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Homeowner failed to plead RESPA claim.

Byline: Virginia Lawyers Weekly

A homeowner who became frustrated after multiple unsuccessful attempts to request loan modification or loss mitigation relief did not adequately state a claim his provider violated the loss mitigation rules because he had already availed himself of the loss mitigation process.


On May 15, 2006, plaintiff entered into a mortgage loan contract to purchase property in Suffolk. Plaintiff alleges that, sometime after securing this loan, "[he] fell behind on his payments." He further alleges that, on or about Aug. 22, 2014, he entered into a loan modification agreement with Selene, which increased plaintiff's loan principal but reduced his interest rate and reduced his owed monthly payments.

According to the complaint, sometime after plaintiff obtained this loan modification in 2014, he and his wife again began experiencing financial difficulty due to a decrease in his wife's income. Presumably because of this financial difficulty, plaintiff allegedly contacted Selene on five occasions over a period of approximately two years to request loan modification and/or loss mitigation relief. After the last denial, plaintiff allegedly retained the legal services of Heath J. Thompson P.C. to assist him with his "ongoing mortgage issues."

According to the complaint, "[a] representative from Selene, Tammy, was given as the single point of contact for [plaintiff's] loan." On June 20, 2018, a representative from Heath J. Thompson P.C. allegedly "faxed an appeal for the loan modification denial" to Selene. On July 3, 2018, Selene informed such representative that plaintiff's appeal was denied.

On Oct. 4, 2018, plaintiff filed a two-count complaint against Selene in the Circuit Court for the City of Suffolk. Count I of the complaint alleges that defendant violated Section 1024.41(h) of Regulation X of the Real Estate Settlement Procedures Act in connection with the review and subsequent appeal of plaintiff's "loss mitigation application." Count II of the complaint alleges that defendant violated Section 1639c of the Truth in Lending Act when reviewing plaintiff's loss mitigation requests.

Defendant removed plaintiff's action to this court pursuant to 28 U.S.C. 1441, 1446. On Dec. 5, 2018, defendant filed a motion to dismiss. Plaintiff concedes in his opposition brief that his TILA claim in count II is barred by a three-year statute of limitations and thus moves to strike count II from his complaint. Therefore, the only remaining issue before the court is whether plaintiff's RESPA claim in count I states a plausible claim.


Defendant argues that count I fails to state a claim for a violation of RESPA's loss mitigation rules as a matter of law because such rules do not apply to subsequent loss mitigation requests after a borrower has already fully availed himself of the RESPA loss mitigation process, as the plaintiff did here.

The facts alleged in the complaint indicate that plaintiff already availed himself of RESPA's loss mitigation rules in 2014 when he entered into the loan modification agreement with defendant. Therefore, unless plaintiff can show that he became current on his loan sometime after Oct. 19, 2017, when the amendment to 1024.41(i) became effective, his claim that defendant violated 1024.41 of RESPA with respect to a subsequent loss mitigation application fails as a matter of law. In his complaint, plaintiff does not allege any facts about whether he was ever current on his loan, leaving his right to relief under RESPA a matter of pure speculation. For this reason, count I does not set forth sufficient factual allegations to survive a Rule 12(b)(6) motion and must be dismissed.

Defendant's second argument for dismissal is that count I fails to allege that the same person who reviewed and denied his loan modification application in May of 2018 was the same person who reviewed and denied his appeal of such application, which is necessary to state a claim that defendant violated 1024.41(h)(3). The court agrees.

Motion to dismiss granted.

Brannen v. Selene Finance LP, Case No. 18-cv-602, Feb. 11, 2019. EDVA at Norfolk (Doumar). VLW 019-3-048. 8 pp.

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Title Annotation:Real Estate Settlement Procedures Act, Brannen v. Selene Finance LP, U.S. District Court for the Eastern District of Virginia
Publication:Virginia Lawyers Weekly
Date:Mar 17, 2019
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