinja, LLC /s/ Catherine J. Jones CATHERINE J. JONES Florida Bar No.: 0709271 400 Orange St. Titusville, Florida 32796 (321) 888-2280 Telephone (321) 400-1192 Facsimile Email: jones@mylegalninja.com Brevard Consumer Law Center Case 6:16-cv-01919-CEM-GJK Document 86 Filed 12/05/17 Page 8 of 9 PageID 3335 9 /s/ George Gingo George Gingo FBN 879533 400 Orange Street Titusville, FL 32796 (321) 264-9624 (866) 311-9573 (Fax) gingo.george@gmail.com Case 6:16-cv-01919-CEM-GJK Document 86 Filed 12/05/17 Page 9 of 9 PageID 3336