COPOZIO et al v. JP MORGAN CHASE BANK, NA

Filing 26

MEMORANDUM AND/OR OPINION. SIGNED BY HONORABLE NITZA I QUINONES ALEJANDRO ON 11/7/17. 11/7/17 ENTERED AND COPIES E-MAILED.(kw, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA

MARK CAPOZIO, et al.
Plaintiffs
v.
JP MORGAN CHASE BANK, NA
Defendant

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CIVIL ACTION
NO. 16-5235

NITZA I. QUIÑONES ALEJANDRO, J.

NOVEMBER 7, 2017

MEMORANDUM OPINION
INTRODUCTION
Presently before this Court is the motion to dismiss filed by Defendant JP Morgan Chase
Bank, NA (“Defendant” or “Chase”), pursuant to Federal Rule of Civil Procedure (“Rule”)
12(b)(6), in which Defendant seeks the dismissal of all of the federal and state claims asserted
against it by Plaintiffs Mark Capozio and Linda Capozio (“Plaintiffs”). [ECF 13]. Plaintiffs
have opposed the motion. [ECF 16]. The issues raised in the motion to dismiss have been fully
briefed1 and are now ripe for disposition. For the reasons stated herein, Defendant’s motion to
dismiss is granted, in part, and denied, in part.
BACKGROUND
On December 27, 2016, Plaintiffs filed an amended class action complaint against
Defendant essentially claiming that Defendant has uniformly engaged in illegal and deceptive
business practices in violation of the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C.
§1692, et seq., the Pennsylvania Unfair Trade Practices and Consumer Protection Laws Act
In adjudicating Defendant’s motion to dismiss, Defendant’s reply, [ECF 18], and the parties’
supplemental briefs were also considered. [ECF 20, 21, 23 and 25].
1

(“UTPCPL”), 73 Pa. Cons. Stat. §201-1, et seq., the Fair Credit Extension Uniformity Act
(“FCEUA”), 73 Pa. Cons. Stat. §2270.1, et seq., (collectively, “Pennsylvania’s Consumer
Protection Laws”), the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. §2605, et
seq., and Section 524 of the United States Bankruptcy Code, specifically the discharge
injunction. 2 [ECF 9]. In essence, Plaintiffs contend that Defendant failed to honor the parties’
negotiated agreement that Plaintiffs’ future mortgage and escrow payments would not include a
sum for insurance premiums, and as a consequence, Defendant misapplied Plaintiffs’ monthly
mortgage payments resulting in the incurrence of late fees and other penalties.
Defendant filed the underlying motion to dismiss and argues that Plaintiffs have failed to
allege facts sufficient to sustain their pleading burden for each of their claims. [ECF 13]. When
ruling on Defendant’s motion to dismiss, this Court must accept, as true, all relevant and
pertinent factual allegations in the amended complaint and construe these facts in the light most
favorable to Plaintiffs. See Fowler v. UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir. 2009).
The salient allegations of the amended complaint are summarized as follows:
On January 23, 2008, Plaintiffs filed for Chapter 13 bankruptcy protection.
(Am. Compl. at ¶10). On December 26, 2009, Citi Residential Lending, Inc., sold
Plaintiffs’ mortgage, note, and service rights to Defendant. (Id. at ¶11(d)-(e)).
When the loan was transferred to Defendant, the loan was in default. (Id. at ¶91).
On March 13, 2013, Plaintiffs’ bankruptcy trustee sent Defendant a Notice of
Cure Payment, “proclaiming that, unless Chase . . . challenged the discharge, the
mortgage arrears would be deemed ‘cured,’ and, therefore, current.” (Id. at ¶18).
Defendant did not respond to the notice. (Id.). Plaintiffs were discharged from
bankruptcy on October 24, 2013. (Id. at ¶10).
By letter dated December 28, 2015, Defendant transmitted to Plaintiffs a
separate loan modification agreement (the “Loan Modification”), which was
subsequently edited by the parties, with such edits initialed. (Id. at ¶27, Exs. F-1
2

In its motion to dismiss, Defendant seeks dismissal of Count III, which alleges a violation of 11
U.S.C. §524, and any claim premised on the Fair Credit Reporting Act, 15 U.S.C. §1681. In their
response, Plaintiffs concede that these claims are subject to dismissal. [ECF 16-4 at p. 25-26].
Accordingly, Count III and any claims premised on the Fair Credit Reporting Act are dismissed.
2

and F-3). The Loan Modification with the initialed edits was signed by the parties
on December 30, 2015. (Id. at Ex. F-3). Plaintiffs contend that these documents
evidence and/or memorialize the parties’ agreement that Plaintiffs’ future
mortgage payments were not to include sums for insurance premiums to be
escrowed.3
On April 1, 2016, and thereafter, Plaintiffs made monthly mortgage
payments which did not include an amount for insurance premiums escrow. (Am.
Compl. at ¶¶49-63). Defendant placed what it deemed to be the insufficient
payments in “suspense” account, resulting in Plaintiffs’ mortgage account to be,
in effect, a month late. (Id. at ¶¶52-53). Defendant subsequently applied late
charges to Plaintiffs’ mortgage account. (Id. at ¶¶57, 59, 61, 63).
On March 10, 2016, Plaintiffs sent Defendant what Plaintiffs contend was
a “Qualified Written Request” (“QWR”) under RESPA, to which Plaintiffs allege
Defendant did not respond fully and timely. (Id. at ¶¶40, 43, Ex. N).
LEGAL STANDARD
A court may grant a motion to dismiss an action under Rule 12(b)(6) if the complaint
“fail[s] to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). When
considering a Rule 12(b)(6) motion to dismiss, a court must “accept all of the complaint’s wellpleaded facts as true, but may disregard any legal conclusions.” Fowler, 578 F.3d at 210-11.
The court must determine “whether the facts alleged in the complaint are sufficient to show that
the plaintiff has a ‘plausible claim for relief.’” Id. at 211 (quoting Ashcroft v. Iqbal, 556 U.S.
662, 679 (2009)). The complaint must do more than merely allege the plaintiff’s entitlement to
relief: it must “show such an entitlement with its facts.” Id. (citations omitted).
To determine the sufficiency of a complaint, “a court . . . must take three steps.”
Connelly v. Lane Constr. Corp., 809 F.3d 780, 787 (3d Cir. 2016). First, a court must “tak[e]
note of the elements a plaintiff must plead to state a claim.” Id. (quoting Iqbal, 556 U.S. at 675).
Second, the court must identify allegations that are merely legal conclusions “because they . . .
3

Defendant disagrees with this interpretation. The content of these particular writings, to the
extent relevant, will be discussed more fully in the body of this Memorandum Opinion.

3

are not entitled to the assumption of truth.” Id. While a complaint need not assert detailed
factual allegations, “[t]hreadbare recitals of the elements of a cause of action, supported by mere
conclusory statements, do not suffice.” Iqbal, 556 U.S. at 678. Third, a court should assume the
veracity of all well-pleaded factual allegations and “then determine whether they plausibly give
rise to an entitlement to relief.” Connelly, 809 F.3d at 787 (quoting Iqbal, 556 U.S. at 679).
A court may determine that a complaint’s factual allegations are plausible if the court is
able “to draw the reasonable inference that the defendant is liable for the misconduct alleged.”
Iqbal, 556 U.S. at 678 (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)). “But
where the well-pleaded facts do not permit the court to infer more than the mere possibility of
misconduct, the complaint has alleged—but it has not ‘show[n]’—‘that the pleader is entitled to
relief.’” Id. at 679 (quoting Fed. R. Civ. P. 8(a)) (alterations in original). In other words,
“[f]actual allegations must be enough to raise a right to relief above the speculative level.”
Twombly, 550 U.S. at 555. Thus, to survive a motion to dismiss under Rule 12(b)(6), “a plaintiff
must allege facts sufficient to ‘nudge [his] claims across the line from conceivable to plausible.’”
Phillips v. Cnty. of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008) (quoting Twombly, 550 U.S. at
570). “Although the plausibility standard ‘does not impose a probability requirement,’ it does
require a pleading to show ‘more than a sheer possibility that a defendant has acted unlawfully.’”
Connelly, 809 F.3d at 786 (citations omitted). Reviewing the plausibility of the complaint is a
“context-specific” inquiry and requires a court to “draw on its experience and common sense.”
Iqbal, 556 U.S. at 663-64.
DISCUSSION
As noted, Plaintiffs assert that Defendant violated various federal and state statutes,
including the FDCPA, RESPA, and Pennsylvania’s Consumer Protection Laws. In its motion to
4

dismiss, Defendant argues that each of the claims should be dismissed because Plaintiffs have
failed to allege facts sufficient to state a claim. Plaintiffs’ claims and Defendant’s arguments in
opposition thereto are addressed infra.
Plaintiffs’ FDCPA Claims
At Count I, Plaintiffs allege that Defendant has violated the FDCPA by engaging in
various prohibited practices as a “debt collector.” Defendant moves to dismiss this claim as a
matter of law on the basis that it is not a “debt collector” as the term is defined in the FDCPA
because it is alleged to be the owner of the mortgage loan at issue and is not “in any business the
principal purpose of which is the collection of any debts.” In light of the United States Supreme
Court’s recent decision in Henson v. Santander Consumer USA Inc., 137 S. Ct. 1718 (2017),
which expressly abrogated the holding of Federal Trade Commission v. Check Investors, Inc.,
502 F.3d 159 (3d Cir. 2007), this Court agrees with Defendant.
At issue in Henson was whether Santander Consumer USA Inc., (“Santander”), which
“purchased the defaulted loans from CitiFinancial” and then sought to collect on those loans, was
a “debt collector” for purposes of the FDCPA. 137 S. Ct. at 1720. The Court of Appeals for the
Fourth Circuit had ruled in Santander’s favor, holding that Santander was not seeking to collect
on debts “owed . . . another,” as required to meet the statutory definition of a “debt collector,”
but that Santander “sought instead only to collect debts that it purchased and owned.” Id. at
1721. At the time, a circuit split existed on the issue, which included the Third Circuit’s contrary
decision in Federal Trade Commission, supra. The Supreme Court resolved the split and
affirmed the decision of the Fourth Circuit, holding that Santander was not a “debt collector”
even though, like Defendant here, it had acquired the debt at issue at a time when the loan was in
default:

5

And by its plain terms this language seems to focus our attention
on third party collection agents working for a debt owner—not on
a debt owner seeking to collect debts for itself. Neither does this
language appear to suggest that we should care how a debt owner
came to be a debt owner—whether the owner originated the debt
or came by it only through a later purchase. All that matters is
whether the target of the lawsuit regularly seeks to collect debts for
its own account or does so for “another.” And given that, it would
seem a debt purchaser like Santander may indeed collect debts for
its own account without triggering the statutory definition in
dispute, just as the Fourth Circuit explained.
Id. at 1721–22. As such, the Supreme Court has now clarified that Congress did not intend for
debt buyers to be considered debt collectors for the purposes of the Act, where the debt buyer
attempted to collect debts which the debt buyer owned. Id. at 1724.
Here, in their amended complaint, Plaintiffs allege that Defendant is a “debt collector” as
“defined by [15 U.S.C.] §1692a(6)(F)(iii)” because “Defendant was assigned the Plaintiffs’
mortgage while the loan was in default.” (Am. Compl. at ¶91). In light of Henson, however, the
mere assignment of the mortgage loan at issue to Chase while the loan was in default does not
make Chase a “debt collector” under the section of the FDCPA on which Plaintiffs expressly
rely.
In their supplemental brief, Plaintiffs attempt to reshape their allegations in order to get
around the holding in Henson and to fit within the “first” FDCPA definition of “debt collector,”
i.e., “any business the principal purpose of which is the collection of any debts . . . .” 15 U.S.C.
§1692a(6). Plaintiffs have wholly failed, however, to allege any facts to support their new
contention that Defendant’s “principal purpose” is debt collection such that Defendant fits within
the alternative definition of “debt collector.” Instead, Plaintiffs merely allege that Defendant
became the owner and/or mortgage servicer of the underlying mortgage loan after it was in
default. (See Am. Compl. at ¶91). Notwithstanding the absence of any such allegations in their
amended complaint, Plaintiffs argue in their supplemental brief that “Defendant is a ‘debt
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collector’ under the first definition . . . as [Defendant’s] main business is the making of loans and
the collection of the indebtedness evidenced by its loan portfolio.” [ECF 20 at p. 3]. Even if this
allegation was included in the amended complaint, however, it would not satisfy Plaintiffs’
pleading requirement with respect to Defendant’s requisite role as a “debt collector.” To the
contrary, the inclusion of this purported allegation would merely affirm Defendant’s alleged
status as the owner of the loan and/or a “creditor” under 15 U.S.C. §1692a(4), and not one of a
debt collector. Therefore, in light of the Supreme Court’s recent decision in Henson, Plaintiffs
have not asserted facts sufficient to show that Defendant is a “debt collector” for purposes of the
FDCPA. Accordingly, Plaintiffs’ FDCPA claims at Count I are dismissed.
Plaintiffs’ RESPA Claim Premised on Alleged Failure to
Respond to a QWR (Count IV)
Defendant argues that Plaintiffs’ RESPA claim at Count IV must be dismissed because
the letter correspondence underlying the claim does not meet the statutory requirements of a
Qualified Written Request (“QWR”). As argued by Defendant, the applicable statute requires,
inter alia, that a QWR include enough information to allow a servicer to identify the name and
account of the borrower and provide “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 other information sought by the borrower.” 12 U.S.C. §2605(e)(1)(B)(ii); see also
Bret Binder v. Westar Mortg., Inc., 2016 WL 3762710, at *5 (E.D. Pa. July 13, 2016). The
absence of such a qualifying QWR requires denial of a claim under §2605. See, e.g., Orman v.
MortgageIT, 2012 WL 1071219, at *4-5 (E.D. Pa. Mar. 30, 2012).
Here, the letter underlying Plaintiffs’ RESPA claim includes eight separate requests for
information pertaining to Plaintiffs’ mortgage loan. (See Am. Compl. at Ex. N). With respect to
the escrow, Plaintiffs inquired “why JP Morgan Chase is escrowing our home owners’ insurance
7

policy,” and “what the escrow advances represent.” (Id.). Plaintiffs’ letter, however, does not
anywhere state that Plaintiffs believe that this escrow is in error or why Plaintiffs believe it is in
error. (Id.). In their response to Defendant’s argument, Plaintiffs concede that the letter on
which their RESPA claim is based “fails to set forth the reasons why the account is in error.”
[See ECF 16-4 at p. 25]. Thus, in the absence of this required information, Plaintiffs’ RESPA
claim fails. Accordingly, the claim is dismissed.
Defendant also argues that Plaintiffs’ RESPA claim must be dismissed because Plaintiffs
have failed to allege actual damages as a result of the alleged violation. Notably, Plaintiffs do
not provide any response to this argument. Regardless, this Court agrees with Defendant. In its
relevant part, 12 U.S.C. §2605(f) provides that an individual may only recover damages for “any
actual damages” suffered and “any additional damages . . . in the case of a pattern or practice of
noncompliance . . . .” 12 U.S.C. §2605(f)(1)(A)-(B). Plaintiffs’ amended complaint is silent
with respect to any actual damages suffered as a result of the alleged RESPA violation. As such,
Plaintiffs have failed to allege a RESPA claim. See Orman, 2012 WL 1071219, at *5. The
claim, therefore, is dismissed for this additional reason.
Plaintiffs’ Pennsylvania Unfair Trade Practices Claims
At Count II, Plaintiffs assert Pennsylvania state law claims for unfair trade practices in
violation of the FCEUA and the UTPCPL. Unlike the FDCPA (discussed above), the FCEUA
prohibits unfair or deceptive collection practices of both debt collectors and creditors. 73 Pa.
Cons. Stat. §2270.4; see also Howe v. Creditors Interchange Receivables Management, LLC (In
re Howe), 446 B.R. 153, 158 (Bankr. E.D. Pa. 2009). In general, the FCEUA prohibits certain
acts of creditors and debt collectors deemed to be unfair or deceptive practices. See 73 Pa. Cons.

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Stat. §2270.4.

With respect to creditors, 4 the FCEUA provides, in its relevant part, the

following:
(5) A creditor may not use any false, deceptive or misleading
representation or means in connection with the collection of any
debt.
***
(6) A creditor may not use unfair or unconscionable means to
collect or attempt to collect any debt. Without limiting the general
application of the foregoing, the following conduct is a violation of
this paragraph:
(i) The collection of any amount, including any interest, fee,
charge or expense incidental to the principal obligation, unless
such amount is expressly authorized by the agreement creating the
debt or permitted by law.
Id. at §2270.4(5)-(6)(i).

In addition, a violation of the FCEUA “shall constitute a violation of

the . . . Unfair Trade Practices and Consumer Protection Law.” Id. at §2270.5(a). Because the
FCEUA does not provide individuals with the right to institute private causes of action for
violations, individual plaintiffs must use 73 Pa. Cons. Stat. §201-9.2, the remedial provision of
the UTPCPL, to obtain relief. See Benner v. Bank of America, 917 F. Supp.2d 338, 359 (E.D.
Pa. 2013). Section 201-2(4)(xxi) of the UTPCPL, on which Plaintiffs rely, defines an “unfair
method of competition” and “unfair or deceptive acts or practices” as “engaging in any other
fraudulent or deceptive conduct which creates a likelihood of confusion or of misunderstanding.”
“[T]he UTPCPL is to be liberally construed to effectuate its objective of protecting the

As part of this Count II, Plaintiffs assert a claim under Pennsylvania’s Consumer Protection Laws
premised upon Defendant’s violation of the FDCPA. (Am. Compl. at ¶¶116, 119). Because Plaintiffs’
FDCPA claim fails as a matter of law, so, too, does any state law claim premised on a violation of the
FDCPA. Cf., Klein v. HSBC Mortgage Services (In re Klein), 2010 WL 2680334, at *2 (Bankr. E.D. Pa.
June 29, 2010) (“To repeat, the only way that a ‘debt collector’ can violate [73 Pa. Cons. Stat. §2270.4] is
to violate the FDCPA: there is no independent act under [73 Pa. Cons. Stat. §2270.4] pursuant to which a
debt collector may violate that statute.”).
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consumers of this Commonwealth from fraud and unfair or deceptive business practices.” Ash v.
Cont’l Ins. Co., 932 A.2d 877, 881 (Pa. 2007).
Plaintiffs’ remaining state law unfair trade practices claims are premised upon Plaintiffs’
contention, as alleged in the amended complaint, that Defendant has wrongfully required
Plaintiffs’ monthly mortgage payments to Defendant to include a sum for insurance premiums as
part of escrow despite the parties’ negotiated agreement that Plaintiffs’ future monthly mortgage
payments would not include insurance premiums as part of escrow. Plaintiffs allege that in
failing to abide by the parties’ agreement as to escrow, each month Defendant misapplies
Plaintiffs’ payments, resulting in the assessment of late fees and other charges. (Am. Compl. at
¶28(b)). In support of their claim, Plaintiffs point to language in the Loan Modification and
correspondence between Plaintiffs’ counsel and Defendant’s counsel that preceded the parties’
signing of the Loan Modification that clearly reflect an agreement that Plaintiffs’ future monthly
mortgage payments would not include insurance payments to be escrowed. Defendant disagrees
with Plaintiffs’ interpretation of the Loan Modification and, in turn, argues that the Loan
Modification, along with the incorporated Loan Documents, requires Plaintiffs to escrow
insurance premiums and, further, allows for the assessment of fees and/or penalties if Plaintiffs
fail to make full, required payments. Defendant also argues that because the Loan Modification
is a written, signed, and fully integrated agreement that was intended to include all of the terms
of the parties’ agreement, the parties and this Court are precluded from relying upon parol
evidence to substantiate the terms of the agreement. Defendant further argues that the Loan
Modification incorporates all of the terms of the Loan Documents that were not expressly
modified by the Loan Modification and that the Loan Modification did not expressly modify the
Loan Documents’ escrow requirements.

10

In reviewing the Loan Modification, it is clear that although the Loan Modification
amends and/or supersedes certain terms contained in the Loan Documents, it does not expressly
require or not require the payment of insurance premiums into escrow. To the contrary, with
respect to escrow, it provides as follows:
[t]his Agreement does not waive future escrow requirements. If
the Loan includes collection for tax and insurance premiums, this
collection will continue for the life of the Loan.
(Am. Compl. Ex. F-3, at ¶3(B)). The Loan Modification also provides that:
[t]he Mortgage and Note together, as may previously have been
amended, are referred to as the “Loan Documents.” Capitalized
terms used in this Agreement have the meaning given to them in
the Loan Documents.
(Id. at Preamble at ¶1). As argued by Defendant, pursuant to the clear terms of the Loan
Modification, the Loan Documents continue to bind the parties unless “expressly modified” by
the Loan Modification. Specifically, the Loan Modification provides that Plaintiffs agree:
[t]hat all terms and provisions of the Loan Documents, except as
expressly modified by this Agreement, or by the U.S. Bankruptcy
Code, remain in full force and effect; nothing in this Agreement
shall be understood or construed to be a satisfaction or release in
whole or in part of the obligations contained in the Loan
Documents; and that except as otherwise specifically provided in,
and as expressly modified by, this Agreement, or by the U.S.
Bankruptcy Code, the Lender and I will be bound by, and will
comply with, all of the terms and provisions of the Loan
Documents.
(Id. at ¶(3)(D)).

As such, one must look to the Loan Documents, and, in particular, the

Mortgage5 to determine the requirements with respect to escrow.6 To that end, the Mortgage
provides the following with respect to escrow:

5

It is well-settled that this Court may look to and rely upon an authentic document upon which the
complaint is based when the defendant attaches such a document to its motion to dismiss. See Pension
Ben. Guar. Corp. v. White Consol. Industries, Inc., 998 F.2d 1192, 1197 (3d Cir. 1993). Here, Plaintiffs’
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Funds for Escrow Items: Borrower shall pay to Lender on the day
Periodic Payments are due under the Note, until the Note is paid in
full, a sum (the “Funds”) to provide for payment of amounts due
for: (a) taxes and assessments and other items . . . (c) premiums
for any and all insurance required by Lender under Section 5 . . .
These items are called “Escrow Items.”
(ECF 18-1, Mortgage at §3). Section 5 of the Mortgage requires Plaintiffs to maintain hazard
insurance (homeowner’s insurance) for the property. (Id. at §5). What both parties inexplicably
miss, however, is that §3 of the Mortgage goes on to permit the lender (Defendant) to waive any
or all of the borrower’s escrow obligations. That provision provides:
Borrower shall pay Lender the Funds for Escrow Items unless
Lender waives Borrower’s obligation to pay the Funds for any or
all Escrow Items. Lender may waive Borrower’s obligation to pay
to Lender Funds for any or all Escrow Items at any time. Any such
waiver may only be in writing. In the event of such waiver,
Borrower shall pay directly, when and where payable, the amounts
due for any Escrow Items for which payment of Funds has been
waived by Lender and, if Lender requires, shall furnish to Lender
receipts evidencing such payment within such time period as
lender may require. Borrower’s obligation to make such payments
and to provide receipts shall for all purposes be deemed to be a
covenant and agreement contained in this Security Instrument, as
the phrase “covenant and agreement” is used in Section 9. If
Borrower is obligated to pay Escrow Items directly, pursuant to a
waiver, and Borrower fails to pay the amount due for an Escrow
Item, Lender may exercise its rights under Section 9 and pay such
amount and Borrower shall then be obligated under Section 9 to
repay to Lender any such amount. Lender may revoke the waiver
claims are premised in large part upon the interpretation of the Loan Modification, which incorporates the
terms of the Mortgage, a copy of which Defendant has attached to its reply in support of its motion to
dismiss. [ECF 18-1]. Plaintiffs do not dispute this document’s authenticity. As such, this Court may
consider the Mortgage without converting the underlying motion to dismiss to a motion for summary
judgment.
Plaintiffs point to the parties’ cross-out of the word “insurance” in Paragraph 2(B) to support their
contention that the Loan Modification sets out the parties’ intention that Plaintiffs’ monthly mortgage
payment not include a sum for insurance premiums. This argument is misplaced since the provision in
which the word “insurance” is crossed-out pertains only to the modified principal balance and does not
expressly require or not require the payment of insurance to Defendant for escrow nor does it expressly
modify the escrow requirements of the Loan Documents.
6

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as to any or all Escrow Items at any time by a notice given in
accordance with Section 15 and, upon such revocation, Borrower
shall pay to Lender all Funds, and in such amounts, that are then
required under this Section 3.
(Id. at §3). This provision, which was not expressly modified by the Loan Modification, clearly
provides that Plaintiffs are obligated to pay insurance premiums into escrow unless the escrow
requirement is waived by Defendant in writing.
While neither party directly references this “waiver” provision contained in the
Mortgage, Plaintiffs’ amended complaint relies upon and attaches a series of correspondence
between the parties through their respective counsel and/or representatives prior to final
execution of the Loan Modification in which Defendant purports to agree that Plaintiffs’ monthly
mortgage payment will not include escrow of insurance premiums. In particular, at Paragraph 27
of the amended complaint, Plaintiffs allege that the parties entered into a letter agreement,7 as
evidenced by an attached letter dated December 28, 2015, from Defendant to Plaintiffs (the
“December 28 Letter”), through which the parties agreed that homeowner’s insurance would not
be required to be paid into escrow. (Am. Compl. at ¶27). The December 28 Letter from
Defendant sets forth Plaintiffs’ new monthly mortgage payment as follows:
Your new principal and interest payment will be $980.96, plus a
monthly escrow amount for taxes and insurance of $516.88, which
equals a new total monthly payment amount of $1,497.84. This
amount may change if there’s an increase or decrease in your taxes
or insurance premiums or other escrow items.
(Am. Comp. at Ex. F-1) (strike-out in original). As noted above, the words “and insurance” are
crossed out and initialed. Similarly, the December 28 Letter from Defendant also provides:

While Plaintiffs’ contention that the attached letter constitutes a “letter agreement” is a
conclusion of law subject to debate, the content of the letter may constitute a written waiver of Plaintiffs’
obligation to escrow homeowner’s insurance as permitted by Section 3 of the Mortgage.
7

13

The terms of your modified loan will require that a portion of your
new monthly payment be set aside in an escrow account for
payment of your property taxes, insurance premiums and other fees
as required. Any prior waiver of escrows will no longer be in
effect. We’ll pay your real estate taxes and insurance premiums as
they come due from this account. Your initial monthly escrow
payment will be $516.88. Please note that this is an estimated
amount. Your escrow payment amount may adjust annually;
therefore, the amount you must place in escrow will also adjust as
permitted by law. You can expect your monthly payment to
change after the first year.
(Id.) (strike-out in original).

Again, the words “insurance premiums” are crossed out and

initialed. This letter from Defendant can plausibly be construed as Defendant’s “written waiver”
of Plaintiffs’ obligation to include fees for insurance premiums for escrow. As such, this Court
finds that Plaintiffs’ factual allegations, including, in particular, the December 28 Letter from
Defendant and the facts surrounding it,8 sufficiently plead a waiver of the escrow of insurance
premiums requirement as permitted by the terms of the Mortgage. In light of this alleged written
waiver, if in fact effective, Defendant’s alleged misapplication of Plaintiffs’ monthly mortgage
payments and assessment of late fees and other charges could constitute unfair trade practices
under the FCEUA and/or UTPCPL. Accordingly, Defendant’s motion to dismiss Count II is
denied.

Plaintiffs’ amended complaint also references and attaches email correspondence between
Plaintiffs’ counsel and Defendant’s counsel which appears to support Plaintiffs’ contention that the
parties agreed that Plaintiffs would not be required to escrow insurance payments. (See Am. Compl. at
¶27(c); Ex. F-2). In its motion to dismiss, Defendant argues that the parol evidence rule bars Plaintiffs’
introduction of extrinsic documents, like the correspondence described above, to vary the terms of the
written, signed and fully-integrated Loan Modification agreement. While Defendant’s statement of the
law of the parol evidence rule appears to be correct, for purposes of this Court’s decision here, the rule is
inapplicable to the introduction of this correspondence as evidence of a “written waiver” as required by
the Mortgage.
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Plaintiffs’ “Regulation X” Claim (Count V)
At Count V, Plaintiffs assert a RESPA claim for the violation of 12 U.S.C. §2605
premised on Defendant’s alleged failure to comply with “Regulation X,” in particular, 12 C.F.R.
§1024.17. Defendant moves to dismiss this claim solely on the basis of its above-disposed of
argument that Plaintiffs were required to pay insurance premiums into escrow. [See ECF 13-1 at
p. 17]. Because this argument is without merit, at this stage of the litigation, Defendant’s motion
to dismiss Count V is denied.
CONCLUSION
For the reasons stated herein, Defendant’s motion to dismiss is granted, in part, and
denied, in part. Counts I, III, and IV are dismissed in their entirety. Count II is dismissed to the
extent it relies upon Defendant’s alleged status as a “debt collector” and/or a violation of the
FDCPA only.9 An Order consistent with this Memorandum Opinion follows.

NITZA I. QUIÑONES ALEJANDRO, U.S.D.C. J.

9

This matter will, therefore, proceed with the claims asserted against Defendant at Count II, to the
extent premised on Defendant’s status as an entity other than a “debt collector,” and Count V.
15