RESPA

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Bank Cannot Be Liable for RESPA Violation under Vicarious Liability Theory

In a case of first impression, the Fifth Circuit held that a RESPA action under section 2605 against a servicer for failure to comply with its obligation to provide loss-mitigation options to the homeowner, could not extend to the mortgagee Bank under a theory of respondeat superior. Christiana Trust v. Riddle, 911 F.3d 799 (5th Cir. Dec. 21, 2018).

Here, the homeowner, Mary Sue Riddle, took out a loan with Bank of America and the Bank engaged Ocwen Loan Servicing to service the loan. After the current loan owner, Christiana Trust, initiated foreclosure proceedings against Ms. Riddle, she counterclaimed and filed a third-party complaint against the Bank and Ocwen, alleging that the servicer failed to comply with RESPA’s mandate that it respond to Ms. Riddle’s timely application for loss-mitigation options. Specifically, Ms. Riddle invoked 12 U.S.C. § 2605(k)(1)(E), which provides that “a servicer of a federally related mortgage shall not … fail to comply with any other obligation found by the Bureau of Consumer Financial Protection, by regulation, to be appropriate to carry out the consumer protection purposes of this chapter.” The district court granted the Bank’s motion to dismiss on the dual basis that Ms. Riddle failed to support her claim that the Bank was vicariously liable for Ocwen’s actions, and, in the alternative, because under section 2605(k)(1)(E), the Bank could not be held liable for the actions of its servicer even if an agency relationship were established. [Read more…] about Bank Cannot Be Liable for RESPA Violation under Vicarious Liability Theory

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Wells Fargo on the Hook for Misreporting Delinquency

Finding genuine issues of material fact, the district court denied Wells Fargo’s motion for summary judgment on most of the chapter 13 debtors’ federal and state claims based on Wells Fargo’s misapplication and misreporting of mortgage payments while the debtors were in bankruptcy. Anderson v. Wells Fargo Bank, No. 16-2514, 2018 WL 3426269 (N.D. Tex. July 13, 2018).

Tony and Hanna Anderson were current on their mortgage when they filed their chapter 13 petition. Their confirmed plan provided for continued payments on the mortgage outside the plan. Though the Anderson made all mortgage payments in a timely manner, the mortgage servicer, Wells Fargo, misapplied the payments and reported the debt as delinquent. The Andersons sent Wells Fargo five qualified written requests for information under RESPA and filed a request for investigation under the FCRA. Wells Fargo admitted its error and sent the corrected information to credit reporting agencies approximately two months later. [Read more…] about Wells Fargo on the Hook for Misreporting Delinquency

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$2 Million Jury Verdict Against Mortgage Servicer

On Monday, Alena Hammer obtained a $2 million jury verdict against Residential Credit Solutions, Inc. (RCS), a national mortgage loan servicer, for its breach of contract, violations of the Real Estate Settlement Procedures Act (RESPA), and violations of the unfairness and deception provisions of the Illinois Consumer Fraud and Deceptive Business Practices Act. All of Hammer’s claims dealt with RCS’s misconduct in handling and servicing the mortgage loan on Hammer’s home in DuPage County, Illinois, where Hammer has resided for the last 27 years.

[Read more…] about $2 Million Jury Verdict Against Mortgage Servicer

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Court Rejects Unsupported Escrow Charges

In In the Matter of Breit, the chapter 13 trustee filed an objection to JPMorgan Chase’s proof of claim relating to the debtor’s residential mortgage.  No. 11-32461 (Bankr. N.D. Ind. March 27, 2013). In its POC, Chase claimed an arrearage in the amount of $27,897.09, encompassing unpaid monthly installments of $1,102.53 which represented a principal and interest component of $804.79, and an escrow component of $297.74. Under this calculation, Chase sought $7,145.76 attributable to the escrow deficiency. Although RESPA contemplates the creation of an escrow account to cover, among other things, tax and insurance payments that the mortgage servicer is forced to pay on behalf of a delinquent debtor, the trustee argued that the arrearage claim should be reduced by $3,379.35 because Chase had actually paid only $2,909.37 for those obligations. The court agreed. It rejected Chase’s “mathematical manipulation” (Chase’s phrase) in calculating the pre-petition escrow shortfall and permitted recovery only of those expenditures authorized by RESPA. Thus, even though Chase had met its initial burden of proof with respect to Rule 3001, it failed to counter the trustee’s evidence refuting the POC and therefore failed to meet its ultimate burden of proving the validity of the claim.

Breit opinion

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Lack of Notice Constitutes Waiver of Wells Fargo’s Claim

Declining to “dim the light that shines at the end of the long 60-month tunnel for compliant debtors,” the Bankruptcy Court for the Southern District of Texas held that Wells Fargo waived its right to collect post-petition shortfalls in escrow payments due to its failure to comply with notice requirements. In re Garza, No. 08-60088 (Bankr. S.D. Tex. Oct. 1, 2012). [Read more…] about Lack of Notice Constitutes Waiver of Wells Fargo’s Claim

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RESPA Prohibition Against Fee-Splitting not Applicable to Undivided Unearned Fee

The Supreme Court declined to interpret RESPA’s prohibition against fee-splitting as applying to the situation in which fees were charged for services that were not provided but where the fees were not divided between two or more parties. Freeman v. Quicken Loans, No.10-1042, __U.S.___ (May 24, 2012). [Read more…] about RESPA Prohibition Against Fee-Splitting not Applicable to Undivided Unearned Fee