ORDER ON RECOMMENDED DECISION ON DEFENDANT’S MOTION TO DISMISS AND PLAINTIFF’S MOTION TO AMEND
Walter McGahey’s Amended Complaint against Federal National Mortgage Association (“Fannie Mae”) and PHH Mortgage Corporation (“PHH”) alleges violations of the Maine Unfair Trade Practices Act, 5 M.R.S.A. §§ 205-A et seq. (2017), and the Real Estate Settlement Procedures Act, 12 U.S.C.A. §§ 2605 et seq. (2017), as well as claims for fraud and for misrepresentation in violation of Maine’s Consumer Credit Code, 9-A M.R.S.A. § 9-401 (2017). ECF No. 16. Defendants moved to dismiss all claims against them. ECF No. 19 at 6. McGahey subsequently moved for leave to amend his Complaint a second time. ECF No. 23. The United States Magistrate Judge recommended. that the Motion to Dismiss be granted and the Motion for Leave to Amend be denied, ECF No. 30 at 37, and McGahey objected, ECF No. 31; ECF No. 32.1 have carefully reviewed and considered the Magistrate Judge’s recommended decision and the parties’ briefs, and have made a de novo determination of the matters pbjected to, in accordance with 28 U.S.C.A. § 636(b)(1) (2017).. For the reasons discussed below, I conclude that the Defendants’ Motion to Dismiss should be denied, and the Plaintiffs Motion for Leave to Amend should be granted.
L FACTUAL BACKGROUND
I accept — and repeat — the Magistrate Judge’s recitation , of the facts relevant to the pending motions, which is based on the factual allegations in the First Amended Complaint and the documents appended thereto and referenced by the parties.
At all relevant times, Fannie Mae owned, and PHH serviced, McGahey’s mortgage loan on property located at 42 McKenney Road in Saco, Maine (the “Property”). Fannie Mae retained PHH to service the loan under Fannie Mae’s direction, control, and authority. PHH is required to follow Fannie Mae regulations and guidelines, particularly the Fannie Mae Servicing Guide, including the Fannie Mae Single Family Servicing Guides (the “Fannie Mae Guidelines”). PHH was and is required to participate in the Home Affordable Modification Program (“HAMP”) for Fannie Mae loans.
McGahey owns the Property by virtue of a deed from his parents, George L. McGa-
On May 22, 2006, McGahey executed and delivered to TD Banknorth, N.A. (“TD Bank”) a promissory note in the original principal amount of $170,000 (the “Note”). The Note provided for repayment at a fixed annual interest rate of 7.868 percent. To secure repayment of the Note, McGa-hey executed and delivered to Mortgage Electronic Registration Systems, Inc., as nominee for TD Bank, its successors and assigns, a mortgage in the amount of $170,000 (the “Mortgage”), which was recorded on June 7, 2006, in the York County Registry of Deeds at Book 14860, Page 847.
A. 2010 Loan Modification
In 2009, due to medical issues and job loss, McGahey fell behind on payments on the Note and applied for loss mitigation. At that time, his monthly income was $3,387.67, and his monthly payment ■ for principal, interest, taxes, and insurance was less than $1,600. In or about July 2009, PHH offered McGahey a HAMP modification contingent on his successful completion of a Trial Payment Plan (“TPP”) and income verification. The TPP required McGahey to make payments in the amount of $1,031.79 on August 5, September 1, and October 1, 2009. McGahey timely signed and returned the TPP and timely made the required payments. He successfully completed the HAMP TPP.
On or about December 21, 2009, PHH delivered a loan modification agreement to McGahey, which he signed in early 2010 (the “2010 Loan Modification”). The 2010 Loan Modification, which called for a monthly principal, interest, and escrow payment of $1,456.49, was not provided pursuant to HAMP. Pursuant to that modification, the principal and interest portion of McGahey’s monthly payment dropped from $1,231.80 to $1,176.80. At the time, McGahey’s income was $979.33 monthly due to a recent job loss. The 2010 Modification Agreement required an initial contribution of $1,987.07. Believing that this was the only way to save his home, McGa-hey signed and returned the agreement and provided the contribution payment.
B. 2013 Loan Modifications
With the help of his parents, and by selling his car, McGahey made the monthly payments until December 2011, after which it was too difficult to come up with the unaffordable amount. In June 2012, PHH delivered a notice of intention to foreclose to McGahey. Shortly thereafter, McGahey retained counsel to help him apply for a more affordable loan modification to prevent the foreclosure. On August 31, 2012, he submitted a complete loss mitigation application to PHH requesting to be reviewed for a HAMP modification. He explained that he had experienced a change in circumstances since 2009-10 in that he was receiving Social Security Disability (“SSD”) income rather than wages and was unable to make the modified monthly payment. As of August 12, 2012, the estimated fair market value of the Property was between $180,000 and $200,000, McGahey’s income, as submitted to PHH, together with his father’s contribution, totaled about $3,819 per month when adding a multiplier of 1.25 as required by Fannie Mae for non-taxed income.
On September 25, 2012, PHH sent McGahey a letter stating that it was unable to offer a HAMP modification but providing no reason for the denial. PHH
On September 25, 2012, McGahey met all of the criteria to be eligible for a HAMP modification pursuant to the Fannie Mae Guidelines. Even though McGahey was evaluated for a HAMP modification in 2009-10 and was not offered one after he completed the HAMP TPP due to his change in income, he could still request and be provided reconsideration for a HAMP modification at a future time if he had a change in circumstances. McGahey had neither failed a HAMP TPP nor received a HAMP permanent modification and lost good standing per the Fannie Mae Guidelines. Pursuant to those guidelines, PHH was obligated to evaluate McGahey’s application for a HAMP modification.
Had PHH evaluated McGahey’s application properly, it would have found him eligible for a HAMP modification and would have had to offer him a HAMP trial plan. McGahey would have been able to afford and pay the HAMP trial payments. For purposes of a Fannie Mae HAMP, a loan can be modified by capitalizing arrears, reducing the interest rate to a floor of 2 percent, extending' the term to 40 years, and/or forbearing principal to reach the target ratio of 31 percent of. the borrower’s gross monthly income. As of September 25, 2012, a HAMP modification would have provided a monthly principal, interest, and escrow payment of about $1,183.89, a new capitalized principal- balance of about $182,500, and an initial modified interest rate of 2 percent. McGahey would have been able to sustain that monthly payment.
Apart from its September 25, 2012, letter, PHH provided no other written response regarding evaluation or eligibility for any other loss mitigation program besides HAMP from August 31, 2012, through January 1, 2013.
In a letter dated September 28, 2012, PHH, through counsel, stated that it would continue with the foreclosure on the loan. McGahey paid his counsel more than $1,000 to prevent the foreclosure and eventually appear in the foreclosure action, including participating in the foreclosure diversion program. Through counsel, McGahey appealed the HAMP denial on October 2, 2012. On October 4, 2012, through counsel, he requested that PHH escalate his appeal of the HAMP denial and cease further foreclosure activity on the loan. PHH did not respond to either the appeal or the request to escalate the appeal and cease foreclosure efforts, and did not reevaluate McGahey’s application for a HAMP modification or review his loan for other loss mitigation options.
McGahey, in collaboration with his counsel, sought assistance from York County Community Action (“YCCA”) regarding the denial of his application for a HAMP modification. A YCCA housing counselor contacted PHH with McGahey on October 26, 2012. PHH falsely stated that McGahey did not complete a HAMP in 2009 and, therefore, was, not eligible for another HAMP modification offer. PHH represented that it was going to seek an exception through Fannie Mae for another modification. On November 2, 2012, McGahey, through counsel, emailed PHH to check on the status of his appeal but received no response.
On or about November 4, 2012, PHH filed a complaint for foreclosure against McGahey in the Maine District Court in
In an effort to continue to try to save his home with an affordable monthly payment, McGahey submitted another complete loss mitigation application for a HAMP modification to both PHH and Fannie Mae on December 4, 2012. PHH acknowledged receipt of the application in a letter dated January 31, 2013. In the application, McGahey reported a change in income, which, combining his SSD payments and his father’s contribution of retirement income plus food, stamps and accounting for a 1.25 multiplier for non-taxed income, totaled $4,012,75. McGahey was eligible at that time for a HAMP modification. PHH knew or should have known that he was eligible to be at least evaluated for, if not offered, a HAMP modification at that time as it possessed the original non-HAMP modification and McGahey’s complete loss mitigation packet.
PHH delivered McGahey a notice dated February 13, 2013, offering a TPP in the amount of $1,501.68 per month beginning March 1, 2013. In a second letter dated February 13, 2013, PHH offered McGahey a TPP with a monthly payment of $1,625.19. Neither letter indicated that the TPP offers were provided pursuant to HAMP. Based on PHH’s repeated misrepresentations that he was ineligible for a HAMP modification, McGahey forewent taking steps at that tíme to pursue a HAMP modification, such as furthering an appeal, submitting another HAMP application, sending a demand letter, or pursuing litigation, and he accepted the first February 13, 2Ú13, offer of a monthly payment of $1,501.68 and made a timely first TPP payment.
By letter dated February 18, 2013, PHH offered McGahey yet another TPP with monthly payments of $1,591.63 beginning April 1,-2013. He continued to send timely payments per the prior offer of a monthly payment of $1,501.68 and' completed that TPP. By letter dated June 5, 2013, PHH offered McGahey a permanent loan modification with a monthly principal, interest, and escrow payment of $1,630.73 beginning June 1, 2013 (the “2013 Loan Modification”). The interest rate remained 6.67 percent, and the term of the loan was extended to 40 years, A total of $28,678 in escrow advances, attorney fees and costs, recoverable advances, and interest was added to the modified loan balance, creating a new capitalized principal balance of $198,216,01.
The 6.67 percent interest rate was a higher rate than McGahey would have had pursuant to a HAMP offer. McGahey was not offered a permanent HAMP modification in June 2013. Although PHH again
McGahey made at least 20 payments pursuant to the 2013 Loan Modification (as later revised). A portion of those payments went to cover (i) attorney’s fees incurred by PHH and Fannie Mae in the 2012 foreclosure .action, (ii) higher interest (6.67 percent) than would have been charged pursuant to a HAMP loan modification, (iii) interest on that interest accruing from September 25, 2012, through June 1, 2013, and (iv) “recoverable advance” fees, as well as interest on those fees accruing during that period. McGahey would not have had to pay these costs if PHH had properly managed his loan, including following Fannie Mae Guidelines and accurately evaluating his eligibility for a HAMP modification.
On August 27, 2013, PHH called McGa-hey, stating that the permanent loan modification was not effective because it was signed in the wrong place - and that it would send a new modification agreement for him to sign. On August 28, 2013, McGa-hey’s counsel delivered a letter to PHH, characterized as a Qualified Written Request pursuant to RESPA, requesting information regarding McGahey’s loan, including any, modifications made to it. The letter stated:
In order to determine the amount due and owing on my client’s account, I need all information about the costs, accounting, escrow procedures, and application of payments in connection with this loan. Due to the complicated nature of mortgage account servicing, accounts. frequently contain errors in the form [of] misapplied payments, excess fees, or unwarranted/unauthorized charges. I have reason to believe that this account may contain such errors.
EOF No. 16-23 at 1. The,letter made-10 demands for documents or information.
PHH responded by letter dated September 10, 2013, but did not provide information regarding the 2010 Loan Modification. PHH disputed that the August 28, 2013, letter was a Qualified Written Request in that it failed to identify an actual error in McGahey’s account. However, it provided copies of McGahey’s Mortgage, Note, HUD-1 Settlement Statement, Truth in Lending (“TIL”) disclosures, Assignment Notice, Payment History, and a key to interpret the Payment History, and provided the contact information of a PHH employee.
In September 2013, PHH asked McGa-hey to execute a revised modification agreement with similar terms with a monthly payment of $1,625.22 and capitalization of $27,756.55 in attorney fees, recoverable-advances, advanced escrow, and interest (the “Revised 2013 Loan Modification”). This was not a HAMP modification. Again, based on PHH’s misrepresentations regarding his HAMP eligibility, McGahey timely signed and returned the Revised 2013 Loan Modification agreement. Again, PHH knew or should have known McGa-hey was eligible to at least be evaluated for, if not offered, a HAMP modification at that time.
C. 2015 Loan Modification
McGahey struggled for over two years to make the monthly payments on the 2013 TPP and loan modifications. He had bought another used car but had to sell it to help make the payments. PHH knew or should have known that $1,625.22 was an unaffordable payment amount based on McGahey’s submitted financial information.
In May 2015, McGahey reconnected with the YCCA housing counselor and submitted another complete loss mitigation application, again seeking a HAMP modification. During the process of working with the housing counselor in 2015, McGahey had to travel approximately 45 miles round-trip at least two times from Saco to Sanford, paying gas and mileage expenses. Again, McGahey had changed circumstances in that he could not maintain the modification payments and had unexpected housing expenses, as outlined in his hardship letter submitted to PHH.
By letter dated June 4, 2015, PHH falsely stated that McGahey did not qualify for a HAMP modification because he did not “successfully complete a previous HAMP offer.” ECF No. 16 at ¶ 125. In June 2015, PHH offered McGahey a non-HAMP TPP with three monthly payments of $1,339.98 beginning July 1, 2015. Again, PHH knew or should have known McGahey was eligible to be evaluated for, if not offered, a HAMP at that time. Had PHH evaluated his application properly pursuant to Fannie Mae Guidelines, it would have found him eligible for a HAMP modification and would have had to offer him a HAMP trial plan. McGahey would have been able to afford and pay the HAMP trial payments. Again, PHH knew or should have known the modification payment offered was unaffordable based on McGahey’s submitted financial information. Based on PHH’s repeated misrepresentations that he was ineligible for a better HAMP modification, McGahey again forewent taking steps to pursue the HAMP option, believing that if he did not take the modification offered, he would lose his home.
As of June 1, 2015, McGahey was eligible for a HAMP modification with a monthly payment of about $1,177.70 based on his SSD income of $1,374 and a $1,665 per month contribution from his father. Pursuant to Fannie Mae Guidelines, PHH was required to evaluate McGahey for a HAMP modification and communicate its decision to him.
On June 12, 2015, McGahey delivered a letter to PHH characterized as a Notice of Error in which he sought to appeal PHH’s wrongful denial of a HAMP modification and obtain proper review for such a modification. He submitted a similar complaint on June 12, 2015, to the Consumer Financial Protection Bureau (“CFPB”).
PHH responded to the CFPB complaint, not the Notice of Error, by letter dated July 10, 2015, acknowledging McGahey’s successful completion of the 2009 HAMP TPP but falsely stating that he was offered a HAMP modification agreement and was
By letter dated August 3, 2015, PHH offered McGahey a non-HAMP permanent modification (the “2015 Loan Modification”) with a monthly payment of $1,336191 beginning November 1, 2015. The interest rate was 4 percent, with a 40-year term. This resulted in a reduction in McGahey’s principal and interest payment from $1,179.76 to $851.89. The 2015 Loan Modification was not a HAMP modification. The new capitalized principal balance on the 2015 modification was $203,832.61. The fair market value of the Property in about October 2015 ranged from $208,000 to $259,500. The increase in the principal balance cut into the equity that McGahey had in the Property. A total of $8,372.61 was added to the principal balance for escrow advances and accrued interest, including $6,866.23 in interest that accrued, at the prior rate of 6.67 percent. Based on PHH’s repeated misrepresentations that he was ineligible for a better HAMP modification, McGahey again forewent taking steps to pursue the HAMP option, believing that if he did not take the modification offered, he would lose his home.
On August 12, 2015, McGahey delivered a complaint to Fannie Mae regarding the wrongful HAMP denial. '
McGahey made several payments pursuant to the terms of the 2015 Loan Modification. A portion of those payments went to cover (i) attorney’s fees incurred by PHH and Fannie Mae in the 2012 foreclosure action, (ii) interest that accrued at a higher rate than would have been charged pursuant to a HAMP loan modification, (iii) interest on interest that accrued from September 25, 2012, through June 1, 2013, (iv) “recoverable advance” fees, as well as interest on those fees that accrued during that period, and (v) interest at a higher rate than would have been charged pursuant to a HAMP loan modification plus interest on the interest accrued pursuant to -the 2013 loan modifications that was capitalized into the 2015 loan modification balance. McGahey would not have had to pay these costs if PHH had properly managed his loan, including following Fannie Mae Guidelines and accurately evaluating him for eligibility for a HAMP modification in 2012.
In emails in September and October 2015 between the YCCA housing counselor and Jack Maloney, Senior Business Manager of Fannie Mae, Maloney falsely stated that McGahey did not qualify for a HAMP modification because of a previous HAMP modification failure.
On October 30, 2015, McGahey sent another letter to PHH, characterized as a Qualified Written Request pursuant to RESPA, requesting five categories of documents or information regarding his loan, particularly the 2009-10 TPP and modification. PHH responded by letter dated December 1, 2015, stating that it was providing, either in the body of its letter or through enclosed documents, all of the requested documents/information. It stated that, while McGahey had been prequalified for a HAMP TPP on July .6, 2009, based on financial documentation he had submitted reflecting a monthly income of $3,386.67, he later próvided financial documentation confirming monthly gross income of $979.33. It' stated that, as a result, he was ineligible for a HAMP modification but was provided with a standard loan modification. PHH did not address or correct the 2012 and 2015 wrongful denials based incorrectly on the alleged unsuccessful completion of a HAMP.
McGahey again retained and paid counsel $100 to deliver another letter styled as an Notice of Error and Request for Information to PHH on January 27, 2016.
PHH responded by letter dated March 7, 2016, stating that after investigating the issues raised in McGahey’s January 27, 2016, correspondence, it had determined that no error had occurred. It repeated the rationale it had provided in its'December 1, 2015, letter that McGahey was ineligible for a HAMP modification in 2009-10 based on his changed (lower) income. However, it did not address McGahey’s counsel’s argument that subsequent denials of HAMP modifications were wrongful.
On March 24, 2016, McGahey, through counsel, delivered a demand letter to PHH pursuant to the Maine Unfair Trade Practices Act (“UTPA”), 5 M.R.S.A. § 213. PHH responded by letter dated April 8, 2016, that, because the issues were the same as those raised in previous letters to which it had responded, it would take no action regarding the account.
As of August 4, 2016, the date he filed his First Amended Complaint, McGahey was again struggling to make his monthly payment under the current modification. On July 14,2016, through counsel and with YCCA’s help, he submitted a .new loan modification application seeking a HAMP modification. As of August 4, 2016, he had not received a response to the application.
PHH engaged in persistent misprocess-ing and mismanagement of McGahey’s loan, including failing to follow Fannie Mae Guidelines, failing to evaluate him properly for a HAMP modification, and persistently making false representations that he was not eligible for a HAMP modification.
Had PHH properly serviced and managed McGahey’s loan, it would have found him eligible for, and would have offered him, a HAMP loan modification in-September 2012. Instead, he made payments toward .increased interest each month due to higher interest rates, interest on interest that accrued from September 2012 to June 2013, interest on the interest arrears added to the 2015 modification, PHH and Fannie Mae’s attorney fees to pursue the 2012 foreclosure plus interest on those fees, fees and costs from September 2012 to June 2013, and interest on those fees and costs. McGahey also had to pay his own attorney to defend against the 2012 foreclosure action, which would have been unnecessary had he been given a HAMP modification.
PHH and Fannie Mae benefited financially from the increased payments toward interest, fees, and costs that McGahey made from 2012 to 2016. In addition, through the non-HAMP loan modifications, with interest, fees, and costs accruing at a higher rate than would have been the case with a HAMP modification, the principal balance grew and thereby decreased McGahey’s equity in the Property. McGa-hey also suffered harm to his credit because of his inability to sustain the inflated monthly payments offered.
PHH does not have proper policies and procedures in place to process and properly report on a loan when a HAMP TPP is completed but a non-HAMP modification is then offered to a borrower. PHH and Fannie Mae do not have proper policies and procedures in place, to .evaluate and correct wrongful denials of loan modifications. PHH was repeatedly informed.by McGa-hey of the misprocessing of his loan modification applications but failed to take any corrective action,
PHH’s wrongful conduct caused McGa-hey’s home to be at risk. The stress and
McGahey struggled each month to come up with the money to make the payment, cut back on everything he could- — groceries, heat, hot water, gifts, and going out— and-felt worthless and overcome by the fact that he could not make the house payments. He saw that his mother suffered from anxiety over potentially losing the home, as a result of which he felt increased guilt and shame. He tried to keep the situation from his aging, ailing father. He was always irritable and impatient and often fought with his father-and two sons. He became reclusive because of lack of money and depression and, over time, grew distant from all of his friends. He would only leave the house to buy groceries. At his lowest point, in "about August 2014, his sense of failure and distress over potentially losing the home became intolerable and he began to have suicidal ideations. He continues to ■ suffer from anxiety and distress over the fact that his home is at risk and his continued ownership of it - depends on his ability to make an unaffordable mortgage payment each month. He constantly fears that he will lose the home, displacing his elderly father who now suffers from dementia.
II. LEGAL STANDARD
A. Motion to Dismiss
To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a complaint “must contain sufficient factual matter to state a claim to relief that is plausible on its face.” Saldivar v. Racine,
Allegations of fraud are subject to the higher pleading standard of Federal Rule of Civil Procedure Rule 9(b). See Fed. R. Civ. P. 9(b). The complaint must “.be specific about the ‘time, place, and content of an alleged false representation[.]’” Murtagh v. St. Mary’s Reg’l Health Ctr.,
B. Motion to Amend
After the time for amendments as a matter of course has passed, a party may amend its pleading with leave of the court, which should be freely given “when justice so requires.” Fed. R. Civ. P. 15(a)(2). Accordingly, leave to amend should be granted where there is no “undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, [or] futility....” Foman v. Davis,
III. DISCUSSION
PHH and Fannie Mae assert numerous arguments in favor of dismissal of each count in McGahey’s Complaint. I will first address the parties’ standing arguments, and will then address each count in turn.
A. Standing
As a threshold matter, Defendants assert that McGahey lacks standing to assert the claims in his Complaint because each attempts to indirectly enforce the Fannie Mae guidelines pertaining to HAMP modifications. While the First Circuit has held that borrowers do not have standing as third-party beneficiaries to enforce HAMP’s terms, see Mackenzie v. Flagstar Bank, FSB,
B. Count I: Maine Unfair Trade Practices Act (“UTPA”)
McGahey alleges that PHH violated the UTPA by failing to offer him a modification as required by the HAMP guidelines and by making false representations regarding his eligibility for a HAMP loan modification, which caused him to accept
The UTPA gives a private right of action to consumers who are injured as a result of the use of unfair or deceptive business practices.
1. Unfair or Deceptive Act or Practice
PHH’s allegedly false representations that McGahey did not qualify for a HAMP modification were material representations that were likely to mislead a reasonable consumer, and therefore qualify as deceptive under the UTPA. The representations are material because it is reasonable to infer that McGahey’s decision to accept the standard modifications offered by PHH was influenced by his belief that he did not qualify for a more advantageous HAMP modification. See Weinschenk,
2. Damages
Damages cognizable under the UTPA are limited to a loss of money or property that results from a violation. Noveletsky v. Metro. Life Ins. Co.,
McGahey asserts that as a consequence of the alleged UTPA violations, he suffered damages in the form of: (1) paying increased ’interest; (2) paying Defendants’ attorney’s fees in connection with the 2012 foreclosure action; (3) incurring and paying late fees when he fell behind on the payments under the standard modification; (4) paying a higher rate of interest on the capitalized interest, fees, attorney’s fees, and costs; (5) paying his attorney to prevent the 2012 foreclosure; (6) suffering harm to his credit; (7) paying gas and mileage expenses; and (8) suffering a loss of equity in the Property; These alleged damages all constitute losses of money or property, with the exception of the harm to McGahey’s credit, see Poulin,
Defendants assert, and the Magistrate Judge agreed, that these harms are nonetheless not cognizable under the UTPA because they were not caused by an alleged unfair or deceptive act or practice. Defendants’ argument runs as follows. McGahey admits that HAMP does not provide him with a private right of action, and that he has no third-party beneficiary standing to directly enforce the terms' of Fannie Mae’s ■ HAMP-related servicer guidelines. Because he cannot sue to obtain a HAMP modification, McGahey cannot establish that he was entitled to receive a HAMP modification. Because McGahey was not entitled to receive a HAMP modification, he cannot establish that he would have been, given a HAMP modification if PHH ■ had not wrongfully denied his application and falsely told him that he was ineligible. Put another way, Defendants assert that even if PHH had properly evaluated McGahey’s HAMP application and correctly determined that he was eligible for a HAMP modification, it could nonetheless have refused to give him one — in violation of the Fannie Mae Guidelines — with impunity because McGahey lacks a legal mechanism to force PHH to provide the modification. Because PHH could have refused to provide the HAMP modification even in the absence of a UTPA violation, Defendants assert, the damages McGahey claims to have suffered as a result of not receiving the HAMP modification were not caused by the UTPA violation.
The purpose of awarding actual damages to plaintiffs under the UTPA is to put those plaintiffs in the position they would have been in had the violation not occurred. See McKinnon v. Honeywell Intern., Inc.,
An analogy may be useful in illuminating the issue at hand. Imagine a homeowner with a leaking roof who hires a contractor to patch the hole in the roof. The contractor falsely. tells the homeowner, that a patch will not suffice, and instead, the whole roof must be replaced. After paying
Defendants’ emphasis on McGahey’s lack of a private action to enforce HAMP is therefore misplaced. Whether McGahey can sue to obtain the modification does not necessarily answer the question of whether or not he would have received the modification had his application been handled properly. That is, the fact that McGahey does not have a private cause of action to force PHH to give him a HAMP modification does not foreclose the possibility that he would nonetheless have been offered the modificátion if his application had been properly handled and: approved.' Presumably, PHH has offered HAMP modifications to qualified applicants in the past, despite the fact that- none of those applicants had the ability to sue to obtain the modification. '
At the motion to .dismiss stage, I must accept as true all well-pleaded facts in the Complaint and draw all inferences in favor of McGahey. See Saldivar,
3. Total Payments Made
Defendants also argue .that the documents attached to McGahey’s Complaint establish that he has. paid several thousand dollars less on his mortgage since 2012 than he would have paid -under a HAMP modification if ope had been offered to him in 2012. Defendants therefore assert that McGahey cannot claim to have suffered any damage as a consequence of the failure to offer him a HAMP modification. This argument ignores the increase in the principal balance of McGahey’s loan due to the higher interest rates and the capitalized late payments, fees, and costs that resulted from McGahey’s acceptance of the standard modification. The measure of McGahey’s damages must take into account his overall economic position, and is not limited to the sum of the payments he has actually made since 2012. The loss of equity in McGahey’s home resulting from the higher principal balance on his loan is an economic injury that constitutes a loss of money or property. See Napolitano v. Green Tree Servicing, LLC,
4. . Detrimental Reliance
Defendants argue that McGahey’s Complaint fails to demonstrate detrimental reliance because he. cannot show that his acceptance of a standard loan modification was detrimental. This argument essentially
C. Count II: Real Estate Settlement Procedures Act (“RESPA”)
McGahey alleges that PHH violated RE SPA by failing to adequately respond to Qualified Written Requests
RESPA aims to promote transparency and communication between borrowers and lenders. See Bates v. JPMorgan Chase Bank, NA,
McGahey asserts that 12 C.F.R. § 1024 — so-called Regulation X — expands the responsibilities of servicers with respect to RESPA. Regulation X was promulgated in 2014 by the Bureau of Consumer Financial Protection pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act. See Wilson v. Bank of America,
Defendants claim that McGahey did not reference Regulation X in his Complaint, and therefore it should not be considered in evaluating his RESPA claim. The First Amended Complaint does reference Regulation X, however, when describing the Qualified Written Requests and Notices of Error sent to PHH, and the notices themselves — which were incorporated into the Complaint — explicitly reference Regulation X. See, e.g., ECF No. 16 at ¶¶ 138, 159; ECF No. 16-36 at 2. Moreover, Defendants do not cite any case law supporting their position that failure to mention an implementing regulation by name in a complaint renders the regulation inapplicable to a claim under the statute being implemented. Cf. Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc.,
1. Requirements for Qualified Written Requests or Notices of Error
Defendants argue that the communications sent , by McGahey’s attorney do not qualify as Qualified Written Requests under RESPA because they do not identify errors relating to loan servicing as defined by the statute. McGahey responds that the Defendants’ argument is faulty because it is based on pre-Regulation X RESPA. Regulation X specifically enumerates a “[f]ailure to provide accurate information to a borrower regarding loss mitigation options” as a covered error that may be the subject of a Qualified Written Request or Notice of Error. 12 C.F.R. § 1024.35(b)(7). McGahey has therefore sufficiently alleged that his communications regarding his HAMP application denials qualify under RESPA. See Wilson,
2. PHH’s Responses to McGahey’s Communications
Defendants also argue that PHH’s responses to McGahey’s communications were sufficient to satisfy its obligations under RESPA. Describing a servicer’s duty as “limited,” Defendants cite two cases interpreting RESPA before Régulation X went into effect for the proposition that in assessing a RESPA claim, the Court should “simply determine that the servicer responded with information.” ECF No. 19 at 27-29. In one of the cases cited by Defendants, the Eleventh Circuit held that a servicer’s letter providing a cursory explanation for the handling of a borrower’s payments was sufficient to satisfy the servicer’s obligations under RES-PA, despite the fact that the explanation left the borrower “confused and/or unsatisfied.” Bates v. JPMorgan Chase Bank, NA,
There is no case law in the First Circuit addressing the change, if any, that Regulation X wrought in a servicer’s obligations to respond under RESPA. None of the other circuit courts of appeal have explicitly analyzed Regulation X’s effect in this regard either. But two decisions out of the Eleventh Circuit that have been handed down since the Bates decision cited by defendants offer some guidance. In each, the Eleventh Circuit cited Regulation X in reversing a district court’s grant of a motion to dismiss a RESPA claim. See Renfroe v. Nationstar Mortg., LLC,
Wilson v. Bank of America, N.A.,
The reasoning in Wilson — especially to the extent it comports with the Eleventh Circuit’s apparent approach in Renfroe and Nunez — is persuasive. Because Regulation X was promulgated to implement the Dodd-Frank Wall Street Reform and Consumer Protection Act, it is reasonable to interpret the regulation’s added qualification that investigations be “reasonable” as expanding the substantive obligations of servicers under RESPA. Cf. Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376(purpose of Act to improve “accountability and transparency in the financial system”). Under Regulation X, servicers have a duty to perform a reasonably thorough investigation in response to a borrower’s Qualified Written Request or Notice of Error, and to provide a reasonably thorough response to a borrower’s questions and concerns. See Wilson,
McGahey alleges a number of specific violations of RESPA. On June 12, 2015, for example, McGahey sent a notice captioned as a Notice of Error to PHH, alleging that PHH had incorrectly stated that McGahey had failed to complete a previous HAMP offer, and therefore wrongfully denied his latest HAMP application. McGahey alleges that he also submitted a complaint to the Bureau of Consumer Financial Protection (CFPB) at the same time. PHH responded to the CFPB complaint, but not to the Notice of Error, on July 10, 2015. PHH’s July 10 response alleges that McGahey was offered a HAMP- modification in 2009. The response did not advise McGahey of his right to request the records on which PHH’s determination was based, as required by 12 C.F.R. § 1024.35(e)(l)(i)(B). In a letter dated December 1, 2015, PHH apparently reversed itself, and stated that McGahey had been offered a standard modification, rather than a HAMP modification, in 2009. It is reasonable to infer from these facts that the investigation conducted by PHH as a result of McGahey’s June 12 Notice of Error was not sufficient to satisfy PHH’s obligations under RESPA as defined by Regulation X, as it failed to uncover the fact that the modification offered to McGahey in 2009 was a standard modification, rather than a HAMP modification. Further, it is reasonable to infer that this information was readily available to PHH, and a reasonable investigation would have discovered it. McGahey’s Complaint therefore plausibly claims that PHH’s responses to his Qualified Written Requests and Notices of Error were not sufficient to satisfy RESPA.
3. Damages
McGahey alleges that PHH’s violations of RESPA caused him actual dam
RE SPA allows for recovery of “any actual damages to the borrower,” as well as statutory damages in the case of “a pattern or practice of noncompliance.” 12 U.S.C.A. § 2605(f)(1) (2017). The First Circuit has stated that consumer protection statutes should be construed “liberally in favor of consumers.” Barnes v. Fleet Nat’l Bank, N.A.,
McGahey alleges that PHH’s failure to adequately respond to his communications regarding the loan caused him emotional distress. Specifically, he claims that his confusion regarding his eligibility for HAMP resulting from PHH’s misrepresentations contributed to his stress. It is reasonable to infer that the misrepresentations that McGahey refers to in his Complaint include PHH’s inconsistent responses to his Qualified Written Requests and Notices of Error, especially the communications regarding whether he was ever offered or had failed a HAMP modification. McGahey’s allegations of emotional distress suffice to plausibly state actual damages under RESPA. See Moore,
McGahey also alleges that he paid an attorney $100 to draft and deliver a Qualified Written Request/Notice of Error to PHH when he did not receive an adequate answer to his earlier RESPA communications. Defendants argue that attorney’s fees do not constitute actual damages under RESPA because the statute separately provides for their recovery. The cases cited by Defendants, however, do not support the position that attorney’s fees a party incurs as a result of a RESPA violation, but unrelated to the RESPA litigation itself, are not recoverable. In Crow v. Ocwen Loan Servicing, LLC, one of the cases cited by Defendants, the District of Ha-wai’i suggested that payment to an attorney to send a second Qualified Written Request when a servicer failed to respond to a first Qualified Written Request would qualify as actual damages, but held on the facts of that case that the plaintiff had failed to establish a causal connection because the response period for the first Qualified Written Réquest had not yet expired when the second was sent.
Other courts have held that attorney’s fees are recoverable as actual damages under RESPA if they are not incurred in connection with bringing a suit under the statute. See, e.g., Miranda v. Ocwen Loan Servicing, LLC,
Because McGahey adequately alleged actual damages in support of his RESPA claim, in the form of emotional distress and attorney’s fees, his claim for statutory damages due to a pattern or practice of noncompliance also survives dismissal. See Renfroe, 822 F.3d at 1247 (holding allegations of five RESPA violations sufficient to state a claim for pattern or practice of noncompliance).
McGahey additionally asserts that the increased interest, fees, and costs he incurred as a result of not being offered a HAMP modification constitute damages under RESPA because PHH should have corrected the wrongful HAMP denial identified in McGahey’s Qualified Written Requests and Notice of Error, and offered him a HAMP modification. RESPA, however, does not impose an affirmative duty on a servicer to provide a modification. See 12 C.F.R. § 1024.41(a) (Section of Regulation dealing with loss mitigation, noting that Regulation X does not “impose[] a duty on a servicer to provide any borrower with a specific loss mitigation option.”). The goal of RESPA, as noted above, is to encourage communication to provide borrowers with accurate information about, and transparency regarding, their loans. See Bates,
D. Counts III and IV: Fraud and Misrepresentation
McGahey’s claims for common law fraud and for misrepresentation under the Maine Consumer Credit Code closely resemble his claim under the UTPA. In each, McGahey alleges that PHH and Fannie Mae’s false representations that he did not qualify for a HAMP modification induced him to accept a more expensive standard modification instead. McGahey alleges that as a result of -the Defendants’ fraud and misrepresentation, he suffered damages due to increased interest, costs, and fees as outlined in Section III.B.2, above.
To establish that the Defendants are liable for fraud, McGahey must show that they “(1) ma[de] a false representation (2) of a material fact (3) with knowledge of its falsity or in reckless disregard of whether it [was] true or false (4) for the purpose of inducing another to act or to refrain from acting in reliance upon it, and (5) [McGahey] justifiably relie[d] upon the representation as true and act[ed] upon it to [his] damage.” Francis v. Stinson,
McGahey’s Complaint describes the alleged misrepresentations regarding his eligibility for HAMP with sufficient particularity to satisfy Rule 9(b). See, e.g., ECF No. 16 at ¶¶ 41, 47, 70, 77-78, 83, 87, 125, 155. He alleges that Defendants knew or should have known that their representations regarding his eligibility were false, and that he relied on those representations in accepting more expensive standard loan modifications.
Defendants argue that McGahey cannot show that he relied on any misrepresentation to his detriment because he was not entitled to a HAMP modification. This argument essentially restates their argument with respect to damages regarding McGa-hey’s UTPA claim, and fails for the reasons explained earlier. McGahey’s claims in Count III and Count IV, for fraud and misrepresentation, state plausible claims, and will not be dismissed.
E. Motion to Amend
In denying McGahey’s motion to amend his Complaint, the Magistrate Judge concluded that the amendment would be futile because it did not cure any of the supposed defects in McGahey’s First Amended Complaint. ECF No. 30 at 36. Defendants do not advance any other arguments as to why the motion to amend should be denied. See ECF No. 33 at 9-10. Because I conclude that the First Amended Complaint is sufficient to survive dismissal, I also conclude that McGahey’s proposed amendment is not futile and his motion to amend should be granted.
IV. CONCLUSION
For the foregoing reasons, I do not accept the Recommended Decision (ECF No. 30). It is ORDERED that Defendants’ Motion to Dismiss (ECF No. 19) is DENIED. McGahey’s Motion to Amend (ECF No. 23) is GRANTED.
SO ORDERED.
Notes
. According to the Website of the Federal Housing Finance Agency, HAMP "is part of the Making Home Affordable® Program (MHA)® to help homeowners get mortgage relief and avoid foreclosure. Through HAMP, homeowners who are not unemployed but struggling to make their monthly mortgage payments, may lower their monthly payments and make them more affordable and sustainable for the long-term.”. HAMP, Federal Housing Finance Agency website, http://www.fhfa. -gov/Homeownersbuyer/MortgageAssistance/ ' Pages/HAMP.aspx (last visited July 10, 2017).
. This recitation corrects a typographical error in the date, February 13, “2012,” See ECF No. 16 at ¶ 87.
. Section 207 of the UTPA provides, in relevant part:
Unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce are declared unlawful.
5 M.R.S.A. § 207(2017).
Section 213, which establishes a private right of action, provides, again in relevant part:
Any person who purchases or leases goods, services or property, real or personal, primarily for personal, family or household purposes and thereby suffers any loss of money or property, real or personal, as a result of the use or employment by another person of a method, act or- practice declared unlawful by section 207 or by any rule or regulation issued under section 207, subsection 2 may bring an action either in the Superior Court or District Court for actual damages, restitution and for such other equitable relief, including an injunction, as the court determines to be necessary and proper.
5 M.R.S.A. § 213(1) (2017).
. A Qualified Written Request is any written correspondence that includes the name and account of the borrower and includes a statement of reasons that the borrower believes his or her account to be in error, or provides sufficient detail to the servicer regarding other information sought by the borrower. 12 U.S.C.A. § 2605(e)(1)(B) (2017).
. A Notice of Error is "any written notice from a borrower that asserts an error and includes the name of the borrower, information that enables the servicer to identify the borrower’s mortgage loan account, and the error the borrower believes has occurred.” 12 C.F.R. § 1024.35(a).