Helm v. Freedom Mortgage Corporation et al

Filing 30

OPINION AND ORDER (1) Overruling Defendants' 25 Objections to the Magistrate Judge's 24 Report and Recommendation; (2) Adopting the Magistrate Judge's Recommended Disposition, and (3) Granting in Part and Denying in Part Defendants' 15 Motion to Dismiss. Signed by District Judge Matthew F. Leitman. (HMon)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
RODNEY HELM and
LINDA HELM,
Plaintiffs,

Case No. 15-cv-12394
Hon. Matthew F. Leitman

v.
FREEDOM MORTGAGE CORPORATION and
LOANCARE, LLC,
Defendants.
_________________________________/
OPINION AND ORDER (1) OVERRULING DEFENDANTS’ OBJECTIONS
TO THE MAGISTRATE JUDGE’S REPORT AND RECOMMENDATION
(ECF #24); (2) ADOPTING THE MAGISTRATE JUDGE’S
RECOMMENDED DISPOSITION, AND (3) GRANTING IN PART AND
DENYING IN PART DEFENDANTS’ MOTION TO DISMISS (ECF #15)
Following the foreclosure and Sherriff’s sale of their house, Plaintiffs Rodney
Helm and Linda Helm filed this action in Lapeer County Circuit Court against
Defendants Freedom Mortgage Corporation (“Freedom”) and LoanCare, LLC
(“LoanCare”). Defendants removed the case to this Court on July 2, 2015. (See ECF
#1.)
On January 20, 2016, Plaintiffs filed an Amended Complaint that includes
five counts: wrongful foreclosure (Count I); fraudulent misrepresentation (Count II);
slander of title (Count III); declaratory relief due because the foreclosure was barred
by unclean hands (Count IV); request for conversion to judicial foreclosure (Count

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V). (See Am. Compl., ECF #14.) Count I includes five separate sub-claims: (A)
unlawful initiation of foreclosure proceedings while Plaintiffs were being considered
for foreclosure alternatives; (B) failure to publish notice of the sale or adjournments
of the sale; (C) violation of “Regulation X,” 12 C.F.R. § 1024.41, et seq.; (D)
violation of the Truth in Lending Act, 15 U.S.C. §1601, et seq.; (E) violation of the
Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. § 2605, by not giving
Plaintiffs written notice that the servicing of their loan and/or mortgage was sold or
transferred, as required by 12 U.S.C. § 2605(b), and by not responding to Plaintiffs’
Qualified Written Request for more information regarding the servicing of their loan,
as required by 12 U.S.C. § 2605(e)(2) (“Section 2605(e)(2)”). (Id.)
On February 3, 2016, Defendants moved to dismiss all of the counts in the
Amended Complaint (the “Motion”). (See ECF #15.)

In a Report and

Recommendation dated September 7, 2016 (the “R&R”), the assigned Magistrate
Judge recommended that the Court dismiss all of Plaintiffs’ claims other than
Plaintiffs’ claim under Section 2605(e)(2) of RESPA for Defendants’ failure to
respond to Plaintiffs’ Qualified Written Request. (See ECF #24 at 11, Pg. ID 953.)
Section 2605(e)(2) requires that a servicer of a federally related mortgage respond
to a Qualified Written Request within 30 days.1 See 12 U.S.C. § 2605(e)(2). The

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  A Qualified Written Request is “a written correspondence” that “includes, or
otherwise enables the servicer [of a mortgage loan] to identify, the name and account

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Magistrate Judge concluded that the claim under Section 2605(e)(2) should not be
dismissed because Plaintiffs adequately pleaded in the Amended Complaint that: (1)
Plaintiffs sent LoanCare a Qualified Written Request on June 15, 2015; (2) On June
19, 2015, LoanCare acknowledged that it received the Qualified Written Request;
and (3) Plaintiffs did not receive a substantive response to their Qualified Written
Request from LoanCare. (ECF #24 at 11, Pg. ID 943.)
Plaintiffs did not object to the R&R. Defendants filed a single objection (the
“Objection”) to the portion of the R&R recommending against dismissal of
Plaintiffs’ claim under Section 2605(e)(2). (See ECF #25.) Defendants argue that
Plaintiffs have failed to adequately plead damages under Section 2605(e)(2).2 (ECF
#25 at 10-13, Pg. ID 965-68.)

of the borrower” and “includes a statement of the reasons for the belief of the
borrower, to the extent applicable, that the account is in error or provides sufficient
detail to the servicer regarding the information sought by the borrower.” 12 U.S.C.
§ 2605(e)(1)(B). In their objections, Defendants do not dispute that the
correspondence sent by Plaintiffs on June 15, 2015 was a Qualified Written Request.

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In passing, Defendants also argue that the claim under Section 2605(e)(2) should
be dismissed because the Qualified Written Request was made after expiration of
the Plaintiffs’ redemption period, and is therefore, “not related to the foreclosure
procedure itself.” (See ECF #25 at 8, Pg. ID 963.) The Court also rejects this
argument. Defendants fail to explain why Section 2605(e)(2) requires that a
Qualified Written Request be sent prior to the expiration of a borrower’s redemption
period or requires that a Qualified Written Request be “related to the foreclosure
procedure itself.” Defendants cite a single case in support of their argument, Conlin
v. Mortgage Elec. Registration Sys., 714 F.3d 355 (2013), but this case does not
interpret or analyze a claim under Section 2605(e)(2). (See ECF #25 at 8, Pg. ID
963.)

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This Court reviews de novo the portions of the R&Rs to which a party has
objected. See Fed. R. Civ. P. 72(b)(3).
In support of their argument, Defendants cite two unpublished opinions of this
court that held that a plaintiff must allege actual damages when pleading a RESPA
violation. (Id. at 10-12, Pg. ID 965-967.) Defendants assert that Plaintiffs did not
plead actual damages in the Amended Complaint, and instead only sought damages
for “emotional distress, indignity and humiliation.” (Id. at 11, Pg. ID 966.) However,
Defendants fail to address the Sixth Circuit’s published opinion in Marais v. Chase
Home Finance LLC, 736 F.3d 711 (2013). In Marais, the 6th Circuit cautioned
against dismissing claims under 12 U.S.C. 2605(e) “on the basis of inartfullypleaded actual damages.” Id. at 722. See also, Mellentine v. Ameriquest Mortg. Co.,
15 Fed. App’x. 419, 424-25 (6th Cir. 2013); Houston v. U.S. Bank Home Mortg.
Wis. Servicing, 505 Fed. App’x. 543, 548 (6th Cir. 2012). Defendants make no
attempt to reconcile their attack on Plaintiffs’ alleged damages with the Sixth
Circuit’s decisions in these cases.
Here, Plaintiffs allege that they “suffered damages as a result of Defendants’
above-referenced misconduct, including but not limited to … emotional distress,
indignity, humiliation [and] various costs and attorney fees.” (Am. Compl. at 21, Pg.
ID 338.) Plaintiffs use of the phrase “above-referenced misconduct” should be read
to include Defendants’ violation of Section 2605(e)(2).

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Thus, Plaintiffs have

sufficiently pleaded that they suffered actual damages as a result Defendants’
violation of Section 2605(e)(2).
Accordingly, the Court OVERRULES the Objection, ADOPTS the
Magistrate Judge’s recommended disposition, DENIES the Motion with respect to
Plaintiffs’ claim under 12 U.S.C. §2605(e)(2) and GRANTS the Motion in all other
respects.

s/Matthew F. Leitman
MATTHEW F. LEITMAN
UNITED STATES DISTRICT JUDGE

Dated: December 20, 2016
I hereby certify that a copy of the foregoing document was served upon the
parties and/or counsel of record on December 20, 2016, by electronic means and/or
ordinary mail.
s/Holly A. Monda
Case Manager
[phone]

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