Bennett et al v. Bank of America Corporation et al

Filing 50

MEMORANDUM OPINION AND ORDER; 1)Bank of America's 29 Motion to Dismiss is granted in part and denied in part. Specifically, Bank of America's motion to dismiss is DENIED w/respect to Count 1 of the 28 Complaint; 2)Rushmor e's 30 Motion to Dismiss is granted in part and denied in part. Specifically Rushmore's motion to dismiss is denied w/respect to Counts IV and V of the 28 Complaint; 3)MTGLQ's 31 Motion to Dismiss is granted; 4)Counts II, III, VI, VII, and VIII of the Bennetts' complaint are DISMISSED WITHOUT PREJUDICE. Signed by Judge Amul R. Thapar on 8/26/2015. (LST)cc: COR

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
NORTHERN DIVISION
COVINGTON
CHRISTINE BENNETT, et al.,
Plaintiffs,
v.
BANK OF AMERICA, N.A., et al.,
Defendants.

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Civil No. 15-30-ART

MEMORANDUM OPINION AND
ORDER

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Christine and Earl Bennett bought their home at the height of the housing bubble.
Like thousands of other Americans, the Bennetts thought they were getting a great deal on
the home of their dreams. But shortly after they signed their mortgage contract, the Bennetts
found themselves unable to keep up with the monthly payments. Bank of America, their
loan servicer at the time, instituted foreclosure proceedings against the Bennetts, and the
state court placed the Bennetts’ home in foreclosure. Since the foreclosure judgment, the
Bennetts have desperately tried to keep their home, sending numerous applications for loan
modifications to both Bank of America and Rushmore, the new servicer of the loan. But the
Bennetts believe that Bank of America and Rushmore wrongfully denied them certain loss
mitigation options that would have helped them keep their home. The Bennetts reached out
to the Kentucky Attorney General’s Office for help, but the Bennetts allege that Bank of
America and Rushmore still refused to provide them with the information they needed to
pursue their loan modification options effectively. So the Bennetts resorted to the only

option they have left: they brought suit in federal court. Unfortunately for the Bennetts, they
fail to allege sufficient facts to state most of their claims against the defendants.
BACKGROUND
The Bennetts allege the following facts in their amended complaint, R. 28: On July
25, 2007, the Bennetts entered a mortgage contract for $115,090 with Taylor, Bean &
Whitaker Mortgage Corporation (“TBW”). R. 29-1 at 1 (mortgage contract). The Bennetts
quickly began struggling to make their monthly mortgage payments. TBW offered the
Bennetts a forbearance agreement to help them make their payments. R. 28 ¶ 19. But the
Bennetts continued to struggle, and, in May 2009, they started to default on their loan. R.
29-4 at 2 (state court foreclosure judgment). By the end of the year, the Bennetts’ loan was
in default because they were still unable to make a complete mortgage payment. See id. at 3.
So Bank of America (“BANA”), which became the servicer of the loan earlier that year,
initiated a foreclosure proceeding against the Bennetts in Kentucky state court. R. 28 ¶ 13;
see also R. 29-3 (state court complaint). On September 27, 2010, the state court ordered the
property foreclosed and issued an order of sale. See R. 29-4. The Bennetts’ loan has been in
foreclosure since the state court decision, but the property has not been sold. R. 28 ¶¶ 14–15.
In 2013, BANA transferred the servicing of the Bennetts’ loan to defendant Rushmore Loan
Management Services LLC (“Rushmore”). Id. ¶ 16. BANA sold the ownership of the
Bennetts’ loan to defendant MTGLQ Investors, LP (“MTGLQ”). Id. ¶ 17. BANA notified
the Bennetts of the transfers in servicing and ownership. Id. ¶¶ 16–17.
The Bennetts have been attempting to get loan modifications to help them keep their
house since the foreclosure action began. Id. ¶ 18. In 2010, BANA reached out to the
Bennetts about their possible eligibility in the Home Affordable Modification Program
2

(“HAMP”), a government loan modification program in which BANA participates. Id. ¶ 19.
From 2010 to early 2013, the Bennetts sent BANA “various” loss mitigation applications that
were “either misplaced or never fully responded to.” Id. ¶ 20. BANA sent the Bennetts a
letter in April 2013 stating that they had been declined for a loan modification, R. 28-3 at 1
(subsequent letter referencing April 2013 declination letter), but the Bennetts never received
the declination letter. R. 28 ¶¶ 21, 58. Shortly thereafter, the Bennetts engaged Emery Law
(“Emery”) for assistance with loss mitigation. Id. ¶ 22. From November 2013 to July 2014,
Emery or its subcontractor Friedman Law (“Friedman”) submitted four loss mitigation
applications to Rushmore.

Id. ¶ 24.

Two of these applications were approved for a

forbearance agreement, one was not processed, and one was declined for lack of
documentation. Id. The Bennetts claim that neither Emery nor Friedman were notified of
the declination or the reasons for it. Id.
On June 25, 2014, Rushmore approved the Bennetts for their second forbearance
agreement. Id. ¶ 25; R. 28-1 (forbearance agreement). The agreement required the Bennetts
to pay a lump sum of $12,500 followed by six monthly payments of $1250 before their loan
would be reviewed for a final loss mitigation plan. R. 28 ¶ 25; R. 28-1 at 4. The Bennetts
received this offer from Emery in July, and the Bennetts claim it was the same forbearance
offer they had received from Rushmore six months earlier. R. 28 ¶ 26. The Bennetts told
Emery to reject the offer and to request that Rushmore review their loan for additional loan
modification options. Id.
At this point, the Bennetts were desperate to get a loan modification that would help
them keep their home. So they submitted a written complaint to the Kentucky Attorney
General’s Office (“AG”) seeking an inquiry and evaluation on the Bennetts’ behalf. Id. ¶ 27.
3

Specifically, the Bennetts asked the AG to inquire into the status of their loan modification
applications with Rushmore and the servicing practices of BANA. Id. The AG sent letters to
BANA and Rushmore on the Bennetts’ behalf, asking for the information the Bennetts
requested. Id. ¶ 28. These letters contained the Bennetts’ name, address, account number,
and specific inquiries related to the loan account. Id. Both BANA and Rushmore responded
to these letters. Id. ¶¶ 29, 32, 34; R. 28-2 (letter from Rushmore); R. 28-3 (first letter from
BANA); R. 28-4 (second letter from BANA). The Bennetts argue that the responses from
BANA and Rushmore were insufficient and contained misrepresentations. R. 28 ¶¶ 45–50,
78–80.
The Bennetts were unable to obtain a loan modification from Rushmore despite the
involvement of the AG. R. 28 ¶¶ 35–36. Out of options, Christine Bennett filed a petition
for relief under Chapter 13, Title 11 of the Bankruptcy Code on January 30, 2015. Id. ¶ 37.
The bankruptcy case was dismissed a month later for failure to file documents. Id. ¶ 38. A
week after the dismissal of the bankruptcy case, the Bennetts filed the instant complaint
against BANA, Rushmore, and MTGLQ. See R. 1; R. 28 (amended complaint). Defendants
BANA, Rushmore, and MTGLQ each moved to dismiss the claims against them for failure
to state a claim upon which relief can be granted, Fed. R. Civ. P. 12(b)(6). See R. 29–31.
STANDARD OF REVIEW
Under Federal Rule of Civil Procedure 12(b)(6), the Court reviews whether the
Bennetts’ complaint alleges sufficient facts to state a claim that is “plausible on its face.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S.
544, 570 (2007)). To meet this standard, the Bennetts must plead enough facts that the court
can draw a reasonable inference that the defendants are liable for the alleged misconduct. Id.
4

(citing Twombly, 550 U.S. at 556). At this stage, the Court construes factual allegations “in
the light most favorable to the plaintiff” and draws “all reasonable inferences in favor of the
plaintiff.” Watson Carpet & Floor Covering, Inc. v. Mohawk Indus., Inc., 648 F.3d 452, 456
(6th Cir.2011) (quoting In re Travel Agent Comm’n Antitrust Litig., 583 F .3d 896, 903 (6th
Cir.2009)).
DISCUSSION
I.

BANA’S MOTION TO DISMISS
The Bennetts allege BANA: (1) violated the Real Estate Settlement Procedures Act

(“RESPA”), 12 C.F.R. § 1024.36, by failing to respond reasonably to the Bennetts’ qualified
written requests; (2) breached the mortgage contract; and (3) breached the HAMP guidelines.
R. 28, Counts I–III. BANA moved to dismiss all three counts for failure to state a claim
upon which relief may be granted. See R. 29-5. Only the Bennetts’ RESPA claim survives.
a. Count I: The Bennetts stated a claim under RESPA.
BANA contends that the plaintiffs’ RESPA claim fails for two reasons: First, the
letters came from the Attorney General’s office, not the Bennetts, so the letters did not
qualify as Qualified Written Requests (“QWRs”) under RESPA. Second, BANA argues that
the Bennetts’ claim fails because they cannot show damages. Both of these arguments fail.
The Bennetts pled sufficient facts to state a claim under RESPA. BANA is correct
that 12 C.F.R. § 1024.36 seems only to require services to respond to QWRs that come
directly from borrowers. See § 1024.36(a) (“A servicer shall comply with the requirements
of this section for any written request for information from a borrower . . . .”). And the
Bennetts admit that they did not send any letters directly to BANA. R. 47 at 3. However, 12
C.F.R. § 1024.36 is a section of Regulation X, which is a set of regulations issued by the
5

Bureau of Consumer Financial Protection to implement RESPA, 12 U.S.C. § 2601 et seq. 12
C.F.R. § 1024.1. RESPA’s definition of whose letters qualify as QWRs is broader than the
definition in Regulation X. Compare 12 U.S.C. § 2605(e)(1)(A), with 12 C.F.R. § 1024.1.
Section 2605 requires a servicer to respond to QWRs “from the borrower (or an agent of the
borrower).” 12 U.S.C. § 2605(e)(1)(A). Admittedly, the Bennetts do not cite to section 2605
in their complaint. See R. 1. They only cite to Regulation X to refer to RESPA. Id.
However, the failure to cite to the correct statute is not sufficient for dismissal. Johnson v.
City of Shelby, Miss., 135 S. Ct. 346, 346 (2014) (“Federal pleading rules . . . do not
countenance dismissal of a complaint for imperfect statement of the legal theory supporting
the claim asserted.”). The Bennetts named RESPA in the complaint, and Regulation X
expressly states that it implements RESPA. See 12 C.F.R. § 1024.1. So the Court will assess
the complaint to determine if the Bennetts pled sufficient facts to satisfy the corresponding
section in RESPA, § 2605(e)(1)(A). See Bowman v. United States, 564 F.3d 765, 771 (6th
Cir. 2008) (“Where Congress has spoken in unambiguous terms, the inquiry [into the
meaning of the regulation] ends and the court must give effect to the unambiguously
expressed intent of Congress.” (internal quotations omitted)).
The question, then, is whether the AG qualifies as an “agent of the borrower” for the
purposes of section 2605.

Id.

RESPA does not define the meaning of “agent,” see

§ 2605(e)(1)(A); see also § 2602 (definitions), so the Court interprets “agent” “in accordance
with [its] ordinary meaning.” Sebelius v. Cloer, 133 S. Ct. 1886, 1893 (2013) (internal
quotation marks omitted). In determining the ordinary meaning of “agent,” dictionaries at
the time of the enactment of section 2605(e) in 1990 provide a useful guide. See Taniguchi
v. Kan Pac. Saipan, Ltd., 132 S. Ct. 1997, 2002 (2012). The definitions of “agent” include,
6

in relevant part: “one that acts for or in the place of another by authority from him: as (a) a
representative, emissary, or official of a government” or as “(e) a business representative.”
Webster’s Third New Int’l Dictionary 40 (1976). Black’s Law Dictionary defines “agent”
similarly: “A person authorized by another to act for him, one intrusted [sic] with another’s
business.” Black’s Law Dictionary 59 (5th ed. 1979). So “agent” has both a broader
meaning of a “representative” and a narrower meaning of a “business representative.”
Section 2605 intends the broader meaning of the word “agent.” When Congress
wanted to use a narrower definition of “agent” within RESPA, it did so. For example,
section 2607 refers to “duly appointed agent[s].” 12 U.S.C. § 2607(c). Appointed agents are
official representatives, such as accountants or lawyers. See, e.g., Mutual Life Ins. Co. of N.Y
v. Phinney, 178 U.S. 327, 331 (1900) (“[T]he said premium or interest then due shall be paid
to the company or to a duly appointed agent or other person authorized to collect such
premium . . . .”). In section 2605, though, Congress chose to use the broader term “agent,”
suggesting that Congress intended the broader meaning. Moreover, section 2605 has nothing
to do with business interests. Instead, section 2605, as part of RESPA, was established to
protect the rights and interests of homeowners. See 12 U.S.C. § 2601; see also Vega v. First
Fed. Sav. & Loan Ass’n of Detroit, 622 F.2d 918, 923 (6th Cir. 1980) (noting that Congress’s
intent in passing RESPA was “to insure that consumers throughout the Nation are provided
with greater and more timely information” with respect to real estate transactions). Most
homeowners are acting in an individual capacity, not a business capacity, when they engage
in real estate transactions.

So it seems unlikely that Congress intended the narrower,

business-oriented meaning of the word agent.

7

The AG qualifies as the Bennetts’ agent under section 2605. Under a broad reading
of “agent,” any person who is authorized by a borrower to act on her behalf qualifies as an
“agent” for the purposes of section 2605. In this case, the Bennetts reached out to the AG to
help them obtain information from BANA. R. 28 ¶ 27. The AG then sent the letters on the
Bennetts’ behalf. Id. at ¶ 28. These facts indicate that the Bennetts authorized the AG to act
on their behalf by sending inquiries to BANA. So treating the AG as the Bennetts’ agent fits
within the broad definition of “agent.” And BANA recognized that the AG was acting on the
Bennetts’ behalf—BANA addressed its response to Ms. Bennett and stated it was
“responding to the email we received on [the Bennetts’] behalf” from the AG. R. 28-3 at 1.
Finding the AG an agent of the Bennetts also comports with the purpose of section
2605. First and foremost, RESPA is a consumer protection statute. See Vega, 622 F.2d at
923. As such, borrowers who are struggling to communicate effectively with servicers
should be able to seek help or intervention from various government consumer protection
agencies. For example, the AG has a consumer protection division that helped the Bennetts
in this case. See R. 28-2 (Rushmore’s response stamped by the AG’s Consumer Protection
Division). Preventing these government agencies from being “agents” as defined by RESPA
would impede RESPA’s underlying purpose.
The only circuit to rule on this issue agreed with the broad reading of “agent.”
Catalan v. GMAC Mortgage Corp., 629 F.3d 676 (7th Cir. 2011). In Catalan, the plaintiffs
sent a letter to the United States Department of Housing and Urban Development (“HUD”)
detailing the problems they were having with their mortgage servicer. Id. at 682. In the
letter, the plaintiffs asked several questions about the servicing practices of both their loan
servicers. Id. HUD forwarded the letter to the defendant. Id. The Seventh Circuit held that
8

HUD qualified as an “agent of the borrower” under RESPA, stating that an “agent” under
RESPA includes “HUD’s intercession on the plaintiffs’ behalf.” Id. at 688. The court
emphasized that RESPA is a “consumer protection statute,” and the plaintiffs reasonably
sought HUD’s help. Id. The court also pointed to the fact that the defendant’s response
“tacitly acknowledged that the letter was a request for information and raised a dispute with
[plaintiffs’] account.” Id. Following the reasoning in Catalan, the AG qualifies as the
Bennetts’ agent, and the AG’s letters to BANA qualify as QWRs under section 2605.
BANA next argues that the Bennetts’ RESPA claim should be dismissed because the
Bennetts failed to plead damages adequately. R. 29-5 at 4–6. BANA claims that any
inadequacies in their response to the AG’s letter could not have damaged the Bennetts
because BANA was no longer servicing the loan. Id. at 5. Moreover, BANA asserts that the
Bennetts’ claim does not contain sufficient facts for the pattern allegation the Bennetts are
required to plead under RESPA. Id. at 6.
Under RESPA, plaintiffs are not required to plead damages with particularity. BANA
is correct that under Twombly, a pleading must provide “more than labels and conclusions,
and a formulaic recitation of the elements of a cause of action is not enough.” 550 U.S at
555. However, the Sixth Circuit has held that to state a claim under section 2605, a plaintiff
does not have to plead damages with particularity. See Mellentine v. Ameriquest Mortg. Co.,
515 F. App’x 419, 424–25 (6th Cir. 2013). In Mellentine, the plaintiffs alleged “damages in
an amount not yet ascertained, to be proven at trial.” Id. at 425. The district court dismissed
the complaint for failure to plead actual damages or a pattern or practice of noncompliance as
required by section 2605(f). Id. at 424. The Sixth Circuit reversed, holding that plaintiffs’
statement of damages was sufficient to state a claim under section 2605 of RESPA. Id. at
9

425. The court reasoned that because the complaint adequately states a claim that the
defendant violated section 2605(e), the plaintiffs’ complaint “sufficiently sets forth facts
upon which relief can be granted.” Id.
Under Mellentine, the Bennetts adequately pled damages.

In the complaint, the

Bennetts detail how BANA’s responses to the AG’s letters were inadequate under section
2605(e). R. 28 ¶¶ 45–49. The Bennetts allege that BANA’s inadequate responses hindered
their ability to evaluate their past and present loss mitigation options based on the actual
investor guidelines. R. 28 ¶ 48. The Bennetts also assert that BANA’s actions are “a pattern
and practice of behavior in conscious disregard for the Bennetts’ rights.” Id. ¶ 51. The
Bennetts state that BANA is liable to them for “actual damages, statutory damages, costs and
attorney’s fees.”

Id. ¶ 52.

Because the Bennetts adequately state a claim under

section 2605(e) and assert they are seeking actual damages, statutory damages, and costs and
attorney’s fees, the Bennetts’ complaint “sufficiently sets forth facts upon which relief can be
granted.” Mellentine, 515 F. App’x at 425. So BANA’s motion to dismiss Count I is denied.
b. Count II: BANA is not liable for breach of contract.
The Bennetts argue that BANA breached the mortgage contract by violating their
duty to send the Bennetts written notice of default, acceleration, and fees imposed on the
loan. R. 28 ¶¶ 56–59. Specifically, the Bennetts allege that BANA provided the Bennetts
false information about the owner of their loan and misstated the status of mortgage
modifications. Id. ¶ 57. The Bennetts also claim BANA breached in bad faith because it
delayed reviews of the Bennetts’ loss mitigation options and misstated the status of the
Bennetts’ loan. Id. ¶ 60. For the reasons explained below, the Court finds that the Bennetts
failed to state a claim for breach of contract.
10

First, BANA is excused from any possible breach because the Bennetts breached the
mortgage contract first by defaulting on the loan. O’Bryan v. Mengel Co., 6 S.W.2d 249,
251 (Ky. 1928) (“No principle in the law of contracts is better settled than that the breach of
an entire and indivisible contract in a material particular excuses further performance by the
other party and precludes an action for damages on the unexecuted part of the contract.”).
Second, the Bennetts do not point to any particular provision that BANA breached. See R.
28. In order to recover for breach of contract, the Bennetts must show “the existence and the
breach of a contractually imposed duty.” Strong v. Louisville & Nashville R. Co., 43 S.W.2d
11, 13 (Ky. 1931). The Bennetts admit that it is “100% fact” that the mortgage contained no
provisions regarding loan modification. R. 45 at 3 (the Bennetts’ response to BANA’s
motion to dismiss). Because the mortgaged contained no loan modification provisions,
BANA could not have breached the mortgage by failing to evaluate the Bennetts’ for a loan
modification.
Instead, the Bennetts ask this Court to find a duty “between servicer and borrower in
furtherance of loss mitigation.” Id. BANA did not breach if there was no such duty imposed
by law or by the contract. Strong, 43 S.W.2d at 13. Kentucky does impose an obligation of
good faith and fair dealing in performing a contract. Ranier v. Mount Sterling Nat. Bank,
812 S.W.2d 154, 156 (Ky. 1991). But Kentucky law does not provide a cause of action for a
breach of good faith and fair dealing outside the insurance context. Davidson v. Amer.
Freightways, Inc., 25 S.W.3d 94, 102 (Ky. 2000) (“[T]he tort of ‘bad faith’ appl[ies] only to
those persons or entities (and their agents) who are engaged . . . in the business of entering
into contracts of insurance.” (internal quotations omitted)); see also Ennes v. H & R. Block E.
Tax Servs., Inc., 2002 WL 226345, at *4 (W.D. Ky. January 11, 2002) (“Kentucky courts
11

have not extended the tort action for breach of the covenant of good faith and fair dealing to
non-insurance contracts”). The Bennetts do not cite to any Kentucky cases extending a cause
of action for breach of good faith and fair dealing outside the insurance context, and they
make no argument for why this Court should extend it. See R. 28; R. 45. As such, the
breach of contract claim must be dismissed.
c. Count III: BANA is not liable for any breach of the HAMP guidelines.
The Bennetts also fail to state a claim under the Home Affordable Modification
Program (“HAMP”). Congress created HAMP under the Emergency Economic Stabilization
Act of 2008, Pub. L. 110-343. See also 12 U.S.C.A. § 5219. HAMP was established to help
struggling homeowners avoid foreclosure through loan modifications. Rush v. Mac, ---F. 3d--, ---, 2015 WL 4069807, at *4 (6th Cir. 2015). HAMP Servicer Participation Agreements
(“SPA”) require the servicer to perform certain foreclosure prevention services and loan
modifications. R. 28 ¶ 70; see also Ahmad v. Wells Fargo Bank, NA, 861 F. Supp. 2d 818,
825 (E.D. Mich. 2012). Participating servicers must consider all loans that are eligible under
HAMP, but they do not have to modify mortgages. R. 28 ¶ 70; see also Ahmad, 861 F.
Supp. 2d at 825. If a borrower qualifies for a HAMP loan modification, the borrower does
not automatically get a modification. Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547, 557
(7th Cir. 2012). Instead, the servicer first “implement[s] a Trial Period Plan (“TPP”) under
the new loan repayment terms it formulated” according to the HAMP guidelines. Id. If a
borrower successfully completes the conditions of the TPP, then the servicer has to offer a
permanent modification. Id.
The Bennetts allege that BANA’s actions violated HAMP requirements. BANA
signed an SPA to participate in HAMP. R. 28 ¶ 64. The Bennetts submitted an application
12

to BANA for assistance under HAMP. Id. ¶ 68. BANA allegedly denied the Bennetts’
application in April 2013, id. ¶ 69; R 28-3 at 1, but the Bennetts claim they never received
the declination letter. R. 28 ¶ 69. The Bennetts assert that BANA had a duty under the
HAMP servicer participation agreement to review the Bennetts for all applicable HAMP
programs. Id. ¶ 70. The Bennetts also argue that BANA had a duty to provide them with
written notice of approval or denial of their application. Id. Therefore, the Bennetts claim
that BANA breached the HAMP guidelines, and that BANA should be liable to the Bennetts
for this breach. Id. ¶ 72.
HAMP and its enabling act “do not contain a federal right of action.” Olson v.
Merrill Lynch Credit Corp., 576 F. App’x 506, 511 (6th Cir. 2014) (quoting Wigod, 673 F.3d
at 555). So the Bennetts “can only bring a HAMP-related claim if [Kentucky] law provides
one.” Id. (citing Mik v. Fed. Home Loan Mortg. Corp., 743 F.3d 149, 166–67 (6th Cir.
2014)). The Bennetts’ claim rests solely on federal law, and they cite to no Kentucky law
that allows a third-party private action under HAMP.1 See R. 28 ¶¶ 64–73. Therefore. the
Bennetts have failed to allege a theory that BANA owed them a contractual duty in
connection with BANA’s contract with the government. Olson, 576 F. App’x at 512; see
also Rush, 2015 WL 4069807, at *4.
In their response, the Bennetts concede that HAMP does not expressly create a private
right of action. See R. 45 at 4. But the Bennetts argue that this Court should create a private
right of action for breach of the duty to adequately review a borrower for loan modifications
1

The Bennetts do cite to one Kentucky case, Ranier, 812 S.W.2d 154. R. 45 at 4. But Ranier does not create a
private right of action for third-party beneficiaries. Instead, Ranier dealt with creditor subordination agreements, in
which a third-party creditor executes a subordination agreement with the creditor, the creditor “has an implied duty
under equitable principles to apply the payment it receives from the debtor in a manner which does not prejudice the
third-party creditor’s subordinated security interest.” Id. at 157.

13

under HAMP. Id. The Bennetts claim this private right of action is rooted in the Seventh
Circuit’s decision in Wigod and the Ninth Circuit’s decision in Corvello v. Wells Fargo
Bank, NA, 728 F.3d 878 (9th Cir. 2013). But the Bennetts’ reliance on Wigod and Corvello
is misplaced. In both cases, the plaintiffs had received a Trial Period Plan (“TPP”), but
Wells Fargo refused to offer them a permanent loan modification after they successfully
completed the TPP conditions. Wigod, 673 F.3d at 557–59; Corvello, 728 F.3d at 881. Both
cases were considering whether Wells Fargo breached the TPP agreement, not the HAMP
agreement. Wigod, 673 F.3d at 560–61; Corvello, 628 F.3d at 883. In this case, the Bennetts
never qualified for a HAMP loan modification, and they never received a TPP. So Wigod
and Corvello do not apply here.
The Bennetts pled sufficient facts to state a claim under RESPA, but their claims for
breach of contract and breach of the HAMP contract fail to state a claim upon which relief
may be granted. See Fed. R. Civ. P. 12(b)(6). As such, BANA’s motion to dismiss, R. 29,
will be granted in part and denied in part. Count II and Count III of the Bennetts’ complaint,
R. 28, will be dismissed.
II.

DEFENDANT RUSHMORE’S MOTION TO DISMISS
The Bennetts bring five claims against Rushmore: (1) Rushmore violated 12 C.F.R. §

1024.36(d) of RESPA; (2) Rushmore violated 12 C.F.R. §1024.41(c) of RESPA; (3)
Rushmore breached the mortgage contract; (4) Rushmore violated the Fair Debt Collection
Practices Act (“FDCPA”); and (5) Rushmore made fraudulent representations to the
Bennetts. R. 28 at 16–21. Rushmore moved to dismiss all five counts for failure to state a
claim upon which relief may be granted. R. 30 at 1 (citing Fed. R. Civ. P. 12(b)(6)). Only
the Bennetts’ RESPA claims survive.
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a. Count IV: The Bennetts state a claim under RESPA, 12 U.S.C. § 2605.
Rushmore contends that plaintiff’s RESPA claim fails for two reasons.

First,

Rushmore asserts that the letters came from the AG’s office, not the Bennetts, so the letters
did not qualify as QWRs under RESPA. This argument fails for the same reasons that
BANA’s did—the AG qualifies as an agent under RESPA. See supra Part I.a.
Second, Rushmore argues the Bennetts do not state sufficient facts to show that
Rushmore failed to respond adequately to the Bennetts’ QWRs. R. 30 at 4–7. This argument
fails as well. Section 2605 requires that a servicer respond to a QWR by providing the
borrower “with a written explanation or clarification that includes . . . information requested
by the borrower or an explanation of why the information requested is unavailable or cannot
be provided by the servicer.” 12 U.S.C. § 2605(e)(2)(C). The Bennetts allege that Rushmore
inadequately responded to the Bennetts’ questions about the status of their loss mitigation
applications. R. 28 ¶ 78. First, Rushmore stated that the Bennetts had been offered a
proprietary trial loan modification. Id. But the Bennetts had only received a forbearance
agreement, not a proprietary trial loan modification. Id. at ¶¶ 25, 30. Second, Rushmore
stated that the owner of the loan was MTGLQ, which conflicted with all other information
the Bennetts had. Id. These allegations are sufficient—they allege that Rushmore provided
inaccurate or incomplete information, and that Rushmore failed to perform an adequate
investigation to obtain the requested information. So the Bennetts stated a plausible claim
for relief under section 2605.
b. Count V: The Bennetts state a claim under RESPA, 12 C.F.R. § 1024.41.
The Bennetts also allege that Rushmore violated another section of RESPA, 12 C.F.R.
§ 1024.41. 12 C.F.R. § 1024.41 is part of Regulation X that became effective on January 10,
15

2014. Campbell v. Nationstar Mortg., -- F. App’x --, 2015 WL 2084023, at *6 (6th Cir.
2015). It lays out the procedures that servicers are required to follow when they receive a
loss mitigation application. 12 C.F.R. § 1024.41(b)–(j). If a borrower provides a complete
loss mitigation application, section 1024.41 requires that a servicer “[e]valuate the borrower
for all loss mitigation options available to the borrower” and “[p]rovide the borrower with a
notice in writing stating . . . which loss mitigation options, if any, it will offer to the borrower
on behalf of the owner or assignee of the mortgage.” Id. at § 1024.41(c). The Bennetts
allege that Rushmore decided to offer the Bennetts two loss mitigation options—a
forbearance agreement, see R. 28-1, and a proprietary trial loan modification, see R. 28-2. R.
28 ¶¶ 87–88. But the Bennetts only received the forbearance agreement. Id. So the
Bennetts argue that Rushmore violated section 1024.41(c) by failing to notify the Bennetts of
both offers. Id. ¶¶ 90–92.
Rushmore argues section 1024.41(i) only requires a servicer to comply with section
1024.41 for a single complete loss mitigation application. 12 C.F.R. § 1024.41(i). BANA
had already considered the Bennetts for a loan modification and denied them multiple times
between 2010 and 2013. So Rushmore asserts that section 1024.41 does not apply to the
Bennetts’ case. Rushmore’s argument misinterprets the statute. Section 1024.41(i) states
that “[a] servicer is only required to comply with the requirements of this section for a single
complete loss mitigation application for a borrower’s mortgage loan account.” Id. But
section 1024.41 was not effective until 2014, after BANA considered the Bennetts for any
loss mitigation options. Campbell, 2015 WL 2084023, at *6–7. This means that BANA
never complied with the requirements of section 1024.41 in evaluating the Bennetts for loss
mitigation options. As such, Rushmore was still required to comply with the requirements of
16

section 1024.41 at least once after the section became effective. So section 1024.41 does
apply to the Bennetts’ case.
Rushmore further argues that it met the requirements of section 1024.41 by sending
the Bennetts the forbearance agreement. R. 30 at 9–10. Rushmore asserts that it did not
have a duty to extend any other offers to the Bennetts. Id. at 9. Rushmore is correct that
section 1024.41 does not “impose[] a duty on a servicer to provide any borrower with any
specific loss mitigation option.” 12 C.F.R. § 1024.41(a). But section 1024.41 does require a
servicer to notify the borrower of the servicer’s “determination of which loss mitigation
options, if any, it will offer to the borrower.” 12 C.F.R. § 1024.41(c)(1)(ii). So section
1024.41 does impose a duty on a servicer to notify a borrower of all loss mitigation offers.
The Bennetts allege that Rushmore decided to offer the Bennetts two different loss
mitigation options: the forbearance agreement and a proprietary trial loan modification. R.
28 ¶¶ 87–89; see also R. 28-1; R. 28-2 (“Our records indicate Rushmore reviewed and
approved the loan for a proprietary trial loan modification . . . .”).

As such, section

1024.41(c)(1)(ii) required Rushmore notify the Bennetts of both offers.

12 C.F.R. §

1024.41(c)(1)(ii). But the Bennetts claim they never received notice of the offer for a
proprietary trial loan modification. R. 28 ¶ 90. So the Bennetts pled sufficient facts to state
a claim that Rushmore violated section 1024.41.
Finally, Rushmore argues that plaintiffs’ claim fails because the forbearance
agreement and the proprietary trial loan modification both required a large payment before
Rushmore would approve a final loan modification. R. 30 at 10. So the Bennetts would
have had to pay the amount in the forbearance agreement either way. Id. Rushmore seems
to claim that since the Bennetts rejected the forebearance agreement they would have also
17

rejected a proprietary trial loan modification that contained the same lump sum payment. Id.
If this is Rushmore’s argument, it misconstrues the documents. Rushmore cannot use any
assumption about this as an excuse for why it never sent the Bennetts notice of both offers.
See § 1024.41(c)(1)(ii) (requiring a servicer to “[p]rovide the borrower with a notice in
writing stating . . . which loss mitigation options, if any, it will offer to the borrower”). Also,
there is nothing in the letter to suggest that the payment amount would have been the same as
that in the forbearance agreement. See R. 28-2. Finally, in its response to the AG’s letter,
Rushmore stated that it “reviewed and approved [the Bennetts’] loan for a proprietary trial
loan modification.” Id. Rushmore had already approved the Bennetts for the trial loan
modification. Therefore, its approval was not dependent on any large payment. The letter
goes on to state that the large payment “would not be required until you have been approved
for a loan modification (which would be conditioned upon you making such a payment).”
Id. So the Bennetts would only be required to make the payment as a condition of the final
loan modification plan. As such, Rushmore’s argument fails, and its motion to dismiss
Count V will be denied.
c. Count VI: Rushmore is not liable for breach of contract.
The Bennetts claim Rushmore breached the mortgage contract by failing to provide
the Bennetts with required information. R. 28 ¶¶ 95–100. Specifically, the Bennetts’ claim
revolves around Rushmore’s failure to notify the Bennetts of the proprietary trial loan
modification offer. Id. ¶¶ 96–99. The Bennetts also claim Rushmore breached in bad faith
because it knowingly misstated the status of the Bennetts’ loss mitigation applications. Id.
¶ 60. These claims against Rushmore fail.

18

Like BANA, Rushmore is excused from any possible breach because the Bennetts
breached the mortgage contract first by defaulting on the loan. See supra Part I.c (citing
O’Bryan, 6 S.W.2d at 251). The Bennetts concede that they breached first. R. 36 at 4.
Instead, the Bennetts argue that Rushmore had a duty to notify the Bennetts of certain
information as part of the general implied duties of good faith and fair dealing. Id. at 5. As
stated earlier, Kentucky law contains no cause of action for breach of good faith and fair
dealing outside the insurance context, so Rushmore cannot be held liable for breaching this
alleged obligation. See supra Part I.b. Therefore, Rushmore’s motion to dismiss Count VI
will be granted.
d. Count VII: The Bennetts fail to state a claim under the FDCPA.
The FDCPA prohibits a debt collector from using “any false, deceptive, or misleading
representation or means in connection with the collection of any debt.” 15 U.S.C. § 1692e.
The Bennetts allege four violations of the FDCPA: (1) the forbearance agreement was a
misleading representation of all of the Bennetts’ loan mitigation options; (2) Rushmore’s
response to the AG’s letter contained material misrepresentations; (3) Rushmore made false
statements to BANA about the legal status of the Bennetts’ foreclosure; and (4) Rushmore’s
monthly mortgage statements to the Bennetts contain misrepresentations. R. 28 ¶¶ 109–12.
All of the Bennetts’ claims under the FDCPA must be dismissed.
First, the forbearance agreement does not violate the FDCPA. The Bennetts do not
point to any provision in the forbearance agreement that contains misrepresentations or
misleading representations. Instead, the Bennetts claim that the agreement as a whole was a
misrepresentation of the loss mitigation options available to them at the time. But the
forbearance agreement does not suggest that it was the Bennetts’ only loss mitigation option.
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See R. 28-1. The forbearance agreement only presents the terms for this specific loss
mitigation option. Id. Even if the Bennetts should have also received a proprietary trial loan
modification from Rushmore, that fact does not make the forbearance agreement itself
misleading. See Miller v. Javitch, Block, & Rathbone, 561 F.3d 588, 595 (6th Cir. 2009)
(holding that a court “read[s] the [document] in its entirety and give[s] it a common sense
appraisal” to determine if the document is misleading (internal quotations omitted)).
Rushmore’s response to the AG’s letter also does not violate the FDCPA. To violate
the FDCPA, the misrepresentations must be made “in connection with the collection of any
debt.” 15 U.S.C. § 1692e. The FDCPA does not apply to every communication between a
debtor and a debt collector. Grden v. Leikin Ingber & Winters PC, 643 F.3d 169, 173 (6th
Cir. 2011) (citation omitted). The FDCPA only applies to a communication if “an animating
purpose of the communication [is] to induce payment by the debtor.” Id. (citation omitted).
A “ministerial response to a debtor inquiry” does not have an animating purpose to induce
payment. Id. In this case, the AG’s letter was a debtor inquiry into the status of the
mortgage and any loss mitigation options. R. 28 ¶ 27. Rushmore’s response was simply a
“ministerial response” to this inquiry. See R. 28-2. In the response, Rushmore makes no
attempt to induce payment from the Bennetts. See id. So the FDCPA does not apply to
Rushmore’s response.
Similarly, Rushmore’s statements to BANA (as reflected in BANA’s response to the
AG) do not violate the FDCPA. BANA only reached out to Rushmore for more information
about the loan’s status, not to induce payment from the Bennetts. See R. 28-3 at 1–2.
Because Rushmore did not provide that information to BANA to induce payment from the
Bennetts, the FDCPA does not apply to these statements. See Grden, 643 F.3d at 173.
20

Finally, the monthly mortgage statement that Rushmore sent to the Bennetts does not
violate the FDCPA.

The complaint only contains a vague statement that Rushmore’s

monthly mortgage statements “contain misrepresentations based on their responses to the
Attorney General which are direct attempts to collect a debt which Rushmore has every
reason to know is a misstatement.” R. 28 ¶ 111. On its face, the monthly mortgage
statement does not appear to contain any misrepresentations or material that conflicts with
Rushmore’s response to the AG’s letter. See R. 28-6 (monthly mortgage statement). And
the Bennetts do not point to anything in the monthly mortgage statement that is a
misrepresentation. See R. 28. So the Bennetts’ claim fails. See Blackburn v. Fisk Univ., 443
F.2d 121, 123 (6th Cir. 1971) (holding that a court is “not bound by allegations that are
clearly unsupported and unsupportable” (citations omitted)).
e. Count VIII: Fraudulent Misrepresentation
The Bennetts fail to state a claim for fraudulent misrepresentation as well. A claim of
fraud under Kentucky law includes six elements: that (1) the defendant made a material
representation to the plaintiffs, (2) the representation was false, (3) the defendant knew that it
was false or made it recklessly, (4) the defendant made the misrepresentation to induce the
plaintiff to act, (5) the plaintiff relied on it, and (6) suffered injury as a result. United Parcel
Serv. Co. v. Rickert, 996 S.W.2d 464, 468 (Ky. 1999). To survive a motion to dismiss,
claims of fraud must satisfy the heightened pleading standard in Federal Rule of Civil
Procedure 9(b). Minger v. Green, 239 F.3d 793, 800 (6th Cir. 2001). This means that “the
circumstances constituting fraud . . . shall be stated with particularity.” Bovee v. Coopers &
Lybrand C.P.A., 272 F.3d 356, 361 (6th Cir. 2001). It is not enough to offer “[g]eneralized
and conclusory” recitations of the elements. Id. Instead, a plaintiff must plead facts showing
21

that the defendant’s actions satisfy each element of the claim. Ashland, Inc. v. Oppenheimer
& Co., 648 F.3d 461, 471–72 (6th Cir. 2011) (affirming dismissal based on failure to plead
one element of fraud sufficiently).
The Bennetts make three arguments for fraudulent misrepresentation.

First, the

Bennetts claim that Rushmore’s statements in the response to the AG’s letter about the
proprietary trial loan modification were misrepresentations. Id. ¶¶ 115, 117. This claim fails
because the Bennetts do not state sufficient facts to plead the fifth and sixth elements of
fraud. Even if Rushmore’s statements were false, the Bennetts do not assert how they relied
on these statements. In the absence of particularized factual allegations showing reliance, the
Bennetts fail to plead a claim for fraud. Evans v. Pearson Enterprises, Inc., 434 F.3d 839,
852 (6th Cir. 2006) (holding that a plaintiff “failed to plead reliance sufficiently and
therefore is unable to state a claim for fraud” despite alleging in “her complaint that she
‘relied implicitly on the representations’”). The Bennetts also failed to assert how any
reliance on Rushmore’s statements injured them. The Bennetts’ main argument for injury is
that they never received the proprietary trial loan modification offer. R. 28 ¶¶ 119–20. But
this injury did not result from the Bennetts’ reliance on Rushmore’s statements in
Rushmore’s response to the AG’s letter—all Rushmore’s statements did was alert the
Bennetts to the existence of the proprietary trial loan modification offer. So the Bennetts did
not adequately plead injury.
Second, the Bennetts seem to argue that the forbearance agreement they received
from Rushmore was a fraudulent misrepresentation of their loss modification options. See
id. As discussed in Part II.c, the forbearance agreement contained no statements regarding
other loss mitigation options, and the agreement does not claim to be the Bennetts’ only
22

option. See R. 28-1. The Bennetts fail to point to a single representation in the document
that is false. See R. 28. So the Bennetts do not state a claim for fraud. Eidson v. State of
Tennessee Dep’t of Children’s Servs., 510 F.3d 631, 634 (6th Cir. 2007) (citing Twombly,
550 U.S. at 555) (“Conclusory allegations or legal conclusions masquerading as factual
allegations will not suffice.”).
Finally, the Bennetts claim that Rushmore’s statements to BANA were fraudulent
misrepresentations. This claim also fails. Rushmore made these claims to BANA, not the
Bennetts, so the Bennetts insufficiently pled the first element of fraud. See Ashland, 648
F.3d at 471 (noting that the first element of fraud in Kentucky requires “the declarant made a
material representation to the plaintiff”). Moreover, the Bennetts fail to plead any facts in
support the last three elements of fraud. The Bennetts do not allege how Rushmore made
these statements to BANA in order to induce the Bennetts to act. See R. 28. The Bennetts
also do not even attempt to assert how they relied on these misrepresentations, or how this
reliance caused them injury. See id. Without any particularized factual allegations for any of
these elements, the Bennetts’ claim for fraud must fail. See Evans, 434 F.3d at 852; Eidson,
510 F.3d at 634.
f. Rooker-Feldman abstention does not apply
At the end of its brief, Rushmore quickly mentions that this Court should abstain from
this case under the Rooker-Feldman doctrine. As Rushmore states, Rooker-Feldman is
limited to federal cases “brought by state-court losers complaining of injuries caused by
state-court judgments . . . and inviting district court review and rejection of those
judgments.” Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 294 (2005); see
also R. 30 at 21. The Bennetts are not asking this Court to “review and reject” the state court
23

foreclosure judgment.

Id.

Instead, this action revolves around alleged misconduct

committed by the defendants after the state court judgment went into effect. See R. 28
(alleging conduct that occurred after December 22, 2009). So Rooker-Feldman abstention
does not apply here.
The Bennetts only pled sufficient facts to support the RESPA claims against
Rushmore. The Bennetts failed to state a claim for breach of contract, violation of the
FDCPA, and fraudulent representation. Therefore, Rushmore’s motion to dismiss, R. 30,
will be granted in part and denied in part. The Court will dismiss Counts VI, VII, and VIII of
the Bennetts’ complaint, R. 28, as they pertain to Rushmore.
III.

DEFENDANT MTGLQ’S MOTION TO DISMISS
The Bennetts bring one claim against MTGLQ: fraudulent misrepresentation.

Specifically, they argue that Rushmore’s misrepresentations about the Bennetts’ loss
mitigation options were based on MTGLQ’s guidelines and instructions. R. 28 ¶ 121. The
Bennetts also allege that MTGLQ “knowingly and reckless[ly] allowed Rushmore to
misconstrue the [Bennetts’] loss mitigation options.” Id. This claim fails because the
Bennetts do not plead any of the elements of fraud. First, they do not point to a single
representation MTGLQ made directly to them. See Ashland, 648 F.3d at 471. Second, the
Bennetts do not assert: (1) that any of these representations were false, (2) that MTGLQ
knew the representations were false or made recklessly, (3) that MTGLQ made the
representations to induce the Bennetts to act, (4) that the Bennetts relied on the
representations, or (5) that the Bennetts were injured based on this reliance. As such, the
Bennetts fail to state a claim for fraud against MTGLQ, so MTGLQ’s motion to dismiss will
be granted.
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CONCLUSION
Accordingly, it is ORDERED that:
(1)

Bank of America’s motion to dismiss, R. 29, is GRANTED IN PART and
DENIED IN PART. Specifically, Bank of America’s motion to dismiss is
DENIED with respect to Count I of the complaint, R. 28.

(2)

Rushmore’s motion to dismiss, R. 30, is GRANTED IN PART and DENIED
IN PART. Specifically, Rushmore’s motion to dismiss is DENIED with
respect to Counts IV and V of the complaint, R. 28.

(3)

MTGLQ’s motion to dismiss, R. 31, is GRANTED.

(4)

Counts II, III, VI, VII, and VIII of the Bennetts’ complaint, R. 28, are
DISMISSED WITHOUT PREJUDICE.

This the 26th day of August, 2015.

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