A federal judge has partially granted Cenlar's motion to dismiss allegations of Real Estate Settlement Procedures Act violations in a
Judge Edmund Sargus Jr. in the Southern District of Ohio's Eastern Division allowed the portion of the claims that center on a document known as notice of error to move forward, but dismissed other claims related to a request for information in the case, O'Keeffe v. Cenlar.
The case centers on a dispute plaintiffs say arose after one of them asked for a correction on a name spelling in a modification agreement, which was reportedly recorded without an adjustment to billing.
Plaintiffs allege they then received a new, corrected mod that the servicer said it revised because the earlier one was not as intended. They refused to sign the new modification because they found a $90,000 difference in it unacceptable.
During the dispute, plaintiffs sent out both a request for information and a notice of error.
The NOE notified the company that plaintiffs considered the refusal to accept payments under the terms of the recorded modification as an error. It also notified Cenlar that they considered the interest, fees and charges they received based on billing under the original terms of the loan to be errors.
The RFI requested "call logs, recordings service notes and records of communications between Cenlar and plaintiffs" in addition to "all documents from January 2021 to the present" related to the issues at hand.
"Plaintiffs' sole damages arising from Cenlar's allegedly inadequate RFI response appear to be the costs incurred in preparing and transmitting the QWR — costs which this court has found insufficiently concrete," Sargus said in an opinion and order filed last week, which JD Supra reported on earlier.
However, the judge said he did see alleged damages as potentially "arising from the NOE."
The content of the servicer's response to the NOE played a role in his conclusion, according to the court document.
Sargus said NOE responses are supposed to contain either a correction or "a reasonable investigation" that ends with "a written notification that includes a statement that the servicer has determined that no error occurred," reasons for that determination and how borrowers can obtain supporting documentation.
So "the mere fact that Cenlar would have concluded that no enforceable loan modification existed after conducting a reasonable investigation does not absolve them of the responsibility of conducting a reasonable investigation and explaining their belief," he said.
The case is part of a broader body of law that servicers and attorneys are reviewing to update compliance parameters for handling the
Another recent legal development exemplifying the broader body of litigation centered on responses to formal borrower communications is a case involving Specialized Loan Servicing and allegations made by a former couple, Michael and Renita Russell.
The dispute involves a loan that dates back to a period when loose, securitized
"The 'prior deferred principal' should not have been added since that sum was already included in the modified unpaid principal balance," they said in court documents, noting that it brought their debt to an unmanageable level of $946,239.60 in excess of the value of their home.
Their amended complaint filed in January in California's Superior Court alleges that although the servicer filed a 72-page response to their qualified written request about the issue, the documentation was "in violation of RESPA in that SLS provided no information to account for the significant increase."
The plaintiffs eventually applied and received approval for a short sale. Their home sold for $793,918.78 and the amount was applied to their higher stated debt obligation, but they allege "the actual debt obligation at the time of the short sale was about $600,000," and it should have returned funds to them.
SLS does not comment on legal proceedings, according to an emailed statement from a spokesperson at Computershare, its parent company.
The servicer did file a cross complaint in February, alleging that "plaintiffs' financial mismanagement was the predominant, if not sole, cause of plaintiffs' default on the loan, inability to reinstate the loan, sale of the property and any damages." It also attempts to divide the couple's interests based on their separation.
In turn, the plaintiffs have filed a demurrer to the cross complaint.
The demurrer alleges that "SLS continues to argue that plaintiffs' claims are for wrongful foreclosure and therefore the plaintiffs could afford the subject real property is at issue" but that information is incorrect given that the home was sold instead in a short sale.
In addition, plaintiffs asserted that "at all times relevant herein, Michael and Renita were a married couple acting jointly to protect community property that was held by Michael and Renita as joint tenants," further alleging that "the cross complaint is frivolous, for the sole purpose of delay."
No further action in that case was anticipated until June at the time of this writing.
