Fustolo v. Select Portfolio Servicing, Inc. et al

Filing 23

Judge Denise J. Casper: ORDER entered. MEMORANDUM AND ORDER - The Court ALLOWS Defendants' motion to dismiss as to Counts I, III, IV, V and VI and DENIES the motion as to Count II. D. 15. (Hourihan, Lisa)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
__________________________________________
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STEVEN C. FUSTOLO,
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Plaintiff,
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v.
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Case No. 23-cv-10166-DJC
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SELECT PORTFOLIO SERVICING, INC.
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and FEDERAL HOME LOAN MORTGAGE )
CORP. as Trustee of SCRT 2019-2,
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Defendants.
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)
__________________________________________)
MEMORANDUM AND ORDER
CASPER, J.
I.

November 13, 2023

Introduction
Plaintiff Steven C. Fustolo (“Fustolo”) has filed this lawsuit against Select Portfolio

Servicing, Inc. (“SPS”) and Federal Home Loan Mortgage Corp., as Trustee of SCRT 2019-2
(“Freddie Mac”) (collectively, “Defendants”) seeking declaratory judgment that Defendants are
not entitled to foreclose on the subject property because they allegedly do not hold the mortgage
or the promissory note (Count I) and because of a defect in the default notice sent by SPS (Count
II). D. 1-3. Fustolo also asserts claims for violation of the Real Estate Settlement Procedures Act
(“RESPA”) (Count III), defamation (Count IV), slander of title (Count V) and violation of Mass.
Gen. L. c. 93, § 49 (Count VI). Id. Defendants have moved for dismissal as to all claims. D. 15.
For the reasons stated below, the Court ALLOWS the motion as to Counts I, III, IV, V and VI and
DENIES it as to Count II. Id.

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II.

Standard of Review
A defendant may move to dismiss for a plaintiff’s “failure to state a claim upon which

relief can be granted.” Fed. R. Civ. P. 12(b)(6). To withstand a Rule 12(b)(6) challenge, the Court
must determine if the complaint “plausibly narrate[s] a claim for relief.” Schatz v.
Republican State Leadership Comm., 669 F.3d 50, 55 (1st Cir. 2012) (citation omitted). Reading
the complaint “as a whole,” the Court must conduct a two-step, context-specific inquiry. GarcíaCatalán v. United States, 734 F.3d 100, 103 (1st Cir. 2013) (citations omitted).

First,

the Court must perform a close reading of the claim to distinguish the factual allegations from the
conclusory legal allegations contained therein. Id. (citation omitted). Factual allegations must be
accepted as true, while conclusory legal conclusions are not entitled credit. Id. (citation omitted).
Second, the Court must determine whether the factual allegations present a “reasonable inference
that the defendant is liable for the misconduct alleged.” Haley v. City of Boston, 657 F.3d 39, 46
(1st Cir. 2011) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). In sum, the complaint must
provide sufficient factual allegations for the Court to find the claim “plausible on its face.” GarcíaCatalán, 734 F.3d at 103 (quoting Iqbal, 556 U.S. at 678).
III.

Factual Background
The following facts are drawn from Fustolo’s verified complaint, D. 1-3, and the exhibits

attached thereto, id. at 19–105, and are accepted as true for the purpose of resolving the pending
motion to dismiss.
In late 2007, Fustolo acquired the subject property located at 115 Salem Street, Unit 14,
Boston, Massachusetts (the “Property”) with a quitclaim deed recorded in the Suffolk Registry of
Deeds at book 42920, page 260. Id. ¶¶ 4, 7; see id. at 19–20. On January 11, 2008, Fustolo
executed a mortgage (“the Mortgage”) on the Property in favor of Mortgage Electronic
Registration Systems, Inc. (“MERS”) as nominee for Union Capital Mortgage Business Trust
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(“Union Capital”), recorded in the Suffolk Registry of Deeds at book 42920, page 316, in the
amount of $283,500. Id. ¶ 8; see id. at 21. On January 10, 2008, in connection with the Mortgage,
Fustolo executed a promissory note (the “Note”) in the amount of $283,500, and payable to Union
Capital. Id. ¶ 9; see id. at 44.
Paragraph 22 of the Mortgage states in relevant part:
22. Acceleration; Remedies. Lender shall give notice to Borrower prior to
acceleration following Borrower’s breach of any covenant or agreement in this
Security Instrument . . . . The notice shall specify: (a) the default; (b) the action
required to cure the default; (c) a date, not less than 30 days from the date the notice
is given to Borrower, by which the default must be cured; and (d) that failure to
cure the default on or before the date specified in the notice may result in
acceleration of the sums secured by this Security Instrument and sale of the
Property. The notice shall further inform Borrower of the right to reinstate after
acceleration and the right to bring a court action to assert the non-existence of a
default or any other defense of Borrower to acceleration and sale. If the default is
not cured on or before the date specified in the notice, Lender at its option may
require immediate payment in full of all sums secured by this Security Instrument
without further demand and may invoke the STATUTORY POWER OF SALE and
any other remedies permitted by Applicable Law. Lender shall be entitled to collect
all expenses incurred in pursuing the remedies provided in this Section 22,
including, but not limited to, reasonable attorneys’ fees and costs of title evidence.
Id. at 33.
Union Capital was a trust whose trustee was UCM, LLC, a Massachusetts limited liability
company (“UCM”). Id. ¶ 11. Union Capital was terminated on June 29, 2010 by filing a
Termination of Trust with the Massachusetts Secretary of the Commonwealth. Id. ¶ 12; see id. at
57. UCM filed a Certificate of Cancellation of the LLC on June 30, 2010, stating that the reason
for the filing of the cancellation was that the Trust for which it was acting as Trustee was being
dissolved. Id. ¶ 13; see id. at 60.
The Mortgage was assigned four times after Union Capital and UCM ceased to exist as
business entities. See id. ¶ 10. In December 2011, MERS, as nominee for Union Capital, assigned
the Mortgage to HSBC Bank USA, N.A. (“HSBC”). Id. ¶ 10; see id. at 47. In January 2017,

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HSBC assigned the Mortgage to Nationstar Mortgage LLC (“Nationstar”). Id. ¶ 10; see id. at 49.
In July 2022, Nationstar assigned the Mortgage to Federal Home Loan Mortgage Corporation, as
Trustee for the Benefit of the Seasoned Credit Risk Transfer Trust, Series 2019-2 (“Trust 20192”). Id. ¶ 10; see id. at 52. In October 2022, Trust 2019-2 assigned the Mortgage to Freddie Mac.
Id. ¶ 10; see id. at 55.
On April 2, 2021, SPS, the servicer of the Mortgage, sent Fustolo a valuation of the
Property asserting that it was worth between $500,000 and $510,000. Id. ¶¶ 5, 20; see id. at 64.
Fustolo obtained a valuation from an area real estate brokerage concluding that the Property was
worth $350,000. Id. ¶ 21; see id. at 74. Fustolo sent this valuation to SPS, who acknowledged
receiving it and notified Fustolo that it was “in the process of completing our research of the
issue(s) identified in your correspondence” but did not otherwise respond to Fustolo’s
correspondence disputing the value of the Property. Id. ¶¶ 22–25.
On May 12, 2021, Fustolo requested a copy of the front and back of the Note with any
indorsements and allonges from SPS. Id. ¶ 29; id. at 79. On May 20, 2021, SPS provided the Note
to Fustolo, which remained payable to Union Capital and contained no indorsements or allonges.
Id. ¶ 30; see id. at 83–85. Defendants attached an affidavit (the “Mortgagee’s Affidavit”) filed in
conjunction with a pre-foreclosure Massachusetts Land Court Servicemembers Civil Relief Act
case against Fustolo.1 See D. 16 at 91; D. 1 ¶ 36; id. at 88. In the Mortgagee’s Affidavit, an SPS

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The Court takes judicial notice of the Mortgagee’s Affidavit as an official public record.
On a motion to dismiss, “the court may consider documents attached to or expressly incorporated
in the Complaint, as well as ‘documents the authenticity of which are not disputed by the parties,’
‘official public records,’ ‘documents central to the plaintiff’s claim,’ and ‘documents sufficiently
referred to in the complaint’ without converting the motion into one for summary judgment.”
Wilborn v. Walsh, 584 F. Supp. 2d 384, 386 (D. Mass. 2008) (quoting Watterson v. Page, 987
F.2d 1, 3–4 (1st Cir. 1993)).
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representative attested that she was “[a]cting on behalf of the person(s) or entity(ies) currently
holding the subject Mortgage and the note.” D. 16 at 91.
On or about September 7, 2021, SPS sent Fustolo a “90 Day Right to Cure Your Mortgage
Default” notice (“the Notice”). Id. ¶ 53; see id. at 98. The Notice, in relevant part, informed him
that he had failed to make his monthly loan payments and that he “must pay the past due amount .
. . on or before December 9, 2021, which is 90 days from the date of this notice.” Id. at 98. Also
on September 7, 2021, SPS sent Fustolo a letter (the “Letter”) which stated, in relevant part, that
he has “the right to bring a court action to assert the non-existence of a default or any other defense
[he] may have to acceleration and sale.” Id. ¶ 55; id. at 102.
On May 6, 2013, an involuntary bankruptcy was filed against Fustolo in the U.S.
Bankruptcy Court for the District of Massachusetts. Id. ¶ 34; see id. at 86. An automatic stay went
into effect, prohibiting his creditors from attempting to collect any debt from him. Id. ¶ 35. On
January 31, 2014, in connection with the bankruptcy proceedings, Fustolo stated his intent to
surrender the Property. D. 16 at 85.
Defendants have sent Fustolo collection notices “virtually every month” and reported the
account on his credit report, contending that “Fustolo is presently obligated to tender mortgage
payments.” D. 1-3 ¶¶ 37–39; see id. at 90, 95. To date, “Defendants have already scheduled one
foreclosure, and have requested permission from the Bankruptcy Court for relief from the
automatic stay in order to foreclose.” Id. ¶ 59.
IV.

Procedural History
Fustolo commenced this action on December 30, 2022 in Suffolk Superior Court. D. 1-3.

Defendants removed the action to this Court on January 26, 2023, D. 1, and moved for dismissal,

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D. 15. The Court heard the parties on the pending motion and took the matter under advisement.
D. 22.
V.

Discussion
A.

Fustolo’s Claims Are Not Barred by Judicial Estoppel

Defendants argue that judicial estoppel bars Fustolo from “asserting any title rights to the
Property,” including “contesting the power of the Trust to enforce the Mortgage” because he stated
his intent to surrender the Property in the involuntary Chapter 7 bankruptcy case. D. 16 at 5.
“[T]he doctrine of judicial estoppel prevents a litigant from pressing a claim that is
inconsistent with a position taken by that litigant either in a prior legal proceeding or in an earlier
phase of the same legal proceeding.” United States v. Szpyt, 785 F.3d 31, 41 (1st Cir. 2015)
(quoting InterGen N.V. v. Grina, 344 F.3d 134, 144 (1st Cir. 2003)) (internal quotation marks
omitted). The doctrine is “equitable and thus cannot be reduced to a precise formula or test.”
Zedner v. United States, 547 U.S. 489, 504 (2006). “It is, however, widely agreed that, at a
minimum, two conditions must be satisfied before judicial estoppel can attach.” Alternative Sys.
Concepts, Inc. v. Synopsys, Inc., 374 F.3d 23, 33 (1st Cir. 2004) (collecting cases). “First, the
estopping position and the estopped position must be directly inconsistent, that is, mutually
exclusive.” Id. (citations omitted). “Second, the responsible party must have succeeded in
persuading a court to accept its prior position.” Id. (citations omitted). Here, the second factor
weighs against dismissing on this basis.
Although Defendants may be correct that Fustolo’s surrender of the Property is inconsistent
with his present challenge to the foreclosure of the Mortgage, see Ibanez v. U.S. Bank Nat. Ass’n,
856 F. Supp. 2d 273, 276 (D. Mass. 2012) (defining “surrender” in the Chapter 7 context as
“agree[ing] to make the collateral available to the secured creditor” and concluding that this was

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“fatal” to his claims), it cannot be said that Fustolo was successful in convincing the bankruptcy
court of his position because it denied his discharge. See D. 16 at 56 (reflecting docket entry #391
denying discharge). By contrast, in each of the cases Defendants rely on, the plaintiff attempted
to challenge a foreclosure after receiving a discharge in exchange for surrendering the property in
question. See Ibanez, 856 F. Supp. 2d at 274–75 (noting that “Ibanez (and his spouse) were
discharged of their debts”); Souza v. Bank of Am., Nat. Ass’n, 13-cv-10181-PBS, 2013 WL
3457185, at *1 (D. Mass. July 8, 2013) (noting that “the Bankruptcy Court granted Souza a
discharge of her debt”); In re Schiavone, No. 14 SBQ 10142 04-001, 2016 WL 7496166, at *10
(Mass. Land Ct. Dec. 20, 2016) (noting that “the Schiavones’ debt was discharged”); Pacia v.
Deutsche Bank Nat’l Tr. Co. as Tr. for Morgan Stanley ABS Cap. I, Inc. Tr. 2006-NC5, Mortg.
Pass Through Certificates Series 2006-NC5, No. 22-cv-0014-MSM-PAS, 2022 WL 16961417, at
*1 (D.R.I. Nov. 16, 2022) (noting that “Mr. Pacia received a bankruptcy discharge”). Because
Fustolo did not succeed in persuading the bankruptcy court to discharge his debt in exchange for
his surrender of the Property, the Court declines to apply judicial estoppel, an equitable doctrine,
here and turns to Defendants’ other bases for dismissing Fustolo’s claims.
B.

Declaratory Judgment as to Mortgage and Note Assignments (Count I)

Defendants argue that Fustolo does not state a claim to prohibit enforcement of the
Mortgage. D. 16 at 6. Count I seeks a declaration that Defendants are not entitled to foreclose the
Property on two legal theories. See D. 1 at 9–13. The Court addresses each in turn.
1.

Assignment of the Mortgage

Fustolo first alleges that Defendants do not hold a valid assignment of the Mortgage. Id.
¶¶ 47–48. “Under Massachusetts law, if a mortgage grants a statutory ‘power of sale’ and the
mortgagor defaults, as is the case here, an authorized party ‘may sell the property at a public

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auction and convey the property to the purchaser in fee simple.’” Lewis v. Bank of New York
Mellon Tr. Co., N.A., No. 16-cv-11122-FDS, 2016 WL 4555969, at *3 (D. Mass. Aug. 31, 2016)
(quoting U.S. Bank Nat’l Ass’n v. Ibanez, 458 Mass. 637, 641 (2011)). “A mortgagee has the
authority to exercise the power of sale only if it was the assignee of the mortgage at the time of the
notice of sale and the subsequent foreclosure sale.” Id. (quoting Ibanez, 458 Mass. at 648).
“However, for foreclosure sales occurring after June 22, 2012, simply holding the mortgage is
necessary, but not sufficient, to exercise a power of sale; a mortgagee must also hold the
promissory note or act as the authorized agent of the note holder.” Id. (citing Eaton v. Federal
Nat’l Mortg. Ass’n, 462 Mass. 569, 582–84 (2012)).
“The MERS system is intended to lower transaction costs and facilitate the securitization
of mortgage notes.” Id. “A MERS member, upon becoming a lender, names MERS as its nominee
and the mortgagee of record and inputs the mortgage into the MERS database. The mortgage note
can then be assigned freely among MERS members, with MERS—as mortgagee of record—
authorizing and memorializing these trades while circumventing much of the time and paperwork
associated with traditional assignments. Only when a note is transferred to a non-MERS member
institution does MERS transfer away its interest as mortgagee, thus ending its involvement in the
assignment process.” Id. (quoting Woods, 733 F.3d at 351 n.1). “If a borrower defaults and the
note holder seeks to foreclose on the collateral, MERS, acting as the nominee for the original
lender and its successors and assigns (the subsequent note holders), assigns the mortgage to the
note holder to comply with the rule that the mortgage and note must be unified before foreclosure.”
Id. at *4.
Fustolo alleges that Defendants do not hold the mortgage because the original lender,
Union Capital and its trustee UCM, dissolved in June 2010 before the Mortgage was purportedly

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assigned from MERS, as nominee for Union Capital, to HSBC in December 2011. D. 1 ¶¶ 10–19.
This argument, however, has been consistently rejected by courts in this district where MERS is
named as a nominee of the original lender and its successors and assigns. See, e.g., Lewis, 2016
WL 4555969, at *4–5 (concluding that a lender’s dissolution “did not preclude MERS from
assigning the mortgage” to another lender); Rosa v. Mortg. Elec. Sys., Inc., 821 F. Supp. 2d 423,
431 (D. Mass. 2011) (same); Kiah v. Aurora Loan Servs., LLC, No. 10-cv-40161-FDS, 2011 WL
841282, at *4 (D. Mass. Mar. 4, 2011) (same); Boguslav v. BLB Trading, LLC, 136 F. Supp. 3d
11, 14 (D. Mass. 2015) (same). Accordingly, Union Capital and UCM’s dissolution in 2010 did
not preclude MERS from assigning the mortgage to HSBC in 2011.
2.

Identity of the Note Holder

Fustolo also challenges Defendants’ status as the holder of the Note. D. 1-3 ¶ 47.
Specifically, Fustolo alleges that the Note was payable only to Union Capital and was “never
indorsed or assigned to any subsequent holders.” Id. ¶ 30; see D. 1-3 at 83–85. Even accept this
allegation as true, Massachusetts law, however, “permits one who, although not the noteholder
himself, [to act] as the agent of the noteholder and stand[ ] ‘in the shoes’ of the mortgagee to
effectuate a foreclosure.” Culley v. Bank of Am., N.A., No. 18-cv-40099-DHH, 2019 WL
1430124, at * 6 (D. Mass. Mar. 29, 2019) (quoting Eaton, 462 Mass. at 586). “One way for the
foreclosing entity to ‘establish that it either held the note or acted on behalf of the note holder at
the time of a foreclosure sale [is] by filing an affidavit in the appropriate registry of deeds’”
pursuant to Mass Gen. L. c. 183, § 5B. HMC Assets, LLC v. Conley, No. 14-cv-10321-MBB,
2016 WL 4443152, at *17 (D. Mass. Aug. 22, 2016) (alteration in original) (quoting Eaton, 462
Mass. at 589 n.28).

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Here, even accepting that Fustolo is correct that the Note is payable only to Union Capital
and contains no indorsements or allonges, the Mortgagee’s Affidavit, D. 16 at 91, is sufficient to
establish that SPS is acting on behalf of the note holder in carrying out the foreclosure because it
was filed at the appropriate registry, namely, at the Massachusetts Land Court, and certifies that
SPS is “[a]cting on behalf of the person(s) or entity(ies) currently holding the subject mortgage
and the note.” D. 16 at 91; see HMC Assets, 2016 WL 4443152, at *18 (concluding that
foreclosing entity held note where affidavit registered with the Land Court certified that
foreclosing entity was acting on behalf of note holder). Fustolo’s challenge to Defendants’ status
as the holder of the Note, therefore, fails to state a claim.
Accordingly, the Court dismisses Count I.
C.

Declaratory Judgment as to the Notice of Default (Count II)

Defendants have also moved to dismiss Fustolo’s claim that the Notice was defective
because it failed to state that “Fustolo had the ‘right to bring a court action’ as required under
Paragraph 22” of the Mortgage. D. 1 ¶ 54.
Massachusetts is a non-judicial foreclosure state, where a mortgagee need not obtain
judicial authorization to foreclose on a mortgaged property if, as here, “the mortgage itself gives
the mortgagee a power of sale and includes by reference the statutory power” set out in Mass. Gen.
L. c. 183, § 21. Pinti v. Emigrant Mortg. Co., Inc., 472 Mass. 226, 232 (2015) (citation omitted).
To foreclose on a mortgaged property, the mortgagee “first [must] comply[] with the terms of the
mortgage and with the statutes relating to the foreclosure of mortgages by the exercise of a power
of sale.” Mass. Gen. L. c. 183, § 21. Because this is a “substantial power . . . without judicial
oversight, [courts have] followed the traditional and familiar rule that one who sells under a power
[of sale] must follow strictly its terms; the failure to do so results in no valid execution of the

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power, and the sale is wholly void.” Fed. Nat’l Mortg. Ass’n v. Marroquin, 477 Mass. 82, 86
(2017) (second alteration in original) (citation and internal quotation marks omitted).
This strict compliance regime, however, does not require a mortgagee’s “punctilious
performance of every single mortgage term.” Pinti, 472 Mass. at 235. Rather, the Supreme
Judicial Court held in Pinti that a foreclosing mortgagee must only strictly comply “with the terms
of the actual power of sale in the mortgage, [and] with any conditions precedent to the exercise of
the power that the mortgage might contain.” Id. at 233–34 (citing cases). These terms and
conditions precedent include only “(1) terms directly concerned with the foreclosure sale
authorized by the power of sale in the mortgage, and (2) those prescribing actions the mortgagee
must take in connection with the foreclosure sale — whether before or after the sale takes place.”
Id. at 235. Here, Paragraph 22, among other terms, states that the notice of acceleration “shall
further inform Borrower of . . . the right to bring a court action to assert the non-existence of a
default or any other defense of Borrower to acceleration and sale.” D. 1-3 at 33. Because this
provision of Paragraph 22 constitutes a term prescribing actions the mortgagee must take in
connection with the foreclosure sale, SPS was required to inform Fustolo in the Notice that he has
a right to bring a court action. Pinti, 472 Mass. at 240.
The Notice does not contain such “right to bring a court action” language, see D. 1-3 at
98–99, and Defendants do not argue that it does. Rather, Defendants appear to take the position
that the “notices,” that is, the Notice and the separate Letter (dated the same day as the Notice),
strictly comply with Paragraph 22 when read together. See D. 16 at 9. While Defendants are
correct that the Letter contains the requisite “right to bring a court action” language, D. 1-3 at 102,
it is not clear as a matter of law that the separate Notice and Letter, when read together, strictly
comply with Paragraph 22.

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This precise issue has been addressed by at least one state court. See Towd Point Mortg.
Trust v. Cruz, No. 19H79SP005472, 8 W. Div. H. Ct. 116 (Mass. Hous. Ct. Mar. 11, 2021); D.
19-2. In that case, as here, SPS sent a mortgagor two separate documents, a “90-Day Right to
Cure Your Mortgage Default” notice and a letter addressed to the mortgagor that was dated the
same day as the notice. Id. at 118. SPS argued, inter alia, that “the Letter was intended to be read
together with the 90-Day Notice, and its provisions are incorporated into the 90-Day Notice.” Id.
at 124. The court rejected this reading, noting that the “plain language” of the mortgage “states
with clarity that the required information must be set forth in ‘the Notice.’” Id. at 125. The court
did not categorically reject the theory that a right to cure notice could “incorporate information set
forth in a carefully prepared supplemental letter.” Id. at 127. Such a letter, however, would have
to “be structured so that a mortgagor of average intellect would recognize and understand that
important information about their mortgage default is being provided that is part of the
default/right to cure notice.” Id. The court concluded that the letter provided by SPS, which
contained “multiple single-spaced paragraphs over four pages” and the requisite language “in the
next to last paragraph on page three,” fell “far short of meeting that standard.” Id.
Similarly, here the Notice does not contain the required “right to bring a court action”
language and the Letter contains multiple single-spaced paragraphs over three pages and the
requisite language in the middle of the third page. See D. 1-3 at 98–102. It, therefore, cannot be
said that Fustolo has failed to state a claim.2
Accordingly, the Court denies Defendants’ motion to dismiss Count II.

2

This conclusion is also consistent with a recent decision allowing an identical claim to
survive a motion to dismiss in another session of this court involving these same parties. See
Fustolo v. Select Portfolio Servicing, Inc. et al., 23-cv-10033-RGS, D. 14 (D. Mass. March 20,
2023).
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D.

RESPA (Count III)

Fustolo claims that SPS violated RESPA by failing to respond to Fustolo’s notice
informing SPS of the alleged overvaluation of the Property and by failing to correct the error as
required by 12 C. F. R. § 1024. D. 1-3 ¶¶ 62–65. Defendants argue that the alleged overvaluation
was provided in connection with Fustolo’s loss mitigation application, which is not “covered error”
under RESPA. D. 16 at 10. The Court agrees with Defendants.
To state a claim under RESPA pursuant to 12 U.S.C. § 2605, a plaintiff must show: “(1)
that the servicer failed to comply with the statute’s [qualified written request] rules; and (2) that
the plaintiff incurred ‘actual damages’ as a result of this failure.” Okoye v. Bank of New York
Mellon, No. 10-cv-11563, 2011 WL 3269686, at *17 (D. Mass. July 28, 2011) (alteration in
original) (citation omitted). Alternatively to showing actual damages, a plaintiff may also plead
statutory damages, requiring a “showing of a pattern or practice of noncompliance by the servicer.”
Afridi v. Residential Credit Cols., Inc., 189 F. Supp. 3d 193, 200 (D. Mass. 2016) (citation
omitted). “Section 1024.35 only requires a servicer to respond to qualified written requests related
to certain types of covered errors, and disputes related to the substance of a servicer’s review of a
loss mitigation application do not fall under the umbrella of covered errors.” Canty v. Wells Fargo
Bank, N.A., 463 F. Supp. 3d 57, 64 (D. Mass. 2020).
Here, SPS prepared this valuation as part of Fustolo’s “request for mortgage assistance.”
D. 1-3 at 62.

A request for mortgage assistance is a loss mitigation application. See Lage v.

Ocwen Loan Servicing LLC, 839 F.3d 1003, 1006 (11th Cir. 2016) (noting that “[a] loss mitigation
application is simply a request by a borrower for any of a number of alternatives to foreclosure,
known as loss mitigation options, including, among others, modification of the mortgage”)
(citation omitted); 12 C.F.R. § 1024.31 (defining “loss mitigation option” to mean “an alternative

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to foreclosure offered by the owner or assignee of a mortgage loan that is made available through
the servicer to the borrower”). SPS was, therefore, not obligated to respond to Fustolo’s letter
because the alleged overvaluation error relates to a loss mitigation application, which is not
covered error under 12 C.F.R. § 1024.35.
Fustolo argues that the alleged overvaluation falls under the catch-all provision of Section
1024.35(b)(11), covering “[a]ny other error relating to the servicing of a borrower’s mortgage
loan.” D. 19 at 13 (alteration in original and emphasis removed). Fustolo relies upon Naimoli v.
Ocwen Loan Servicing, LLC, 22 F.4th 376 (2d Cir. 2022) to support this argument. Id. In Naimoli,
a loan servicer denied a loan modification after the servicer lost a borrower’s loan documents.
Naimoli, 22 F.4th at 379. The Second Circuit concluded that the mismanagement of documents
is an error “related to” servicing of the borrower’s loan and is covered by the catch-all provision
of RESPA. Id. at 383–84. But, importantly, the Second Circuit’s holding is still limited to
servicing errors. The Naimoli court noted that the identification of “errors while in pursuit of a
loss mitigation option does not impair their connection to the servicing of [the borrower’s] loan,”
as it was the “loss of the loan documents [that] made [the borrower] ineligible for the loan
modification” and in turn “jeopardized [the servicer’s] ability to make payments to the loan’s
owners in the event of a foreclosure.” Id. at 384.
The alleged overvaluation of the Property in connection with Fustolo’s application for
mortgage assistance, on the other hand, is a contractual issue and does not relate to the servicing
of the loan. See Morgan v. Caliber Home Loans, Inc., 26 F.4th 643, 651 (4th Cir. 2022)
(distinguishing Naimoli and concluding that “correspondence limited to the dispute of contractual
issues that do not relate to the servicing of the loan, such as loan modification applications” were
not covered under RESPA); Fox v. Statebridge Co., LLC, No. CV SAG-21-01972, 2022 WL

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4386231, at *5 (D. Md. Sept. 21, 2022) (distinguishing Naimoli and concluding that RESPA did
not apply to plaintiff’s complaint of error because it was “a contractual issue, not a servicing
matter”).
Accordingly, the Court dismisses Count III.
E.

Defamation (Count IV)

Fustolo also raises a claim for defamation, alleging that Defendants published false
statements about him, “namely, that he owed Freddie Mac payments under the Note and Mortgage,
that the payments were in default, and that Freddie Mac was the party entitled to foreclose on and
to sell the Property.” D. 1-3 ¶ 67.
To prevail on a defamation claim under Massachusetts law, “a plaintiff must ‘establish that
the defendants published a false statement about him to a third party that either caused him
economic loss or was the type that is actionable without proof of economic loss.’” Driscoll v. Bd.
of Trs. of Milton Acad., 70 Mass. App. Ct. 285, 295–96 (2007) (quoting Phelan v. May Dept.
Stores Co., 443 Mass. 52, 55–56 (2004)). “A statement is defamatory if it tends to harm the
reputation of another either by lowering the esteem in which he is held or by discouraging others
from associating with him.” Pan Am Systems, Inc. v. Atlantic Northeast Rails and Ports, Inc., 804
F.3d 59, 64 (1st Cir. 2015) (citation omitted). “[I]naccuracy by itself does not make a statement
defamatory,” Yohe v. Nugent, 321 F.3d 35, 41 (1st Cir. 2003), instead there must be a showing
that the alleged statement could subject a plaintiff to “contempt, hatred, scorn or tend to harm his
standing in the community.” Id. (citation omitted). “[W]hether a communication is reasonably
susceptible of a defamatory meaning, is a question of law for the court.” Phelan, 443 Mass. at 56
(citations omitted).

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Here, Fustolo fails to state a claim of defamation because the complaint’s alleged
falsehoods are not “reasonably susceptible of a defamatory meaning.” Id. Although the complaint
alleges that Defendants are not entitled to foreclose on the Property, the complaint (and the exhibits
incorporated therein) does not allege that Fustolo made timely payments under the Note and the
Mortgage. See generally D. 1-3. Even assuming arguendo that Defendants were the wrong
foreclosing entities (which this Court otherwise rejects as a matter of law as discussed above), see
id. ¶ 47, such allegation alone could not reasonably subject Fustolo to economic loss or rise to the
level of subjecting him to “contempt, hatred, scorn or tend to harm his standing in the community.”
Phelan, 443 Mass. at 56.
Accordingly, the Court dismisses Count IV.
F.

Slander of Title (Count V)

Fustolo also fails to state a claim of slander of title. “In Massachusetts, a person is liable
for slander of title, i.e., ‘injurious falsehood,’ if he or she (a) publishes a false statement; (b) that
harms the interests of another; (c) with the intent to harm the interests of another or “either
recognizes or should recognize that it is likely to do so;” and (d) knows that the statement is false
“or acts in reckless disregard of its truth or falsity.” CMI Assocs., LLC v. Reg’l Fin. Co., LLC,
775 F. Supp. 2d 281, 289 (D. Mass. 2011) (quoting Dulgarian v. Stone, 420 Mass. 843, 852
(1995)).
Fustolo’s slander of title claim is premised on the same allegedly false statements
undergirding his defamation claim. See D. 1-3 ¶¶ 67, 73. The complaint, however, contains no
allegations to suggest that these allegedly false statements were made knowingly or with reckless
disregard of the truth. See RFF Fam. P’ship, LP v. Link Dev., LLC, 238 F. Supp. 3d 168, 172 (D.

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Mass. 2017) (noting that “[s]uch lack of scienter is sufficient to defeat a claim for slander of title”)
(citing CMI Assocs., 775 F. Supp. 2d at 289).
Accordingly, the Court dismisses Count V.
G.

Debt Collection Practices (Count VI)

Finally, Fustolo has asserted that Defendants violated Mass. Gen. L. c. 93, § 49, a statute
that prohibits unfair or deceptive debt collection practices. D. 1-3 at 16. Section 49, however,
“does not provide a private right of action.” DeCotis v. Specialized Loan Servicing LLC, No. 22cv-10547-NMG, 2022 WL 17156022, at *5 (D. Mass. Nov. 22, 2022) (citation omitted). “A
violation of § 49 is cognizable only to the extent it forms a basis for liability with respect to a
plaintiff’s Chapter 93A claim.” Id. (citation omitted).
Even assuming arguendo that the instant complaint asserted a Chapter 93A claim, this
claim would fail. “‘[A]s a special element’ of a Chapter 93A cause of action, the plaintiff’s
complaint must allege that the plaintiff sent a demand letter to the defendant.” O’Connor v.
Nantucket Bank, 992 F. Supp. 2d 24, 38 (D. Mass. 2014) (quoting Entrialgo v. Twin City Dodge,
Inc., 368 Mass. 812, 812 (1975)). “Even where a violation of another statute constitutes a per se
violation of Ch. 93A, the demand letter requirement must be met.” Id. (citation omitted); see
McKenna v. Wells Fargo Bank, N.A., 693 F.3d 207, 218 (1st Cir. 2012) (same). Here, the
complaint does not allege that Fustolo sent a demand letter to Defendants at least thirty days prior
to filing this action. Fustolo, therefore, fails to state a Chapter 93A claim.
Accordingly, the Court dismisses Count VI.
VI.

Conclusion
For the foregoing reasons, the Court ALLOWS Defendants’ motion to dismiss as to Counts

I, III, IV, V and VI and DENIES the motion as to Count II. D. 15.

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So Ordered.
/s/ Denise J. Casper
United States District Judge

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