ALI v. OCWEN LOAN SERVICING, LLC et al
MEMORANDUM AND/OR OPINION. SIGNED BY HONORABLE LAWRENCE F. STENGEL ON 3/29/17. 3/29/17 ENTERED AND COPIES E-MAILED.(kw, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
OCWEN LOAN SERVICING, INC.,
and WELLS FARGO BANK, N.A.,
as Trustee for the MORGAN
STANLEY ABS CAPITAL I INC.
March 29, 2017
Azfar Ali brings this action against Ocwen Loan Services, Inc., and Wells Fargo
Bank, N.A., alleging violations of the Real Estate Settlement Procedures Act, 15 U.S.C. §
2605, and Regulation X, 12 C.F.R. § 1024.35 in Count I; Pennsylvania’s Unfair Trade
and Consumer Protection Law, 73 P.S. § 201-3.1, and Pennsylvania’s Fair Credit
Extension Uniformity Act, 73 P.S. § 2270.4 in Count II; and the Fair Credit Reporting
Act, 15 U.S.C. § 1681s-2(b) in Count III. The defendants have filed a motion to dismiss
Count II of the amended complaint pursuant to Rule 12(b)(6) of the Federal Rules of
Civil Procedure. The plaintiff has responded. For the following reasons, I will deny the
motion in its entirety.
Mr. Ali owns and resides in a home in Macungie, Pennsylvania, which he
purchased in 2006. The residence is encumbered by a mortgage, originally in the amount
of $273,472. Sometime before February 10, 2009, Mr. Ali’ s mortgage was assigned to
the Morgan Stanley ABS Capital I Trust 2006-HE8, but the assignment was not recorded.
Around that same time, Mr. Ali entered into a Loan Modification Agreement with Saxon
Mortgage Services. The modification was also not recorded. At some point before
January 10, 2011, Defendant Ocwen began servicing the mortgage on behalf of the Trust.
Mr. Ali’s contractual monthly mortgage payments were $1,533.47.
On October 24, 2011, Mr. Ali received an invitation from Ocwen to apply for a
modification for his loan. Mr. Ali contacted Ocwen to inquire about refinancing options.
Ocwen responded that as a servicer, it could not refinance loans directly and thus did not
participate in a refinancing program.
On March 20, 2013, Mr. Ali submitted an application for a mortgage loan
modification to Ocwen, complete with all requested documents. In a letter dated April
10, 2013, Ocwen offered Mr. Ali a HAMP2 Trial Period Plan (“TPP”) with three trial
payments of $1,941.98 to be made on or before May 1, 2013, June 1, 2013, and July 1,
The facts are gleaned from the amended complaint and the extrinsic documents upon which it
is based. See GSC Partners, CDO Fund v. Washington, 368 F.3d 228, 236 (3d Cir. 2004). For
the purposes of this motion, they are presented in the light most favorable to the plaintiff, as the
non-moving party, and are accepted as true with all reasonable inferences drawn in his favor.
The Home Affordable Modification Program (“HAMP”) began in early 2009. It is part of the
Troubled Asset Relief Program, under which banks and servicers (such as Ocwen) have received
billions of taxpayer dollars. Its purpose is to help millions of families modify and restructure
their mortgage loans to avoid foreclosure.
2013. The offer specifies: “To accept this offer, you must make your first monthly trial
period payment.” It further clarifies: “If each payment is not received by Ocwen Loan
Servicing in the month in which it is due, this offer will end and your loan will not be
modified under the Making Home Affordable Program.”
Upon receiving Ocwen’s HAMP TPP offer and before May 1, 2013, Mr. Ali
called Ocwen to discuss the offer. He rejected it on the telephone with Mr. Yash, an
Ocwen representative. Mr. Ali confirmed that he wanted to continue paying his property
taxes and homeowner’ s insurance premiums directly, and requested that Ocwen not
escrow his account as required by HAMP. Ocwen also allegedly and falsely represented
to Mr. Ali’s that his rejection of the HAMP loan modification had been confirmed.
Based upon Ocwen’s false representations that a trial payment must be made to
accept the HAMP program and that Mr. Ali’s rejection of the loan modification had been
confirmed, Mr. Ali did not make the trial period payment and instead continued making
his contractual mortgage payments of $1,533.47 from May 2013 through the present.
The amended complaint further alleges that immediately after Mr. Ali’s rejection
of the mortgage modification, and Ocwen’s purported acknowledgment of the rejection,
Ocwen began mishandling Mr. Ali’ s contractual mortgage payments. In fact, Ocwen
admits that it treated the mortgage loan as if it had been modified through HAMP,
allocating portions of Mr. Ali’s contractual monthly payment to an escrow account for
property taxes and homeowner’s insurance.
Defendant Ocwen allegedly allocated Mr. Ali’s mortgage payments to a suspense
account, and not towards the principle and interest of the mortgage in May 2013 and June
2013. Ocwen applied late charges to Mr. Ali’s May 2013 mortgage payment, even
though the payment was not late. Ocwen’s misallocation of these payments also included
the application of $614.34 towards an escrow account, an account which should never
have existed because Mr. Ali’s payment allocated to the escrow account was not applied
to interest or principle of the mortgage.
Although Ocwen had allegedly represented to Mr. Ali that his mortgage loan
would not be included in the HAMP modification, Ocwen improperly treated his
contractual mortgage payments as “Forbearance Payments,” which were deposited into
suspense accounts and used to establish escrow accounts. Ocwen also misapplied Mr.
Ali’s contractual mortgage payments to a homeowner’s insurance policy. Mr. Ali had
always paid his property taxes and homeowner’s insurance directly. Mr. Ali renewed his
current homeowner’s policy and paid the premiums directly to the insurance company on
June 20, 2013. Unbeknownst to Mr. Ali, Ocwen opened and paid a homeowner’s
insurance policy on Mr. Ali’s behalf with the contractual mortgage payments Mr. Ali
made, instead of applying them to the principle and interest. In fact, less than a week
after Ocwen paid the homeowner’s policy on Mr. Ali’s behalf, Ocwen sent Mr. Ali a
letter indicating that Mr. Ali’s application for a loan modification had been denied. The
reason given for the denial was, “The application was withdrawn at your request.”
A year later in June 2014, the same situation was repeated. Mr. Ali paid his
homeowner’s insurance directly, and Ocwen paid Mr. Ali’s homeowner’s insurance with
Mr. Ali’s contractual mortgage payments.
Ocwen also allegedly misapplied Mr. Ali’s contractual mortgage payments to his
annual property taxes. Mr. Ali had always paid his property taxes directly. Based on
Ocwen’s representations that his mortgage had not been modified through HAMP, Mr.
Ali paid his property taxes directly to his town’s tax assessor on August 10, 2013.
Defendant Ocwen paid the annual property taxes to Mr. Ali’s town’s tax assessor on
August 14, 2013, with money from Mr. Ali’s contractual mortgage payment. In October
2013, Ocwen was refunded for the double payment of the annual property taxes and
Ocwen applied the refund to the impermissibly opened and operated escrow account.
Mr. Ali has never received any refund from Ocwen stemming from the double payment
of the $4,132 in property taxes.
Mr. Ali disputed the late charges Ocwen applied to his May 2013 payment and
confirmed his rejection of the HAMP loan modification. He also disputed the treatment
of his mortgage as if it had been modified by HAMP in June 2013, in July 2013, twice in
November 2013, twice in January 2014, in April 2014, in May 2014, in August 2014, in
November 2014, in April 2015, and in June 2015.
Apparently, Defendant Ocwen finally acknowledged on May 22, 2015, that there
had been no loan modification. Mr. Ali brought this action against the defendants on
December 30, 2015. Nevertheless, Ocwen sent Mr. Ali notices that his mortgage was in
default and his home would be foreclosed upon on January 6, 2016, January 21, 2016,
February 3, 2016, and February 22, 2016.
II. LEGAL STANDARD
A motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure
for failure to state a claim upon which relief can be granted examines the sufficiency of
the complaint. Conley v. Gibson, 355 U.S. 41, 45-46 (1957). Following the Supreme
Court decisions in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) and
Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009), pleadings standards in federal actions have
shifted from simple notice pleading to a more heightened form of pleading, requiring a
plaintiff to plead more than the possibility of relief to survive a motion to dismiss under
Fed. R. Civ. P.12(b)(6). Fowler v. UPMC Shadyside, 578 F.3d 203, 210-211 (3d Cir.
2009); see also Phillips v. County of Allegheny, 515 F. 3d 224, 230 (3d Cir. 2008).
Therefore, when presented with a motion to dismiss for failure to state a claim,
district courts should conduct a two-part analysis. First, the factual and legal elements of
a claim should be separated. The court must accept all of the complaint’s well-pleaded
facts as true but may disregard legal conclusions. Iqbal, 556 U.S. at 679. Second, a
district court must determine whether the facts alleged in the complaint are sufficient to
show that the plaintiff has a “plausible claim for relief.” Id. In other words, a complaint
must do more than allege the plaintiff’s entitlement to relief. A complaint has to “show”
such an entitlement with its facts. Id.; see also Phillips, 515 F.3d at 234-235. “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.’” Iqbal, 556 U.S. at 679.
Under Federal Rule of Civil Procedure 8(a)(2), a pleading must contain a “short
and plain statement of the claim showing that the pleader is entitled to relief.” As the
Court held in Twombly, the pleading standard Rule 8 announces does not require
“detailed factual allegations,” but it demands more than an unadorned, the-defendantunlawfully-harmed-me accusation. Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S.
at 555). A pleading that offers “labels and conclusions” or “a formulaic recitation of the
elements of a cause of action will not do.” Twombly, 550 U.S. at 555. Nor does a
complaint suffice if it tenders “naked assertion[s]” devoid of “further factual
enhancement.” Id. at 557.
In Count II, Mr. Ali alleges that the defendants engaged in unfair methods of
competition and unfair or deceptive acts or practices, as defined by Pennsylvania’s Unfair
Trade and Consumer Protection Law, by attempting to collect a debt in violation of the
Fair Credit Extension Uniformity Act. The defendants seek to dismiss this claim arguing
that Mr. Ali failed to allege either justifiable reliance or ascertainable loss. I do not
Pennsylvania’s Fair Credit Extension Uniformity Act (“FCEUA”) prohibits unfair
or deceptive acts or practices in the collection of debt. See 73 P.S. § 2270.2.
Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (“UTPCPL”), like
the FCEUA, is “a remedial statute intended to protect consumers from unfair or deceptive
practices or acts” in the conduct of trade or commerce. Balderston v. Medtronic Sofamor
Danek, Inc., 152 F.Supp.2d 772, 776 (E.D. Pa. 2001). Section 201-2(4) of the UTPCPL
“lists specific unfair methods of competition and unfair or deceptive acts or practices, and
includes a catchall provision.” Hunt v. U.S. Tobacco Co., 538 F.3d 217, 221 (3d Cir.
Mr. Ali’s claims under the FCEUA and the UTPCPL are analyzed, at least as an
initial matter, together: “Since the FCEUA does not provide individuals with the right to
institute private causes of action for violations, individual plaintiffs must use 73 Pa. Stat.
§ 201-9.2, the remedial provision of the UTPCPL, to obtain relief.” Benner v. Bank of
Am., N.A., 917 F.Supp.2d 338, 359 (E.D. Pa. 2013); see FCEUA, 73 Pa. Stat. §
2270.5(a) (“If a debt collector or creditor engages in an unfair or deceptive debt
collection act or practice under this act, it shall constitute a violation of [the UTPCPL]”).
The Superior Court of Pennsylvania has stated:
The inclusion of a violation of the FCEUA as also being
a violation of the UTPCPL, evinces a clear intent by our
Legislature that FCEUA claims be treated in the same
manner as other private action claims under the UTPCPL.
. . . As a private action under Section 201-9.2 of the
UTPCPL, FCEUA claims therefore must plead that a
plaintiff suffered an ascertainable loss as a result of a
defendant’s prohibited action. As stated earlier, this
requires that justifiable reliance be pled.
Kern v. Lehigh Valley Hosp., Inc., 108 A.3d 1281, 1290 (Pa. Super. 2015). The Kern
court clarified that a plaintiff proceeding under the UTPCPL’s remedial provision on a
FCEUA claim must plead an ascertainable loss resulting from justifiable reliance on the
defendant’s conduct in order to survive a Rule 12(b)(6) motion. Courts have consistently
adopted Kern’s interpretation of the pleading requirements under the FCEUA and
UTPCPL and required plaintiffs asserting FCEUA claims under the UTPCPL’s remedial
provision to plead ascertainable loss and justifiable reliance. See Kaymark v. Bank of
America, N.A., 783 F.3d 168, 182 (3d Cir. 2015) (finding that Kern’s interpretation of
the pleading requirements for FCEUA claims brought under the UTPCPL is “persuasive
and indeed, logical.”); Walkup v. Santander Bank, N.A., 147 F. Supp. 3d 349 (E.D. Pa.
Dec. 3, 2015) (requiring the plaintiff to plead both ascertainable loss and justifiable
reliance). Therefore, Mr. Ali’s FCEUA and UTPCPL claims may only proceed if he has
set forth sufficient factual allegations demonstrating ascertainable loss and justifiable
Upon review of the amended complaint, I find that Mr. Ali has properly pled that
he justifiably relied upon the defendants’ representations that Mr. Ali had rejected the
HAMP modification agreement, when in fact the defendants treated the loan as if it had
been modified anyway, bolstering his claims under FCEUA Sections 2270.4(b)(5)(ii) and
§ 2270.4(b)(6)(i). Based on his understanding that the defendants had accepted his
rejection of the modification, Mr. Ali continued paying his contractual mortgage payment
on time every month as he always had, instead of paying the HAMP modified payment of
$1,941.98. Mr. Ali also paid his homeowner’s insurance and property taxes directly,
instead of relying upon the defendants to pay them, or instead of paying the defendants an
additional monthly amount to escrow his homeowner’ s insurance and property taxes.
It is clear that Mr. Ali relied upon the defendants’ representations that the HAMP
modification had been rejected, and that his reliance resulted in ascertainable losses. Mr.
Ali identified several ways in which has paid money after the defendants misled him into
believing that they would not treat his mortgage as if it had been modified through
HAMP. These losses include administrative fees; late fees; expense charges; a property
inspection fee; a loan document copy fee; an undisclosed fee of $53.34; two years of
homeowner’s insurance paid by Mr. Ali twice, once directly and once through his
contractual mortgage payment; and one year of property taxes, again paid by Mr. Ali
twice, once through his contractual mortgage payment and once directly. I also note that
Mr. Ali has never received any refund from the defendants stemming from the double
payment of the $4,132 in property taxes. Mr. Ali also alleges that he incurred costs
associated with disputing this quandary with the defendants. All of these losses are
similar to what this court has found sufficient to allege ascertainable loss, specifically
money losses caused by a defendant. Walkup v. Santander Bank, N.A., 147 F.Supp.3d
349 (E.D. Pa. Dec. 3, 2015); Allen v. Wells Fargo, N.A., No. 14-cv-5283, 2015 U.S. Dist.
LEXIS 114310 (E.D. Pa. Aug. 27, 2015); Benner v. Bank of Am., N.A., 917 F. Supp. 2d
338, 360 & n. 16 (E.D. Pa. 2013); and Yelin v. Swartz, 790 F.Supp.2d 331, 336-37 (E.D.
Pa. 2011). Regardless of the defendants’ argument to the contrary, Mr. Ali has properly
and sufficiently pleaded justifiable reliance and ascertainable losses. Accordingly, I will
deny the defendants’ motion to dismiss Count II.
An appropriate Order follows.
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