McWhorter v. Ocwen Loan Servicing LLC
2:15-cv-01831
N.D. Ala.Sep 28, 2017Background
- Plaintiffs Harold McWhorter and Robert Fielder sued Ocwen under the FDCPA, alleging Ocwen charged unlawful convenience fees when collecting loan payments.
- This order addresses only McWhorter: he entered a Trial Period Plan Agreement with prior servicer GMAC on Nov. 9, 2012 requiring three reduced payments (Dec. 1, 2012; Jan. 1, 2013; Feb. 1, 2013).
- The trial agreement stated that acceptance of trial payments did not cure or waive the existing default and that completion would lead GMAC to review eligibility for a permanent modification.
- GMAC notified McWhorter on Feb. 7, 2013 that he had completed the trial period and that GMAC would review and, if qualified, send a permanent modification offer within 30 days.
- Ocwen acquired servicing of McWhorter’s loan on Feb. 15, 2013 and executed a permanent loan modification with him on Mar. 1, 2013.
- The central legal question is whether the loan was "in default" under the FDCPA when Ocwen acquired servicing on Feb. 15, 2013; if it was, Ocwen is treated as a debt collector.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether McWhorter’s loan was in default when Ocwen acquired servicing | Trial-period completion created a new payment arrangement such that the loan was not in default when Ocwen acquired it | Ocwen contends the loan was not in default because GMAC had approved/was implementing a modification and McWhorter completed required trial payments | The court held the loan remained in default at acquisition because the trial plan did not cure or waive default and was only a step toward possible modification |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (establishes pleading standards for plausible claims)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (plausibility standard for Rule 12(b)(6) pleadings)
- Bailey v. Security Nat'l Servicing Corp., 154 F.3d 384 (7th Cir.) (holding a negotiated forbearance that gives a true "fresh start" can mean a debt is not in default when acquired)
- Urquilla-Diaz v. Kaplan Univ., 780 F.3d 1039 (11th Cir.) (courts may consider documents central to a claim on a Rule 12(b)(6) motion)
- Church v. Accretive Health, Inc., [citation="654 F. App'x 990"] (11th Cir.) (determination of default is case-specific; contractual terms are instructive)