He v. Ocwen Loan Servicing, LLC

Filing 27

MEMORANDUM & ORDER granting in part and denying in part 9 Motion to Dismiss for Failure to State a Claim; For the foregoing reasons, Defendant's motion to dismiss (Docket Entry 9) is GRANTED IN PART and DENIED IN PART. Specifically, Plaintiff's Section 349 claim is DISMISSED, however, the balance of Defendant's motion is DENIED. So Ordered by Judge Joanna Seybert on 7/14/2016. C/ECF (Valle, Christine)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
----------------------------------x
ZHAN HE,
Plaintiff,

MEMORANDUM & ORDER
15-CV-4575(JS)(AKT)

-againstOCWEN LOAN SERVICING, LLC,
Defendant.
----------------------------------x
APPEARANCES
For Plaintiff:
Kenneth B. Schwartz, Esq.
The Schwartz Law Group, P.C.
326 Broadway, Suite 203
Bethpage, New York 11714
For Defendant:

Constantine Philip Economides, Esq.
Patrick G. Broderick, Esq.
Matthew Miles Spritz, Esq.
Greenberg Traurig, LLP
777 S. Flager Drive, Ste. 300 East
West Palm Beach, Florida 33401
Shane Matthew Biffar, Esq.
Greenberg Traurig, LLP
200 Park Ave., 28th Fl.
New York, New York 10166

SEYBERT, District Judge:
Plaintiff, Zhan He (“Plaintiff”) commenced this action
on August 5, 2015, against Ocwen Loan Servicing, LLC (“Defendant”)
claiming

that

Defendant

violated

the

Real

Estate

Settlement

Procedures Act (“RESPA”), 12 U.S.C. § 2601 et seq., and New York
General Business Law § 349 (“Section 349”) when it refused to
consider Plaintiff’s loss mitigation application.

Pending before

the Court is Defendant’s motion to dismiss the Complaint (Docket

Entry 9.) For the following reasons, Defendant’s motion is GRANTED
IN PART and DENIED IN PART.
BACKGROUND1
Plaintiff was the owner of real property located in Glen
Cove, New York (“the Property”) and Defendant was the servicer of
Plaintiff’s mortgage on the Property.

(Compl. ¶¶ 6-7.)

In

November 2011, Defendant commenced a foreclosure action against
Plaintiff and a judgment of foreclosure and sale was issued against
the Property on December 4, 2013.

(Compl. ¶¶ 8-9.)

According to

Defendant, the foreclosure sale was originally scheduled to take
place on March 11, 2014, but was subsequently rescheduled several
times for reasons unknown.

(See Def.’s Br, Docket Entry 10, at

5.)
Plaintiff alleges in the Complaint that she submitted a
Loss Mitigation Application (the “Application”) to Defendant on
June 16, 2015, seeking to sell her Property through a “short” sale
in an effort to avoid the foreclosure sale.

(See Compl. ¶ 12.)

The next day, however, Defendant rejected Plaintiff’s Application,
explaining that “the discount (short) sale package was not received
until too close to the confirmed foreclosure sale date that was
already set.”

(Compl. ¶ 15.)

The following facts are taken from the Complaint and are
presumed to be true for the purposes of this Memorandum and
Order.
2

The

day

after

Defendant

rejected

the

Application,

Defendant issued a Notice of Sale, scheduling the foreclosure sale
for July 21, 2015.

The foreclosure sale was held on that date and

the Property was sold.
Plaintiff

(Compl. ¶¶ 10, 13.)

alleges

that

Defendant

failed

to

timely

evaluate her Application prior to the foreclosure sale in violation
of RESPA and Section 349.

(Compl. ¶¶ 16-32.)

court is Defendant’s motion to dismiss.
motion,

Defendant

principally

argues

Pending before the

(Docket Entry 9.)
that

(1)

In the

Plaintiff’s

Application was untimely and (2) Plaintiff’s Section 349 claim
fails because Plaintiff did not plead “deceptive conduct which
went beyond his contractual dispute” with Defendant.

(Def.’s Br.

at 3, 8.)
DISCUSSION
I.

Legal Standard
In deciding a Rule 12(b)(6) motion to dismiss, the Court

applies a “plausibility standard,” which is guided by “[t]wo
working principles.”

Aschroft v. Iqbal, 556 U.S. 662, 678, 129 S.

Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009); accord Harris v. Mills,
572 F.3d 66, 71-72 (2d Cir. 2009).

First, although the Court must

accept all allegations as true, this “tenet” is “inapplicable to
legal conclusions;” thus, “[t]hreadbare recitals of the elements
of a cause of action, supported by mere conclusory statements, do
not suffice.”

Iqbal, 556 U.S. at 679; accord Harris, 572 F.3d at
3

72.

Second, only complaints that state a “plausible claim for

relief” can survive a Rule 12(b)(6) motion to dismiss.
U.S. at 679.

Iqbal, 556

Determining whether a complaint does so is a

“context-specific task that requires the reviewing court to draw
on its judicial experience and common sense.”

Id.; accord Harris,

572 F.3d at 72.
Furthermore, in deciding a motion to dismiss, the Court
is confined to “the allegations contained within the four corners
of [the] complaint.”

Pani v. Empire Blue Cross Blue Shield, 152

F.3d 67, 71 (2d Cir. 1998).

However, this has been interpreted

broadly to include any document attached to the complaint, any
statements

or

documents

incorporated

in

the

complaint

by

reference, any document on which the complaint heavily relies, and
anything of which judicial notice may be taken.

See Chambers v.

Time Warner, Inc., 282 F.3d 147, 152-53 (2d Cir. 2002) (citations
omitted); Kramer v. Time Warner Inc., 937 F.2d 767, 773 (2d Cir.
1991).
II.

Plaintiff’s Claims Under RESPA and 12 C.F.R. § 1024.41
RESPA is a consumer protection statute that was enacted

by Congress to “insure that consumers throughout the Nation are
provided with greater and more timely information on the nature
and

costs

of

unnecessarily

the

settlement

process

and

are

high

settlement

charges

caused

protected
by

[

]

abusive

practices that have developed in some areas of the country.”
4

from

12

U.S.C. 2601(a).

The Consumer Financial Protection Bureau (“CFPB”)

is charged with creating rules, regulations, and interpretations
necessary to achieve RESPA’s purpose.

See 12 U.S.C. § 2617(a).

Plaintiff alleges in this case that Defendant failed to consider
his Application in violation of 12 C.F.R. § 1024.41, a rule
promulgated by the CFPB concerning loss mitigation procedures for
residential mortgages.

See 12 C.F.R. § 1024.41; see Gresham v.

Wells Fargo Bank, N.A., --- F. App’x ----, 2016 WL 1127717, at *2
(5th Cir. 2016).

Section 1024.41 specifically “prohibits a loan

servicer from initiating foreclosure if a mortgagor has submitted
a loan-modification application unless certain conditions are
met.”

Ray v. U.S. Bank Nat’l Ass’n, 627 F. App’x 452, 456 (6th

Cir. 2015).

Borrowers have a private right of action under RESPA

against lenders who evaluate a loss mitigation application while
at the same time pursuing foreclosure.

See Kilgore v. Ocwen Loan

Servicing, LLC, No. 13–CV–5473 2015 WL 698108, at *9 (E.D.N.Y.
Mar. 6, 2015); Wenegieme v. Bayview Loan Servicing, No. 14-CV9137, 2015 WL 2151822, at *2 (S.D.N.Y. May 7, 2015), appeal
dismissed (Aug. 27, 2015); 12 U.S.C. § 2605(f).
Defendant argues in its motion to dismiss that is was
not required to review and consider Plaintiff’s Application, prior
to the foreclosure sale, because the application was submitted too
late.

(Def.’s Br. at 4-5.)

Defendant specifically relies upon

provisions of Section 1024.41 requiring a mortgage servicer to
5

review and consider a loss mitigation application received “more
than

37

days

before

§ 1024.41(c)(1),

the

(g)(1).

foreclosure
Since

sale.”

Plaintiff’s

12

C.F.R.

application

was

received only thirty-five days before the scheduled foreclosure
sale,

Defendant

Application.

claims

it

was

not

obligated

to

review

the

The Court disagrees.

A mortgage servicer need not consider a loss mitigation
application

received

foreclosure sale.

less

than

thirty-seven

days

before

a

12 C.F.R. § 1024.41(c)(1), (g)(1); see also

Gresham, 2016 WL 1127717, at *2.

In this case, however, the

Complaint alleges that the foreclosure sale was not scheduled at
the time Defendant received Plaintiff’s application.

While such

a situation is not addressed within Section 1024.41, according to
the CFPB’s official commentary, “[i]if no foreclosure sale has
been scheduled as of the date that a complete loss mitigation
application is received, the application is considered to have
been received more than 90 days before any foreclosure sale.”
Consumer Financial Protection Bureau’s Official Staff Commentary
on Regulation X, 2014 WL 2195779, at *3 (June 2016).

Of course,

the CFPB’s Commentary is not controlling legal authority.

Here,

however, the Court finds the Commentary to be highly persuasive
because it fills a gap in the text of Section 1024.41 and squarely
addresses

the

factual

situation

described

in

the

Complaint.

According to the Complaint, Plaintiff’s Application was received
6

by Defendant before the foreclosure sale was scheduled.

Thus, the

application must be “considered to have been received more than 90
days before any foreclosure sale.”

Id.

Defendants therefore may

not rely upon the thirty-seven-day window as a basis to dismiss
the Complaint.
III. Section 349 Claim
Defendant also moves to dismiss Plaintiff’s Section 349
claim.

Section 349 prohibits “[d]eceptive acts or practices in

the conduct of any business, trade or commerce or in the furnishing
of any service.”

N.Y. GEN. BUS. L. § 349(a).

To successfully state

a claim under Section 349, “‘a plaintiff must demonstrate that (1)
the defendant’s deceptive acts were directed at consumers, (2) the
acts are misleading in a material way, and (3) the plaintiff has
been injured as a result.’”
F.

Supp.

3d

526,

535

Kilgore v. Ocwen Loan Servicing, 89

(E.D.N.Y.

2015)

(quoting

Maurizio

v.

Goldsmith, 230 F.3d 518, 521 (2d Cir. 2000)); see also Kapsis v.
Am.

Home

Mortg.

Servicing,

Inc.,

923

F.

Supp.

2d

430,

449.

Consumer-oriented conduct is “conduct that potentially affects
similarly situated consumers.”

Kapsis, 923 F. Supp. 2d at 449;

see Kilgore, 89 F. Supp.3d at 535 (noting that the “gravamen of
the

complaint

must

be

consumer

injury”

and

“conclusory

allegations” of injury are insufficient to support a plausible
claim for relief under Section 349).

Plaintiff’s allegations are

insufficient to make out the first element of a Section 349 claim
7

because he fails to plead facts showing that any deceptive conduct
occurred beyond Plaintiff’s dispute with Defendant regarding her
Application.
2d at 449.

See Kilgore, 89 F. Supp. 3d at 536; Kapsis, F. Supp.
See O.K. Petroleum v. Travelers Indem. Co., No. 09-

CV-10273, 2010 WL 2813804, at *5 (S.D.N.Y. July 15, 2010) (“In
order to survive this motion, Plaintiffs were required to plead
facts

showing

that

the

deceptive

conduct

contractual dispute between these parties.”).
that

Defendant’s

actions

were

“misleading”

went

beyond

the

Plaintiff argues
because

Defendant

“represented itself as a duly authorized servicer of mortgage loans
that would act in accordance with the requirements of governing
law” as provided under RESPA and its regulations.
However,

Plaintiff’s

Complaint

does

not

(Compl. ¶ 31.)

allege

facts

to

demonstrate conduct that injured similarly situated consumers.
Therefore, Plaintiff’s Section 349 claim is DISMISSED.2
CONCLUSION
For the foregoing reasons, Defendant’s motion to dismiss
(Docket

Entry

9)

is

GRANTED

IN

PART

and

DENIED

IN

PART.

The Court need not address Defendant’s additional arguments
because they rely upon documents outside of the pleadings.
Chambers v. Time Warner, Inc., 282 F.3d 147, 154 (2d Cir. 2002);
Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 46 (2d
Cir. 1991); Hoo-Chong v. Citimortgage, Inc., No. 15-CV-4051,
2016 WL 868814, at *3 (E.D.N.Y. Mar. 7, 2016)
2

8

Specifically, Plaintiff’s Section 349 claim is DISMISSED, however,
the balance of Defendant’s motion is DENIED.

SO ORDERED.
/s/ JOANNA SEYBERT______
Joanna Seybert, U.S.D.J.
Dated:

July
14 , 2016
Central Islip, New York

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