Sutton v. CitiMortgage, Inc., 228 F. Supp. 3d 254

Background

Sutton obtained a mortgage (refinanced 2004) serviced by CitiMortgage; she received a permanent HAMP modification in October 2013 that reduced monthly payments but left a large balloon payment due at original maturity (March 2019).
Sutton sent written communications to Citi in Feb., May, and Aug. 2014 seeking (among other things) the identity of the mortgage owner (SASCO), the servicing-agreement language allegedly barring a term extension, and a new modification with a term extension.
Citi responded to most inquiries, identifying SASCO and explaining that investor guidelines precluded extending maturity; in Aug. 2014 Citi said it could not alter agreed modification terms after its discretionary period but would explore a new modification.
Sutton sued (Mar. 2016), alleging RESPA violations (12 U.S.C. § 2605 and Regulation X / 12 C.F.R. § 1024.35) for failing to substantiate or correct the alleged error (no term extension) and a New York GBL § 349 claim.
The district court granted Citi’s Rule 12(b)(6) motion: it held Sutton failed to plead a cognizable RESPA claim or proximate damages and declined supplemental jurisdiction over the state-law claim.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Sutton's 2014 letters were actionable QWRs under 12 U.S.C. § 2605(e) demanding servicing-related information	Sutton: letters (Feb/May/Aug 2014) are QWRs and sought servicing information (investor/servicing agreement reasons for refusing term extension)	Citi: the requests challenged a loan modification decision, not loan "servicing" as defined by RESPA, so § 2605(e) does not apply	Court: letters were QWRs in form but the substance related to modification, not "servicing"; § 2605(e) claim fails
Whether Sutton alleged a claim under the Dodd-Frank amendments (12 U.S.C. § 2605(k)(1)(C) and Regulation X § 1024.35) to correct an alleged error in loss-mitigation/modification	Sutton: servicer had duty to correct errors and to substantiate investor restrictions; § 1024.35 and § 2605(k) reach failures to correct loss-mitigation errors	Citi: Dodd-Frank/Reg X do not convert disagreement over modification substance into a covered error; CFPB intentionally excluded incorrect evaluation for loss mitigation from covered errors and directed dispute process to § 1024.41	Court: § 1024.35 (and § 2605(k)) do not cover evaluation-correctness of loss-mitigation/ modification decisions; Sutton's claim fails
Whether Sutton pled actual damages proximately caused by any RESPA breach	Sutton: damages include balloon payment exposure, excess payments vs. rent, emotional distress, incidental costs	Citi: damages are speculative or predate the communications; incidental costs and conclusory pattern allegations insufficient; no proximate causation	Court: Sutton failed to plead damages proximately caused by any RESPA violation; damages categories dismissed
Whether the court should retain supplemental jurisdiction over Sutton's NY GBL § 349 claim after dismissing federal claims	Sutton: consumer-deception claim tied to same facts merits federal adjudication	Citi: federal claims fail, so state claim should be litigated in state court	Court: declined to exercise supplemental jurisdiction; NY GBL claim dismissed without prejudice

Key Cases Cited

Faber v. Metropolitan Life Ins. Co., 648 F.3d 98 (2d Cir. 2011) (standard for Rule 12(b)(6) — draw all reasonable inferences for plaintiff)
Ashcroft v. Iqbal, 556 U.S. 662 (2009) (complaint must state a plausible claim; legal conclusions insufficient)
Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility pleading standard)
Roth v. CitiMortgage, Inc., 756 F.3d 178 (2d Cir. 2014) (discusses servicer obligations under RESPA § 2605)
Kruse v. Wells Fargo Home Mortg., Inc., 383 F.3d 49 (2d Cir. 2004) (agency deference — Chevron/Auer framework discussed)
Edwards v. First Am. Corp., 798 F.3d 1172 (9th Cir. 2015) (discusses deference to CFPB interpretations and shift of RESPA rulemaking authority)