MEMORANDUM AND ORDER REGARDING DEFENDANTS’ MOTION TO DISMISS (Dkt. No. 17)
I. IntRoduction
David B. Sullivan and Donna L. Beck (“Plaintiffs”) brought this action in state court against the Bank of New York Mellon Corporation FKA The Bank of New York, as Trustee for the Sasco 2005-16 Trust Fund, and Nationstar Mortgage, LLC (together, “Defendants”). On November 4, 2014, Defendants removed the action to this court pursuant to 28 U.S.C. § 1441.
Plaintiffs’ claims arise out of a mortgage dispute and threatened foreclosure sale of their home.
II. BACKGROUND
The following facts come directly from Plaintiffs’ amended complaint.
Lender shall give notice to Borrower prior to acceleration following Borrower’s breach of any covenant or agreement in this Security Instrument.... The notice shall specify: (a) the default; (b) the action required to cure the default; (c) a date, not less than 30 days from the date the notice is given to the Borrower, by which the default must be cured; and (d) that failure to cure the default on or before the date specified in the notice may result in acceleration of the sums secured by this Security Instrument and sale of the Property. The notice shall further inform, Borrower of the right to reinstate after acceleration and the right to bring a court action to assert the non-existence of a default or any other defense of Borrower to acceleration and sale. If the default is not cured on or before the date specified in the notice, Lender at its option may require immediate payment in full of all sums secured by this Security Instrument without further demand and mayinvoke the STATUTORY POWER OF SALE and any other remedies permitted by Applicable Law.
(Id. ¶ 14; Dkt. No. 1-3, Ex. 6 (emphasis added).)
The second loan from E-Loan, Inc. was in the amount of $56,100, which was 20% of the purchase price of the Property. (Dkt. No. 16, Am. Compl. ¶ 15.) Although the loan was termed a “Home Equity Line of Credit,” the lender was aware that Sullivan would be borrowing the maximum principal amount to complete the purchase of the Property. (Id.) Sullivan is the only borrower under the note for the second loan. (Id. ¶ 16.) The second loan was also secured by a mortgage given by both Plaintiffs and also listed MERS as the mortgagee. (Id. ¶ 17.) The two loans were underwritten as part of a loan transaction in which the combined loan-to-value ratio was 100%. (Id.) Moreover, the Uniform Residential Loan Application signed by Sullivan shows the ratio of Plaintiffs’ housing-related and recurring monthly debt to their monthly income exceeded 38%. (Id. ¶ 19.)
Plaintiffs believed at the time that they would be able to make the monthly payments, because Sullivan had recently obtained new job-related responsibilities as the Founding Director of the Western New England College Polling Institute and his employer assured him he would receive additional compensation. (Id. ¶ 20.) Unfortunately, however, Sullivan’s compensation was not increased, and Plaintiffs experienced significant increases in their personal and household expenses. (Id. ¶ 21.) Toward the end of 2009, Plaintiffs had nearly exhausted their savings in order to keep up with the two monthly mortgage payments. (Id. ¶ 22.) In November, 2009, Plaintiffs began requesting a modification of the terms of the mortgages from the companies servicing the two loans. (Id. ¶ 22.) Initially, Plaintiffs’ First Mortgage was serviced by Aurora Loan Services LLC, but Nationstar took over as servicer around July 1, 2012. (Id. ¶ 23.)
Plaintiffs allege that, beginning in November, 2009, and continuing for approximately the next three and a half years, they repeatedly submitted applications for modifications and other debt relief to the servicing companies, along with all the documentation requested by the servicers to support the applications. (Id. ¶ 24.) However, long delays ensued without any word from the servicers and, in response to their numerous inquiries, Plaintiffs received form letters and electronic messages indicating the applications were still being processed or requesting documentation which had already been provided. (Id. ¶ 25.) On a number of occasions, the servicing companies refused to process Plaintiffs’ Home Affordable Modification Program (“HAMP”)
Thereafter, Plaintiffs received an offer of modification from Aurora which called for monthly payments approximately $400 higher than the existing monthly payments. (Id. ¶¶ 28-29.) Plaintiffs, desperate to avoid foreclosure, signed the second modification offered by Aurora on February 9, 2012 and made their first payment
In March, 2013, Plaintiffs each received from Nationstar: ■ (1) a set of letters dated March 18, 2013 notifying them that they were in default on their first loan and requiring payment of $19,189.68 within 35 days or the full amount due on the loan would be accelerated; (2) a set of letters dated March 19, 2013 notifying them they were in default and requiring payment of $19,119.68 within 150 days or the full amount due on the loan would be accelerated; and (3) another letter dated March 19, 2013 notifying them of their right to request a modified mortgage loan. (Id. ¶35; Dkt. No. 1-3, Ex. 6.) In response, Plaintiffs submitted another request for a loan modification, along with all the completed forms and supporting documentation requested by Nationstar over the following two months. (Dkt. No. 16, Am. Compl. ¶ 36.) On the first page of Plaintiffs’ Request for Mortgage Assistance (“RMA”), dated May 29, 2013, Plaintiffs highlighted the fact that Beck was not a co-borrower under the note and that she was listed on the RMA only because she is on the deed and is a “Borrower” on the mortgage. (Id. ¶ 37.) While Plaintiffs sent Nationstar all of the documentation requested, Plaintiffs were informed their application for a HAMP modification had been denied by Nationstar because they had not submitted required documentation. (Id. ¶ 38.) After Sullivan inquired further, Plaintiffs received a letter dated July 11, 2013 stating that their HAMP application had been rejected because they failed to provide certain documentation which Plaintiffs had already submitted to Na-tionstar and Aurora on multiple prior occasions. (Id. ¶ 39; Dkt. No. 1-3, Exs. 7 and 8.) Again, among the requested documentation was income information for Beck, even though she was not a borrower under the original note. (Dkt. No. 16, Am. Compl. ¶ 39; Dkt. No. 1-3, Ex. 8.) The letter also assured Plaintiffs that Nationstar had created a new HAMP case for Plaintiffs’ mortgage account and that it would “happily review the account for payment assistance.” (Id.)
In August, 2013, Plaintiffs each received three letters from Nationstar dated August 21, 2013. (Dkt. No. 16, Am. Compl. ¶ 40; Dkt. No. 1-3, Ex. 9.) Similar to the March letters, the first letters indicated they were in default on their first loan and required payment of $28,976.58 within 35 days or the full amount due on the loan would be accelerated. (Id.) This letter also stated: “You are hereby informed that you have the right to ‘cure’ or reinstate the loan after acceleration and the right to assert in the foreclosure proceeding the non-existence of a default or any other defense you may have to acceleration and sale.” (Id. (emphasis added).) The second letter indicated they were in default on their first loan and required payment of $28,905.58 (an amount slightly lower than that listed in the first letter) within 150 days or the full amount due on the loan would be accelerated. (Id.) Appended to this letter was a page of “Additional
In response, Plaintiffs again submitted a new loan modification application on August 25, 2013, along with all the required supporting documentation. (Dkt. No. 16, Am. Compl. ¶ 41; Dkt. No. 1-3, Ex. 10.) Plaintiffs, however, never received any further communication from Nationstar regarding their eligibility for a loan modification. (Dkt. No. 16, Am. Compl. ¶42.)
In late August or early September, 2014, Plaintiffs received separate notices dated August 29, 2014 informing them a foreclosure sale of their home had been scheduled for September 23, 2014. (Id. ¶ 50; Dkt. No. 1-3, Ex. 11.) This sale was canceled because the first notice was not published until September 4, 2014, which was less than the required twenty-one days prior to the scheduled sale date. (Dkt. No. 16, Am. Compl. ¶ 51.) Plaintiffs each received new notices dated September 25, 2014 informing them a foreclosure sale of their home had been scheduled for October 16, 2014. (Id. ¶ 52.) At an initial hearing in Superi- or Court on October 15, 2014, the parties mutually agreed to continue the hearing and Defendants agreed to postpone the foreclosure sale; the sale subsequently was rescheduled for December 11, 2014. (Id. ¶ 53.) Plaintiffs were notified by letter dated November 26, 2014 that Defendants had postponed the sale until January 16, 2015. (Id. ¶ 54.) On January 8, 2015, Defendants’ counsel informed the court, at the hearing on the instant motion, that the foreclosure sale has since been temporarily canceled.
The following facts, which also come from Plaintiffs’ amended complaint, relate to the Sasco 2006-16 Trust Fund and the assignment of the First Mortgage to Bank of New York. Shortly after Plaintiffs originally granted the First Mortgage to MERS, Bank of New York entered into a Pooling and Servicing Agreement (“PSA”) dated August 1, 2005, creating a trust into which multiple mortgages would be pooled and securitized (“Trust”). (Id. ¶ 55.) The Trust was structured and operated so as to achieve and maintain the status of a Real Estate Mortgage Investment Conduit
The PSA provides the following. On or before the Closing Date of the Trust, the Depositor would sell, transfer, and assign to Bank of New York, as Trustee, all of the Depositor’s right, title, and interest in the mortgage loans which were scheduled to form the corpus of the Trust Fund. (Dkt. No. 16, Am. Compl. ¶ 59; Dkt. No. 1-4, Ex. 1.) The Depositor warranted Bank of New York that it held good title to each of the notes and corresponding mortgages as of the Closing Date. (Dkt. No. 16, Am. Compl. ¶ 60; Dkt. No. 1-1, Ex. 1.) The Trustee may only receive and accept the transfer or assignment of Mortgage Loans from the Depositor. (Dkt. No. 16, Am. Compl. ¶ 61; Dkt. No. 1-4, Ex. 1.) The Depositor must deliver to Bank of New York, as Trustee, the complete file on each mortgage loan, including the original note endorsed in blank without recourse, the original mortgage creating a first lien on the mortgaged property, an assignment of the mortgage in recordable form, and all recorded intervening assignments of the mortgage. (Dkt. No. 16, Am. Compl. ¶ 62; Dkt. No. 1-4, Ex. 1.) Within forty-five days of the Closing Date, Bank of New York, as Trustee, must complete a review of the Mortgage Files for each Mortgage Loan and produce an interim certification as to the completeness of the Mortgage Files. (Dkt. No. 16, Am. Compl. ¶ 63; Dkt. No. 1-4, Ex. 1.) If Bank of New York, as Trustee, did not receive the mortgage file for a loan, it could require the Depositor to repurchase the loan or provide a Substitute Mortgage Loan. (Dkt. No. 16, Am. Compl. ¶ 64; Dkt. No. 1 — 4, Ex. 1.) But no substitution could occur more than two years after the Closing Date and not unless the Trustee received an Opinion of Counsel that the substitution would not jeopardize the favorable tax treatment accorded to the Trust as a REMIC. (Id.) Bank of New York must act to maintain the status of the Trust as a REMIC under the Tax Code, and it may not take any action which would jeopardize such status. (Dkt. No. 16, Am. Compl. ¶ 65; Dkt. No. 1-4, Ex. 1.) Moreover, Bank of New York may not acquire any assets or accept any contribution after the Closing Date unless it first receives an Opinion of Counsel that any such acquisition or acceptance would not jeopardize the Trust’s REMIC status. (Dkt. No. 16, Am. Compl. ¶ 66; Dkt. No. 1-4, Ex. 1.) The PSA is governed by the laws of the State of New York. (Dkt. No. 16, Am. Compl. ¶ 67; Dkt. No. 1 — 4, Ex. 1.)
Plaintiffs’ First Mortgage was not assigned to Bank of New York, as Trustee, until March 12, 2014, which was more than 8 1/2 years after the Closing Date of the Trust. (Dkt. No. 16, Am. Compl. ¶ 68; Dkt. No. 1-4, Ex. 2 and 3.) MERS executed an assignment of Plaintiffs’ First Mortgage to Aurora Loan Services LLC on April 6, 2011, and Aurora Loan Services LLC assigned the Mortgage to Bank of New York on March 12, 2014. (Id.) There is no evidence the Depositor, Structured Asset Securities Corporation, ever received a transfer or assignment of Plaintiffs’ First Mortgage or owned the mortgage at any time prior to or after the Closing Date of the Trust. (Dkt. No. 16, Am. Compl. ¶ 69.)
Lastly, Plaintiffs allege they do not have alternative housing available, and the loss of their home through foreclosure would cause them to suffer immediate and irrep
III. STANDARD OF REVIEW
When confronted with a Rule 12(b)(6) motion to dismiss for failure to state a claim, the court must accept the well-pleaded allegations of the complaint as true, drawing all reasonable inferences in favor of the plaintiff. See S.E.C. v. Tambone,
IV. Analysis
A. Breach of Contract (Count I)
In Count I, Plaintiffs allege Defendants failed to provide them with notice of their right to bring a court action to assert a defense to acceleration of their loan and sale of their home in breach of paragraph 22 of the First Mortgage contract. (Compare Dkt. No. 1-3, Ex. 6 (“The notice shall further inform Borrower of ... the right to bring a court action to assert the nonexistence of a default or any other defense of Borrower to acceleration and sale.”) with Dkt. No. 1-3, Ex. 9 (“You are hereby informed that you have ... the right to assert in the foreclosure proceeding the nonexistence of a default or any other defense you may have to acceleration and sale.”).) Plaintiffs allege, as a result of the breach, Defendants have no legal right to conduct a foreclosure auction of their home.
Defendants argue the court should dismiss this claim because Plaintiffs have failed to plead facts suggesting there has been a material breach of the contract or that they have been harmed as a result. According to Defendants, the difference in wording between a right to assert a defense in a “court action” as opposed to a “foreclosure proceeding” is immaterial, especially since a common definition of “proceeding” is a “legal action before a court of law.” Defendants also argue no harm resulted from any breach since Plaintiffs did bring a court action challenging the foreclosure sale. Plaintiffs contend that strict compliance with the terms of a mortgage contract is required under M.G.L. c. 183, § 21 before an entity may conduct a nonjudicial foreclosure. Plaintiffs further argue a material breach occurred, as Massachusetts is a non-judicial foreclosure state and, therefore, contrary to the August 21, 2013 notice, there is no “foreclosure proceeding” at which a borrower may assert a defense. In addition, Plaintiffs argue there is no requirement for harm or prejudice in light of the strict compliance standard set forth in M.G.L. c. 183, § 21.
“In Massachusetts, a breach of contract is proven by a showing that (1) an agreement was made between the plaintiff and the defendant supported by valid consideration, (2) the plaintiff was ready, willing and able to perform, (3) the defendant failed to perform a material obligation under the agreement and (4)' the plaintiff suffered damage as a result of defendant’s failure to perform.” Coady Corp. v. Toyota Motor Distribs.,
Accordingly, the court will dismiss Count I of Plaintiffs’ amended complaint.
B. Violation of M.G.L. c. 188, § 21 (Count II)
Plaintiffs allege the August 21, 2013 notice violated M.G.L. c. 183, § 21, requiring strict compliance “with the terms of the mortgage and with the statutes relating to the foreclosure of mortgages by the exercise of a power of sale.” Plaintiffs allege Defendants may not proceed with foreclosure until they comply with the terms of the mortgage, i.e., until they send the correct notice required by paragraph 22.
Defendants seek dismissal of this claim asserting the notice substantially complied with paragraph 22 and that M.G.L. c. 183, § 21 does not mandate strict compliance here because paragraph 22 is not part of the statutory power of sale.
“The ‘statutory power of sale’ is set out in G.L. c. 183, § 21.” Eaton v. Federal Nat’l Mortg. Ass’n,
Recognizing the substantial power that the statutory scheme affords to a mortgage holder to foreclose without immediate judicial oversight, we adhere to the familiar rule that “one who sells under a power [of sale] must strictly follow its terms. If he fails to do so there is no valid execution of the power, and the sale is wholly void.”
U.S. Bank Nat. Ass’n v. Ibanez,
As an initial matter, the court agrees with Plaintiffs that the August 21, 2013 notice sent by Defendants does not even substantially comply with the requirements of paragraph 22. At first glance, the discrepancy may appear trivial. Unlike in most states, however, “Massachusetts does not require a mortgage holder to obtain judicial authorization to foreclose on a mortgaged property.” Ibanez, 941 N.E.2d at 49. Accordingly, notice language indicating that a borrower will have an opportunity to assert a defense to acceleration or foreclosure “in the foreclosure .proceeding,” like the language at issue here, may mislead borrowers to wait for the nonexistent judicial foreclosure proceeding and thereby fail to bring a separate pre-foreclosure court action.
The more difficult, and unsettled, question is whether M.G.L. c. 183, § 21 requires strict compliance with all the terms of the mortgage or merely those terms “relating to the foreclosure of mortgages by the exercise of a power of sale.” As a matter of statutory interpretation, Plaintiffs’ argument, that the limiting phrase “relating to the foreclosure of mortgages by the exercise of a power of sale” does not apply to “the terms of the mortgage” but only to “the statutes,” is appealing. The statute states the foreclosing entity must first comply “with the terms of the mortgage and with the statutes relating to the foreclosure of mortgages by the exercise of a power of sale.” Mass. Gen. Laws ch. 183, § 21 (emphasis added). It does not, by its terms, state that the entity must merely comply “with the terms of the mortgage relating to the foreclosure of mortgages by the exercise of a power of sale.” The legislature’s twice inserting the word “with” signifies a greater severance between the phrases. This construction is also consistent with the policy that, because of the “substantial power” to foreclose without prior judicial oversight, mortgagees ought to be especially scrupulous in carrying out the foreclosure process. See Ibanez,
Further, even if Defendants were correct that strict compliance is only required as to the mortgage terms “relating to the ... exercise of a power of sale,” the court cannot conclude, at this stage of the litigation, that paragraph 22 is not such a term. Paragraph 22 is the only section in the mortgage which specifically mentions the power of sale. See Ibanez,
The Supreme Judicial Court held in U.S. Bank Nat’l Ass’n v. Schumacher,
The weight of authority appears to side with Defendants. In particular, two recent cases Coelho v. Asset Acquisition & Resolution Entity, LLC,
Accordingly, in light of the unsettled nature of this question, the court believes it would be inappropriate to dismiss Count II at this juncture, or, indeed, to make a definitive ruling interpreting M.G.L. c. 183, § 21 as it relates the mortgage term at issue here, while the Pinti appeal is pending before the Supreme Judicial Court. Cf. Commerce Oil Refining Corp. v. Miner,
C. Violation of M.G.L. c. 2IA, § 35A (Count III)
Plaintiffs allege Defendants 'violated M.G.L. c. 244, § 35A by: wrongfully informing them the entire amount of the loan would be accelerated if they failed to cure the default within 35 days; failing to provide them with the name and address of the current mortgagee; and sending two separate, conflicting past due amounts in the notices. As a result, Plaintiffs allege, Defendants have failed to provide them with notice that complies with § 35A, and Defendants were not entitled to accelerate payment or enforce the First Mortgage.
Defendants seek dismissal on the grounds that strict compliance is not required under Schumacher and, therefore, Plaintiffs must allege some prejudice or harm, which they have not done. Defendants also argue that under Haskins v. Deutsche Bank Nat’l Trust Co.,
Under M.G.L. c. 244, § 35A(g), “[t]he mortgagee, or anyone holding thereunder, shall not accelerate maturity of the unpaid balance of [a] mortgage obligation or otherwise enforce the mortgage ... until at least 150 days after the date a written notice is given by the mortgagee to the mortgagor.” Section 35A(h), in turn, describes the information that must be included in the notice, including
(1) the nature of the default ... and of the mortgagor’s right to cure the default by paying the sum of money required to cure the default; (2) the date by which the mortgagor shall cure the default to avoid acceleration, a foreclosure or other action to seize the home, which date shall not be less than 150 days after service of the notice ... (4) the name and address of the mortgagee.
Mass. Gen. Laws ch. 244, § 35A(h).
Plaintiffs are correct that Schumacher,
where a homeowner who is facing foreclosure claims that the mortgage holder has failed to provide timely and adequate written notice of the right to cure the default in payment of the mortgage, in violation of § 35A, the homeowner may file an equitable action in Superior Court seeking to enjoin the foreclosure. Because, under § 35A(b), the mortgage holder “shall not accelerate maturity of the unpaid balance of [the] mortgage obligation or otherwise enforce the mortgage because of a default consisting of the mortgagor’s failure to make any such payment” until the required time period has elapsed after the required written notice has been provided to the mortgagor by the mortgage holder, the foreclosure may not proceed if the mortgagor proves that the mortgage holder has failed to give the required notice or failed to wait the required time period. If the mortgagor proves a violation of § 35A, the mortgage holder must provide the proper notice required by § 35A and wait to see if the borrower will cure the default within the required time period before recommencing the foreclosure proceeding.
Id. at 890.
Accordingly, in Haskins, the Massachusetts Appeals Court explained that “the present case is in precisely the posture recognized by the court in Schumacher as appropriate to challenge the validity of a § 35A notice in order to prevent a foreclosure sale from going forward.” Haskins,
As to the alleged § 35A violations, even assuming that Défendants complied with § 35A(h)(4) by providing the name and address of the mortgage servicer, see Haskins,
The same analysis applies to § 35A(h)(l). That provision, as mentioned, requires that the notice describe “the nature of the default ... and of the mortgagor’s right to cure the default by paying the sum of money required to cure the default.” Mass. Gen. Laws ch. 244, § 35A(h)(l). Again, as Plaintiffs allege, the two August 21, 2013 notices provided different pay-off amounts. And while the court recognizes that the difference here was not substantial, Plaintiffs were still entitled to receive an accurate pay-off balance before acceleration of the loan, and, obviously, at least one of the notices listed an inaccurate amount. See Bulmer,
D. Violation of M.G.L. c. 2JU, § S5B (Count IV)
Plaintiffs allege that Defendants violated M.G.L. c. 244, § 35B by failing to take reasonable steps to make a good faith effort to avoid foreclosure. Moreover, Plaintiffs allege that Defendants wrongfully refused to process mortgage loan modification applications without receipt of certain documentation not required by § 35B(c), including documentation of income and expenses of Beck, as well as documentation they had already submitted. In addition, Plaintiffs allege, following receipt of the HAMP modification application in August, 2013, Defendants failed to provide a written assessment of Plaintiffs’ ability to make an affordable monthly payment or a notice that no modified mortgage loan would be offered, in violation of § 35B(b) and (c).
Defendants argue that this claim fails because Plaintiffs already received a “modified mortgage loan” under Section 35B(a), and, under Section 35B(c), Defendants had no obligation to grant another modification within three years. The court agrees.
Under M.G.L. c. 244, § 35B(b), a creditor “shall not cause publication of notice of a foreclosure sale, as required by section 14, upon certain mortgage loans unless it has first taken reasonable steps and made a good faith effort to avoid foreclosure.” Moreover, § 35B(e) provides that “|u]nder this section, for certain mortgage loans, the creditor shall send notice, concurrently
The statute provides, however, that “[t]he right to a modified mortgage loan, as described in this section, shall be granted once during any 3-year period, regardless of the mortgage holder.” Id.; see also
a mortgage loan modified from its original terms including, but not limited to, a loan modified under 1 of the following: (i) the Home Affordable Modification Program; (ii) the Federal Deposit Insurance Corporation’s Loan Modification Program; (iii) any modification program that a lender uses which is based on accepted principles and the safety and soundness of the institution and authorized by the National Credit Union Administration, the division of banks or any other instrumentality of the commonwealth; (iv) the Federal Housing Administration; or (v) a similar federal loan modification plan.
Mass. Gen. Laws ch. 244, § 35B(a); see also
Plaintiffs concede in their amended, complaint that they accepted the Loan Modification Agreement in February, 2012, less than three years before they commenced the- present action. (Dkt. No. 16, Am. Compl. ¶ 31.) Accordingly, under the plain language of M.G.L. c. 244, § 35B(c), Plaintiffs had no right to another modified mortgage loan until February, 2015. Granted, Plaintiffs argue that the Loan Modification Agreement was not a “modified mortgage loan,” as defined by the statute, because it was not affordable. Even assuming that affordability is relevant to the definition of “modified mortgage loan,”
Accordingly, the court will dismiss without prejudice Count IV of the amended complaint.
E. Wrongful Foreclosure (Count V)
Plaintiffs allege the assignment of the First Mortgage to Bank of New York over eight years after the Closing Date of the Trust violated the terms of the PSA and the Tax Code. Furthermore, Plaintiffs assert that Bank of New York’s acceptance of the conveyance was an ultra vires action and void under New York law. Because the conveyance is void, Plaintiffs continue, Bank of New York is not the holder or owner of the First Mortgage and has no legal power to exercise the power of sale in the First Mortgage.
In seeking dismissal of this claim, Defendants argue Plaintiffs do not have standing to challenge the assignment because any violation of the PSA merely renders the assignment voidable.
The First Circuit has explained that “standing [is] appropriate in instances where a mortgagor ‘challenged a mortgage assignment as invalid, ineffective, or void,’ although not where the challenge would ‘render [the assignment] merely voidable ... but otherwise effective to pass legal title.’ ” Woods v. Wells Fargo Bank, N.A.,
As Defendants explain, the vast majority of courts to have considered Plaintiffs’ argument regarding noncompliance with the PSA under New York trust law have held that such challenges merely render the assignment voidable and, thus, do not support standing. The Second Circuit, addressing this same “theory that a mortgagor has standing to ‘challenge[] a mortgage assignment as invalid, ineffective, or void’ ” under Woods, recently explained that “the'weight of New York authority is contrary to Plaintiffs’ contention that any failure to comply with the terms of the PSAs rendered defendants’ acquisition of plaintiffs’ loans and mortgages void as a matter of trust law.” Rajamin v. Deutsche Bank Nat’l Trust Co.,
Plaintiffs rely on the one New York state trial court decision which has held the opposite: Wells Fargo Bank, N.A. v. Erobobo,
Plaintiffs argue that the concept of ratification should not apply here because of the practical difficulties of ratification in this context. In particular, they argue the beneficiaries which would have to ratify such “voidable” acts number in the hundreds or thousands, because they are the investors who purchased the residential mortgage-backed securities issued by the Trust. Plaintiffs, however, appear to have missed the point. “Where an act can be ratified, it is voidable rather than void.” Anh Nguyet Tran v. Bank of New York,
As a result, Plaintiffs lack standing to assert their challenge to the mortgage assignment. The court will therefore dismiss Count V of the amended complaint.
F. Breach of Implied Covenant of Good Faith and Fair Dealing (Count VI)
Plaintiffs allege that Defendants breached the covenant of good faith and fair dealing by accelerating the loan and proceeding with the foreclosure without complying with the mortgage terms, by not complying with the applicable notice requirements, by publishing notices without taking reasonable steps to avoid foreclosure, by refusing to process Plaintiffs’ HAMP application and violating HAMP guidelines, and by proceeding with the foreclosure while the HAMP application was still pending.
Defendants argue, citing MacKenzie v. Flagstar Bank, FSB,
“Every contract in Massachusetts is subject, to some extent, to an implied covenant of good faith and fair dealing.” Ayash v. Dana-Farber Cancer Inst.,
In MacKenzie, the First Circuit explained that because “nothing in the mortgage impose[d] a duty on [the servicer] to consider a loan modification prior to foreclosure in the event of a default,” there was no violation of the covenant of good faith and fair dealing for failing to do so. MacKenzie,
Plaintiffs, however, also base their claim on Defendants’ acceleration of the loan without first complying with the mortgage terms, presumably the failure to send a notice in compliance with paragraph 22. Even assuming the court could infer a lack of good faith in this regard,
G. Unfair and Deceptive Business Practices in Violation of M.G.L. c. 98A (Count VII)
Plaintiffs allege that Defendants engaged in unfair and deceptive practices in violation of M.G.L. c. 93A, including: violating paragraph 22 and M.G.L. c. 183, § 21 as described in Count II; violating M.G.L. c. 244, § 35A as described in Count III; violating M.G.L. c. 244, § 35B as described in Count IV; repeatedly requesting documents and information that Plaintiffs had already provided; failing to respond to Plaintiffs’ requests in a timely fashion; requiring Plaintiffs to communicate with multiple individuals with different familiarity with their mortgage; refusing to consider or offer foreclosure prevention options; violating HAMP guidelines; proceeding with the foreclosure even though Plaintiffs’ HAMP loan
Defendants seek dismissal of this claim on a number of grounds. First, they contend that something more than mere violations of Massachusetts foreclosure laws is required to state a Chapter 93A claim. Second, Defendants argue the allegations regarding HAMP violations are also insufficient to support a Chapter 93A claim, citing Morris v. BAC Home Loans Servicing L.P.,
Chapter 93A provides consumers with a private right of action as to “unfair and deceptive acts or practices in the conduct of any trade or commerce.” Mass. Gen. Laws ch. 93A, §§ 2, 11. “To prove such a claim, it is neither necessary nor sufficient that a particular act or practice violate common or statutory law.” Mass. Eye & Ear Infirmary v. QLT Phototherapeutics, Inc.,
While it is true that “not every technical violation of HAMP should expose a servicer to Chapter 93A liability,” Morris,
Contrary to Defendants’ assertions, “the relevant conduct is the entirety of defendants’ actions, not each action viewed in isolation.” Hannigan v. Bank of Am., N.A.,
Defendants’ assertion that, contrary to Plaintiffs’ complaint, they did not proceed with foreclosure while a HAMP application was still pending raises a factual dispute plainly inappropriate for resolution at the motion to dismiss stage. As to Defendants’ argument that Plaintiffs failed to include all these allegations in the Chapter 93A demand letters, the court finds that Plaintiffs in fact included the vast majority of their factual and legal bases for this claim in the letters,
In the end, looking at the totality of Defendants’ conduct as alleged, the court has little trouble concluding that Defendants engaged in unfair and deceptive business practices in violation of Chapter 93A. Accordingly, the court denies that portion of Defendants’ motion which seeks to dismiss Count VII of the amended complaint.
H. Negligence (Count VIII)
Plaintiffs allege that Defendants owed them a duty to comply with Massachusetts law governing the relationship between mortgagors and mortgagees, and that Defendants acted negligently by accelerating payment and proceeding with foreclosure without complying with the terms of the mortgage. Defendants argue this claim should be dismissed because there is no duty between a borrower, and a lender, as the First Circuit explained in MacKenzie,
V. Conclusion
For these reasons, the court ALLOWS Defendants’ motion to dismiss (Dkt. No. 17) with prejudice as to Counts I, V, VI, VIH, and IV, and without prejudice as to Count IV. The court, however, DENIES Defendants’ motion as to Counts II, III, and VII.
It is So Ordered.
Notes
. In addition to their complaint, Plaintiffs had also filed a motion for preliminary injunction in state court. At the hearing on Defendants' motion to dismiss the amended complaint, however, Defendants informed the court that the foreclosure sale scheduled for January 16, 2015 had been canceled. The parties therefore agreed that the motion for preliminary injunction, which sought to prevent the foreclosure sale from going forward, was moot, and the court denied the motion without prejudice. (See Dkt. No. 32.)
. Plaintiffs also asserted a claim for intentional or negligent infliction of emotional distress (Count IX), but they failed to oppose dismissal of this claim in their opposition brief. Furthermore, at the second hearing on the instant motion, held on January 22, 2015, Plaintiffs' counsel confirmed that Plaintiffs do not
. In addition, the court has also reviewed certain exhibits attached to the Affidavit of David B. Sullivan (Dkt. No. 1-3) and the Affidavit of Hugh Heisler (Dkt. No. 1-4)— both of which were filed with Plaintiffs' motion for preliminary injunction — because the amended complaint cites the affidavits which, in turn, often cite these exhibits. See Trans-Spec Truck Serv., Inc. v. Caterpillar Inc.,
. "HAMP is a federal program intended to encourage lenders and loan servicers to offer loan modifications to certain eligible borrowers.” Biltcliffe v. CitiMortgage, Inc.,
. Plaintiffs state in their amended complaint that '‘[t]he Defendants allege that Nationstar sent a letter to Plaintiff David Sullivan dated August 29, 2013 requesting additional documentation from him.” (Id. ¶ 43.) "However,” Plaintiffs allege, "neither of the Plaintiffs have any recollection of receiving this correspondence,” despite the fact that they "have retained all correspondence they have received from Nationstar” and “conducted an exhaustive search of the Plaintiffs’ records.” (Id.) Defendants included this letter as an exhibit in support of their opposition to Plaintiffs’ motion for preliminary injunction, which is presumably how Plaintiffs learned of it. (Dkt. No. 15, Ex. 9.) Looking at the facts in the light most favorable to Plaintiffs, the court infers, for purposes of this motion, that Plaintiffs never received this letter. In any event, as Plaintiffs explain, the letter states that Na-tionstar was missing documentation for all sources of income, an IRS 4506-T signed by borrowers, and the most recent quarterly or year-to-date profit and loss statement, but Plaintiffs included this material with the August 25, 2013 modification application. (Dkt. No. 16, Am. Compl. ¶¶ 44-46; Dkt. No. 1-3, Ex. 10.)
. Plaintiffs here did bring the pre-foreclosure action that paragraph 22 sought to protect, which is why their breach of contract claim fails for lack of harm. That Plaintiffs were not harmed by the deficient notice, however, does not mean that Defendants strictly or substantially complied with paragraph 22.
. While a persuasive argument can be made that it would be unreasonable to interpret M.G.L. c. 183, § 21 to require strict compliance with every single term in the mortgage contract, even merely technical terms that provide no protections to the mortgagor, the court is not faced with such a provision. Rather, as discussed, paragraph 22 contains significant consumer protection language, designed to inform mortgagors of their right to contest a looming foreclosure and the potential loss of their home.
. The court also notes that, in the mortgage foreclosure context, the concept of treating requirements contained in a mortgage contract differently from similar provisions contained in a statute finds support in two, albeit dated, Supreme Judicial Court decisions. Compare Smith v. Provin,
. The "fundamental unfairness” standard was adopted by Justice Gants, and the full majority, with regard to post-foreclosure claims in ' the summary process context which seek to set aside foreclosures based on violations of § 35A. See Schumacher,
. Contrary to Plaintiffs’ argument, Haskins does apply to notices sent after publication of the Supreme Judicial Court’s decision in Eaton,
. Defendants also press other grounds for dismissing this claim, namely, that the terms of the loan as modified by the Loan Modification Agreement do not qualify as a "certain mortgage loan" under § 35B(b) and that Plaintiffs were required to provide financial documentation for Beck. Because the court agrees with Defendants’ first argument, it need not address these additional arguments.
. As Plaintiffs point out, M.G.L. c. 244, § 35B(b)(l) provides that "[a]ny modified mortgage loan offered to the borrower shall comply with current federal and state law, including, but not limited to, all rules and regulations pertaining to mortgage loans and the borrower shall be able to reasonably afford to repay the modified mortgage loan according to its scheduled payments.” Interestingly, however, the affordability requirement did not make its way into the definition of "modified mortgage loan” or the provision stating that the right to a modified mortgage loan is only available once every three years. See Mass. Gen. Laws ch. 244, §§ 35B(a) and (c).
. Although Plaintiffs did not provide the court with a copy of the Loan Modification Agreement, they did specifically refer to it in
. Contrary to Defendants’ assertion, " '[t]here is no requirement that bad faith be shown; instead, the plaintiff has the burden of proving a lack of good faith.... The lack of good faith can be inferred from the totality of the circumstances.’ ” Weiler,
. Defendants are correct, however, that the demand letters did not include the allegation that Plaintiffs were required to communicate with multiple individuals who had different familiarity with their mortgage.