Nathan Terry et al v. Wells Fargo Bank NA et al
Filing
48
ORDER DENYING 43 MOTION FOR LEAVE TO AMEND.(whalc2, COURT STAFF) (Filed on 7/26/2016)
1
2
3
4
5
6
IN THE UNITED STATES DISTRICT COURT
7
FOR THE NORTHERN DISTRICT OF CALIFORNIA
8
9
11
For the Northern District of California
United States District Court
10
NATHAN TERRY; GERALDINE
TERRY,
Plaintiffs,
12
13
14
15
No. C 15-01483 WHA
ORDER DENYING MOTION
FOR LEAVE TO AMEND
v.
WELLS FARGO BANK, N.A.; U.S.
BANK, N.A.; and DOES 1 through 50,
inclusive,
16
Defendants.
/
17
18
INTRODUCTION
19
In this foreclosure dispute, plaintiff borrowers move for leave to file an amended
20
complaint to assert a claim under federal regulations. To the extent stated herein, the motion is
21
DENIED.
22
23
STATEMENT
The following well-pled facts are assumed to be true for the purposes of the present
24
motion. In November 2006, plaintiffs Nathan Terry and Geraldine Terry obtained a mortgage
25
from Wells Fargo Bank, N.A. to purchase a single-family residence in Fremont, California. In
26
January 2011, another deed of trust was recorded on the property.
27
28
In July 2012, plaintiffs applied for a loan modification. In October 2012, Wells Fargo
approved plaintiffs for a Trial Period Plan (the “TPP Agreement”). Pursuant to the TPP
Agreement, plaintiffs made three trial period payments of $2,905.04 from November 2012 to
1
January 2013. The TPP stated that “[u]pon successful completion of these payments, we will
2
offer you a mortgage modification” (Amd. Compl. ¶¶ 9–11).
3
In December 2012, in the middle of the trial period, Wells Fargo sent plaintiffs a letter
4
stating that the mortgage was not in first lien position. The letter requested that plaintiffs obtain
5
signed subordination agreements from the other lien holders on the property (id. ¶ 13).
6
Plaintiffs then made repeated attempts to contact their “single point of contact” at Wells Fargo
7
to inquire about the subordination issue. Plaintiffs’ calls were not returned (id. ¶¶ 13–16).
8
9
In March 2013, after plaintiffs had successfully completed the trial period pursuant to
the TPP Agreement, Wells Fargo sent plaintiffs a letter stating that they did not qualify for the
mortgage assistance program. The letter provided no information about the reason for the
11
For the Northern District of California
United States District Court
10
denial (id. ¶ 19).
12
In November 2013, defendants recorded a notice of default. Plaintiffs again attempted
13
to reach their “single point of contact” at Wells Fargo but to no avail. Plaintiffs reached a
14
general Wells Fargo representative who advised plaintiffs to submit a new loan modification
15
application. The representative indicated that she would send a modification application to
16
plaintiffs. On January 6, 2014, plaintiffs received the application packet and, on or around
17
January 14, 2014, plaintiffs submitted the application to Wells Fargo.
18
19
20
21
22
23
24
25
On or around January 14, 15, and 17, 2014, Wells Fargo (id. ¶¶ 23–24):
sent Plaintiffs letters confirming receipt of Plaintiffs’ application
and [sic] would inform Plaintiffs if any additional documents were
needed. Thereafter, Defendant sent Plaintiffs a letter requesting
that Plaintiffs submit additional documents which were not
initially requested from Plaintiffs by Defendant. Specifically, the
letter stated that Plaintiffs would need to submit proof of income
by no later than April 20, 2014. The letter also stated that “[w]e’ll
continue to work with you to help you avoid a foreclosure
sale….[i]f your loan has been referred to foreclosure, we will not
conduct a foreclosure sale on this loan while your documents are
being reviewed.”
On or around April 1, 2014, plaintiffs submitted all documentation requested by Wells Fargo.
26
Despite the pending modification application, defendants recorded a notice of trustee’s
27
sale in February 2014 (Amd. Compl. ¶ 26). From what can be gleaned from the complaint, the
28
property has not yet been sold in foreclosure.
2
1
In March 2015, plaintiffs filed a complaint alleging: (1) breach of contract; (2) violation
2
of California Civil Code Section 2923.6; (3) violation of California Civil Code Section 2923.7;
3
(4) violation of California Civil Code Section 2924.17; (5) violation of California Civil Code
4
Section 2924.10; and (6) violation of Business and Professions Code Section 17200 et seq.
5
Defendants moved to dismiss the complaint for failure to state a claim or, in the
6
alternative, for a more definite statement (Dkt. No. 21). A subsequent order allowed the bulk of
7
the claims to proceed but granted the motion to dismiss the claim under Section 2923.6 as to the
8
2014 application. As to that claim, the order concluded that plaintiffs had not pled facts
9
sufficient to show that they had submitted a “complete” modification application in 2014 as
required under Section 2923.6 and that, therefore, the 2014 application (as opposed to the 2012
11
For the Northern District of California
United States District Court
10
modification application) had not triggered HBOR’s protections against dual-tracking.
12
Plaintiffs now seek to file an amended complaint that alleges that, under federal
13
regulations, plaintiffs’ 2014 modification application was complete and that, therefore,
14
defendants violated federal regulations by recording a notice of trustee’s sale in February 2014.
15
ANALYSIS
16
Under Rule 15, leave to amend should be freely given absent undue delay, bad faith or
17
dilatory motive, repeated failure to cure deficiencies, futility of amendment, and prejudice to the
18
opposing party. Foman v. Davis, 371 U.S. 178, 182 (1962). The general rule that parties be
19
allowed to amend does not extend to situations where amendment would be an exercise in
20
futility or where the amended complaint would also be subject to dismissal. Steckman v. Hart
21
Brewing, Inc., 143 F.3d 1293, 1298 (9th Cir. 1998). “Futility of amendment can, by itself,
22
justify the denial of a motion for leave to amend.” Bonin v. Calderon, 59 F.3d 815, 845
23
(9th Cir. 1995).
24
The federal regulations contain prohibitions against dual-tracking that are similar to
25
those contained in the California Homeowner’s Bill of Rights. A previous order concluded that
26
plaintiffs’ 2014 modification application did not trigger the dual-tracking prohibitions under
27
HBOR. Plaintiffs now seek leave to amend in order to allege that the 2014 modification
28
application is entitled to the dual-tracking prohibitions under federal regulations. Specifically,
3
1
plaintiffs contend that, under 12 C.F.R. 1024.41(c)(2)(iv), their 2014 application was “facially
2
complete,” and that, therefore, defendants were prohibited from recording a notice of trustee’s
3
sale under 12 C.F.R. 1024.41(g).
4
Under federal regulations, a servicer shall not move for foreclosure judgment or order of
application. 12 C.F.R. 1024.41(g). A servicer can also be prohibited from moving for
7
foreclosure judgment or order of sale if an application is “facially complete” and certain other
8
conditions are met. Under 12 C.F.R. 1024.41(c)(2)(iv), an application is deemed “facially
9
complete” only “if a borrower submits all the missing documents and information as stated in
10
the notice required pursuant to § 1026.41(b)(2)(i)(B), or no additional information is requested
11
For the Northern District of California
sale, or conduct a foreclosure sale if a borrower has submitted a “complete” modification
6
United States District Court
5
in such notice.”
12
Plaintiffs allege that they received two types of responses from Wells Fargo: (1) letters
13
sent on January 14, 15, and 17, 2014, acknowledging receipt of the application; and (2) a letter
14
sent on January 20, 2014, which requesting that plaintiffs submit additional documents (Amd.
15
Compl. ¶¶ 23–24). At the hearing, plaintiffs’ counsel asserted that the letters sent on January
16
14, 15, and 17 were “notices” under 12 C.F.R. 1024.41(b)(2)(i)(B). Given this interpretation,
17
and given the allegation that this letter did not ask for additional documentation, plaintiffs assert
18
that their modification was “facially complete” under 12 C.F.R. 1024.41(c)(2)(iv) and plaintiffs
19
were therefore eligible for the regulations’ protections from foreclosure proceedings.
20
In essence, plaintiffs contend that because Wells Fargo acknowledged receipt of the
21
modification application and did not simultaneously request additional documentation,
22
plaintiffs’ modification application should be deemed “facially complete” as of the day of the
23
first acknowledgment letter. This order concludes, however, that the letters sent on January 14,
24
15, and 17 were not “notices” within the meaning of 12 C.F.R. 1024.41(b)(i)(B) and that
25
therefore plaintiffs’ application was not “facially complete” as of February 21 when Wells
26
Fargo recorded the notice of trustee’s sale.
27
28
4
1
Under 12 C.F.R. 1024.41(b)(i)(A), a servicer must “promptly” determine if an
2
application is complete upon receipt of a loss mitigation application forty-five or more days
3
before a foreclosure sale. Under 12 C.F.R. 1024.41(b)(i)(B), a servicer must then:
4
5
6
7
8
9
The letters sent to plaintiffs on January 14, 15, and 17 allegedly acknowledged receipt
11
For the Northern District of California
United States District Court
10
Notify the borrower in writing within 5 days (excluding legal public holidays,
Saturdays, and Sundays) after receiving the loss mitigation application that the
servicer acknowledges receipt of the loss mitigation application and that the
servicer has determined that the loss mitigation application is either complete or
incomplete. If a loss mitigation application is incomplete, the notice shall state
the additional documents and information the borrower must submit to make the
loss mitigation application complete and the applicable date pursuant to
paragraph (b)(2)(ii) of this section. The notice to the borrower shall include a
statement that the borrower should consider contacting servicers of any other
mortgage loans secured by the same property to discuss available loss
mitigation options.
of the application but, as alleged, the letters did not address whether “the servicer ha[d]
12
determined that the loss mitigation application [was] either complete or incomplete” as required
13
under 12 C.F.R. 1024.41(b)(i)(B). The letters merely stated that Wells Fargo “would inform
14
Plaintiffs if any additional documents were needed” (Amd. Compl. ¶ 24).
15
This order therefore concludes that the letters sent on January 14, 15, and 17 were not
16
“notices” within the meaning of 12 C.F.R. 1024.41(b)(i)(B). To hold otherwise would be to
17
discourage servicers from acknowledging receipt of an application until all missing
18
documentation has been identified. Borrowers benefit from prompt acknowledgment of an
19
application, however, as time is precious when a foreclosure is on the horizon. As long as the
20
bank “promptly” determines completeness, it need not do so “immediately.”
21
To be sure, Wells Fargo had a duty to notify plaintiffs within five days (excluding
22
weekends and holidays) as to whether their application was complete or incomplete. But here,
23
the facts alleged suggest that Wells Fargo complied with that duty by sending a letter on
24
January 20 that requested additional documentation. As opposed to the letters sent on January
25
14, 15, and 17, this letter was a “notice” within the meaning of 12 C.F.R. 1024.41(b)(i)(B). As
26
such, plaintiffs’ application was not “facially complete” as of February 21 when defendants
27
recorded a notice of trustee’s sale because plaintiffs had not yet submitted the documentation
28
5
1
requested (they did not do so until April 1). Because the application was not “facially
2
complete” on February 21, it did not trigger the prohibitions against dual-tracking.
3
4
Amendment would be futile because the proposed amended complaint fails to state a
claim under the federal regulations. As such, plaintiffs’ motion for leave to amend is DENIED.
5
6
CONCLUSION
A prior order allowed the bulk of plaintiffs’ claims to proceed but granted dismissal as
7
to one of plaintiffs’ claims. Plaintiffs now seek leave to file an amended complaint. For the
8
reasons stated herein, plaintiffs’ motion for leave to amend is DENIED.
9
IT IS SO ORDERED.
10
For the Northern District of California
United States District Court
Dated: July 26, 2016.
WILLIAM ALSUP
UNITED STATES DISTRICT JUDGE
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
6
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?