United States District Court, D. Oregon
OPINION AND ORDER
Michael McShane United States District Judge
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
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.
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
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.
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.
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
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.
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.
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.
Fair Debt Collection Practices Act
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.
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
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).
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.
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.
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 ...