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Wood v. Nationstar Mortgage, LLC

United States District Court, D. Oregon

August 14, 2017

MICHAEL WOOD and SUMMER WOOD, Plaintiffs,
v.
NATIONSTAR MORTGAGE, LLC, and OCWEN LOAN SERVICING, LLC Defendants.

          OPINION AND ORDER

          Michael McShane United States District Judge

         For the reasons that follow, defendant Ocwen's motion, ECF No. 13, is DENIED; defendant Nationstar's request for judicial notice, ECF No. 15, is GRANTED; and Nationstar's motion to dismiss, ECF No. 14, is GRANTED in part and DENIED in part.

         BACKGROUND[1]

         This case arises from facts surrounding the servicing of a home mortgage. Michael and Summer Wood ("Plaintiffs") purchased their home in Salem, Oregon on November 14, 2011 and their loan was serviced by defendant Ocwen. As of October 7, 2013, Ocwen informed Plaintiffs that their monthly mortgage payment would be $1, 190.31. SAC ¶10. Plaintiffs made each of their monthly payments of $1, 190.31 via automatic withdrawal from that date until Ocwen transferred the loan to Nationstar on or around November 6, 2015. SAC ¶10.

         Plaintiffs requested a full loan history from Ocwen. On November 24, 2015, Plaintiffs received a partial loan history that dated back to November 3, 2014. SAC ¶9. In reviewing the partial loan history, Plaintiffs learned that on or around November 3, 2014, Ocwen had increased the Plaintiffs monthly payment to $1, 206.16. SAC ¶12. Plaintiffs claim that Ocwen never informed them that their payments had increased from $1, 190.31; an amount that Plaintiffs had consistently been paying. SAC ¶12. As of November 3, 2014, Plaintiffs were current on their mortgage payment but OWEN reported a three-month delinquency to credit reporting agencies. SAC ¶13.

         Plaintiffs allege numerous accounting irregularities by Ocwen that appear, without more, to defy explanation. For instance, on November 3, 2014, Ocwen misapplied two payments of $1, 206.16, two escrow payments of $372.52, two suspense payments of $833.64 "as well as other miscellaneous payments." SAC ¶12. Ocwen's accounting shows that on November 3, 2014, the balance of the suspense account ranged from a high of $8, 169.74 to a low of $464.96. SAC ¶14. Despite the last entry in November 2014 showing the balance at $464.96, the beginning balance in December was $8, 558.11. SAC ¶14. Plaintiffs made their payment of $1, 190.31 for December, and the balance on the account that month ranged from a high of $9, 691.78 to a low of $837.47. SAC ¶16. Ocwen then claimed that the mortgage was 120 days in arrears and reported this to credit reporting agencies. SAC ¶17. This process repeated until the balance on the account was as high as $22, 376.69. SAC ¶18. Again, throughout this time period, Plaintiffs were timely making either automated or direct payments consistent with the amount outlined in the loan agreement.

         Plaintiffs state that on July 2, 2015, Ocwen "reversed 16 payments totaling approximately $19, 204.50, " and that this amount was not applied to any account associated with the mortgage. SAC ¶20. Plaintiffs allege that Ocwen kept this money for its own benefit and reported that plaintiffs were 15 months delinquent on their mortgage. SAC ¶20. Plaintiffs say that Ocwen charged a "legal filing service fee" of $15.59. SAC ¶21. They also allege that Ocwen charged and collected late fees despite Plaintiffs never having been late on their payments. SAC ¶19. Plaintiffs further claim that Ocwen kept for their own benefit at least seven months of payments in an amount not less than $8, 332. SAC ¶25.

         Plaintiffs realized in October 2015 that their monthly payment had not been automatically withdrawn from their account as usual. Ms. Wood sent a letter dated October 14, 2015, expressing frustration at Ocwen's services. The letter identifies the borrower and states that Ms. Wood called Ocwen's customer service department to find out why October's payment was not withdrawn from her account. ECF No. 8-1 Exh. 3. She was informed at this point that Ocwen had no record of payments being made for July, August, or September, so the automatic withdrawal was canceled. Id. She disputed this accounting and stated she was attaching bank records showing payments of $1, 190.31 for each of those months. Id. It was only upon receiving a partial loan summary in response to this letter that Plaintiffs were able to piece together the facts alleged in the SAC, as described above.

         The mortgage was transferred to Nationstar in November 2015. SAC ¶23. At the time of the transfer, Ocwen claimed that Plaintiffs were seven months delinquent, despite Plaintiffs having made all payments. SAC ¶24. Nationstar has claimed that the mortgage is delinquent and has reported such to consumer credit reporting agencies, despite Plaintiffs making their monthly payments of $1, 190.31 each month. SAC ¶27. Nationstar has assessed and collected late fees associated with the loan. SAC ¶30.

         STANDARDS

         To survive a motion to dismiss under Fed.R.Civ.P. 12(b)(6), a complaint must contain sufficient factual matter that "state[s] a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is plausible on its face when the factual allegations allow the court to infer the defendant's liability based on the alleged conduct. Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009). The factual allegations must present more than "the mere possibility of misconduct." Id. at 678.

         While considering a motion to dismiss, the Court must accept all allegations of material fact as true and construe in the light most favorable to the non-movant. Burget v. Lokelani Bernice Pauahi Bishop Trust, 200 F.3d 661, 663 (9th Cir. 2000). But the Court is "not bound to accept as true a legal conclusion couched as a factual allegation." Twombly, 550 U.S. at 555. If the complaint is dismissed, leave to amend should be granted unless the Court "determines that the pleading could not possibly be cured by the allegation of other facts." Doe v. United States, 58 F.3d 494, 497 (9th Cir. 1995).

         DISCUSSION

         I. Fair Debt Collection Practices Act

         Plaintiffs allege that Nationstar violated the Federal Debt Collection Practices Act (FDCPA). Nationstar reported Plaintiffs' debt as delinquent to credit reporting agencies and have assessed late fees of $40.89, despite Plaintiffs' assertion that they are current on the payments.

         Nationstar argues that Plaintiffs' FDCPA claim is insufficiently pled because the SAC does not allege that the loan was "in default." Under 15 U.S.C. l692a(6), a mortgage loan must be in default for Nationstar to be considered a debt collector.

         Plaintiffs have alleged that the mortgage was improperly reported as "delinquent, " but the 9th Circuit has drawn a distinction between loans being in default and merely delinquent. De Dios v. Int'l Realty & Investments, 641 F.3d 1071, 1075 (9th Cir. 2011). According to the FDCPA's legislative history, "debt collector" does not include "mortgage service companies and others who service outstanding debts for others, so long as the debts were not in default when taken for servicing." S. REP. 95-382, 3-4 (1977) (emphasis added); §1692a(6)(F) ("the term [debt collector] does not include--... (F) any person collecting... a debt... to the extent such activity... (iii) concerns a debt which was not in default at the time it was obtained by such person...."). The FDCPA does not define "in default, " and courts interpreting § 1692a(6)(f)(iii) must look to the underlying contract and applicable state law. De Dios v. Int'l Realty & Investments, 641 F.3d 1071, 1075 (9th Cir. 2011).

         Nationstar requests the Court to take judicial notice of the Note and Deed of Trust ("the Note") for the mortgage at issue. The Note was attached by Ocwen to a claim in Plaintiffs' prior bankruptcy filing-United States Bankruptcy Court, District of Oregon Case No. 13-62257. Filings in bankruptcy court are judicially noticeable matters of public record. See Copelan v. Techtronics Indus. Co., 95 F.Supp.3d 1230, 1234 (S.D. Cal. 2015). The Court grants Nationstar's request for judicial notice of the Note and reviews it to determine whether the loan was in default at the time it was obtained such that Nationstar would be a debt collector under the FDCPA.

         Page two of the Note under subsection 6(B) entitled "Default" reads: "[i]f I do not pay the full amount of each monthly payment on the date it is due, I will be in default." The following subsections state if the borrower is in default, the Note holder may send a written notice accelerating the due date of the full principal of the loan. The Note also makes it clear that the creditor does not waive their rights to accelerate at a later time even if they choose not to accelerate the Note immediately. Either way, the borrower remains in default. The fact that the contract gives the Note holder discretion to act on the default (by giving notice or accelerating the loan) does not change the fact that the language of the contract creates a default upon the borrower's failure to pay the monthly sum in full.

         Nationstar is bound by the language of the note. They cannot argue that for purposes of the note the Plaintiffs are in default, but for purposes of the FDCPA the Plaintiffs were merely delinquent. The language of the Note, drafted in favor of the creditor, makes it clear that, even though Ocwen did not exercise its right to accelerate the loan, the borrower was in fact in default from the moment Ocwen claims it did not receive full payment. Plaintiffs allege that Ocwen's loan history indicates that the payments were applied as though the payment was $1, 206.16 on November 3, 2014. Because Plaintiffs only paid $ 1, 190.31 for all months relevant here, Plaintiffs were considered by Defendants to ...


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