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EDVA: FDCPA claim viable against lender, servicer.

Byline: Rebecca M. Lightle

Despite skepticism about a plaintiff-debtor's ultimate chances, the court declined to dismiss his Fair Debt Collection Practices Act claim alleging that his mortgage lender and loan servicer intentionally lied to him about whether a home foreclosure was scheduled.


In 2005, Plaintiff George Yarid purchased his home with a mortgage. The deed of trust was assigned to Defendant Bank of New York Mellon in 2012, with Defendant Ocwen Loan Servicing LLC as the servicer.

Yarid admits that he failed to pay his mortgage under the terms of the note. He fell behind on mortgage payments in 2009, got a loan modification, but then fell behind again. Despite his delinquency, in this lawsuit Yarid says that the Bank and Ocwen had no legal authority to foreclose on his house. He also claims that the Defendants' representatives misled him by telling him there was no foreclosure until mere weeks before they sent a foreclosure notice. They also allegedly returned his loan payments months after he sent them and/or failed to apply his payments to his mortgage account.

The Defendants have moved to dismiss.


Among a number of legal problems, Yarid's complaint does not show that he has standing to seek judicial relief for several of his claims.

Yarid filed for bankruptcy before the foreclosure of his home. When he did so, his claims became the property of his trustee in bankruptcy. Therefore, only the trustee can pursue any claims that arose before or during his bankruptcy; Yarid lacks standing to do so. Because Yarid has standing to sue only for claims that arose after his bankruptcy ended, his claims under the Real Estate Settlement Procedures Act and under the theory of unjust enrichment must be dismissed.

Declaratory relief

Yarid's requests for declaratory and injunctive relief to establish that he is the lawful owner of the property both fail due to the foreclosure sale of the property. The sale moots injunctive relief and makes subsequently declaratory relief inappropriate.

Fair debt collection

Based on his allegations, Yarid has standing to pursue his claims that (1) the Defendants falsely claimed a right to foreclose, and (2) the Defendants misled Yaris as to his foreclosure status by telling him there was no foreclosure until weeks before the sale.

Foreclosure proceedings are a method of consumer debt collection. While it is likely that neither Ocwen nor the Bank is a debt collector, that determination will involve a fact-intensive process. Banks and servicers, though generally exempt from liability under the Fair Debt Collection Practices Act, can become debt collectors when they acquire debt already in default. Yarid admits that he fell behind in his mortgage payments in 2009. The Bank acquired the loan in 2012, which makes it plausible that Ocwen and the Bank acquired a loan already in default and thereby became debt collectors.

Yarid does not plead a sufficient claim based on the false right to foreclose; he admits he fell behind on mortgage payments and provides no other facts to suggest that the Defendants lacked a legal right to foreclose. However, he does plead a sufficient claim based on his allegations that the Defendants intentionally lied to him about his foreclosure status. These facts state a plausible violaion of 15 U.S.C.

1692e(2)(A), which prohibits debt collectors from making false representation as to the legal status of any debt.

Thus, although the court doubts that Yarid can ultimately establish these claims, it construes the complaint liberally and will deny the motion to dismiss as to this portion of his Fair Debt Collection Practices Act claim.

Motion to dismiss granted in part and denied in part.

Yarid v. Ocwen Loan Serv'g LLC, Case No. 3:17cv484, July 31, 2018. EDVA at Richmond (Gibney). VLW No. 018-3-315, 11 pp.

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Title Annotation:US Eastern District Court of Virginia, Fair Debt Collection Practices Act
Author:Lightle, Rebecca M.
Publication:Virginia Lawyers Weekly
Date:Aug 17, 2018
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