Jonathan Foxx
Managing Director
Lenders Compliance Group
Answer: When a Florida federal district court distinguishes between a borrower’s allegation that a servicer owned a mortgage loan – an allegation asserting ownership – and the borrower’s allegation that the servicer stated (in a letter) that it, the servicer, was the owner of the loan.
Managing Director
Lenders Compliance Group
Answer: When a Florida federal district court distinguishes between a borrower’s allegation that a servicer owned a mortgage loan – an allegation asserting ownership – and the borrower’s allegation that the servicer stated (in a letter) that it, the servicer, was the owner of the loan.
Get the difference?
The borrower did not connect the allegations by further stating that the servicer was the owner of the borrower’s mortgage loan.
You might think this is a distinction without a difference. But, according to the United States District Court, Southern District of Florida ("Court"), you would be wrong!
Let’s see what happened here.
Back in June 2016, Mr. Scott, the borrower, became aware that his mortgage lender had put his name on a neighbor’s title. The original lender on the mortgage was Sovereign Lending Group, with whom Scott had completed a refinance.
Back in June 2016, Mr. Scott, the borrower, became aware that his mortgage lender had put his name on a neighbor’s title. The original lender on the mortgage was Sovereign Lending Group, with whom Scott had completed a refinance.
Scott dealt with the mistake by getting the title company to resolve that matter. But he began to wonder if the lender and title company had not clouded his title. A clouded title, also called a title defect, is any irregularity in the chain of title of the property that could prevent a conveyance of title.
So, in August 2016, Scott decided to find out if there was any chance of a cloud on title. He sent a letter to the servicer, 360 Mortgage Group, the new servicer (“360MG” or “servicer”). Scott did not state in the letter where the mortgage assignment was recorded, but he had checked the public records and was unable to find any assignment to 360MG.
Apparently, Scott felt he needed an affirmative response from the servicer and, on April 7, 2017, in order to "check on the validity of the loan," he sent 360MG a Qualified Written Request (“QWR”). But the servicer didn’t respond. Then, on April 29, 2017, Scott sent another QWR to the servicer. Also on April 29, 2017, after discovering that MERSCORP® ("MERS") was acting solely as nominee for the lender with respect to his mortgage, Scott sent MERS a request for the “milestones” on the mortgage. He had gone to the MERS website and found that 360MG was indeed listed as the current active servicer.
A couple of weeks later, on May 10, 2017, Scott received a letter from the servicer, in response to his second QWR, which supposedly contained information that he already had from public records, such as a copy of the mortgage and note from Sovereign.
Importantly, 360MG stated in its response that it was the "Holder" of the note and the "Owner" of the loan.
On May 15, 2017, Scott received a letter from 360MG in response to the milestones status that he requested of MERS, which MERS had forwarded to the servicer for it to answer Scott on its behalf. The letter, according to the Complaint, indicated that MERS was the "recorded lienholder of [the] property on behalf of [360MG]" and stated that Scott's county would reflect MERS as the lienholder on behalf of 360MG. But, Scott was unable to find any assignment indicating such in the public records! On that point, the letter advised Scott: "No assignment is required to be recorded with your county as long as…MERS is the recorded lienholder. An assignment, which would be from MERS to [Scott], would only be recorded in the event legal proceedings are ever required."
One can almost sense Scott’s frustration at this point, which no doubt led him to his pro se litigation.[i]
Thus, on May 26, 2017, Scott proceeded pro se, asserting in his Complaint the following four claims for relief:
(A) violation of the Real Estate Settlement Procedures Act, 12 U.S.C. § 2601, et seq. ("RESPA") (Count I);
(B) violation of the Truth in Lending Act, 15 U.S.C. § 1601, et seq. ("TILA") (Count II);
(C) violations of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq. ("FDC- PA") (Count III); and
(D) violation of the Florida Consumer Collection Practices Act, Fla. Stat. § 559.55, et seq. ("FCCPA") (Count IV).
360MG moved to dismiss the Complaint in its entirety, advancing three supporting arguments:
(1) Scott lacks standing to bring this case because he alleges damages based upon 360MG’s and/or MERS's failure to record the assignment of his mortgage – which according to 360MG underlies each of Scott’s claims – to which there is no corresponding cause of action, as there is no duty in Florida to record the assignment of a mortgage; and relatedly,
(2) MERS is an indispensable party to this case (and its absence requires dismissal) because Scott "seeks to attack the lack of an assignment from MERS to Defendant"; and
(3) each of Scott’s claims otherwise fails to state a claim under which relief can be granted.
I will not discuss the full adjudication. My interest here is to discuss the construction of Scott’s allegation, which is derived from Scott’s claim (B), Count II.
Scott alleged a violation of the Truth in Lending Act § 131(g)(1) [15 U.S.C. § 1641(g)(1)], which states:
“In addition to other disclosures required by this title, not later than 30 days after the date on which a mortgage loan is sold or otherwise transferred or assigned to a third party, the creditor that is the new owner or assignee of the debt shall notify the borrower in writing of such transfer, including—(A) the identity, address, [and] telephone number of the new creditor; (B) the date of transfer; (C) how to reach an agent or party having authority to act on behalf of the new creditor; (D) the location of the place where transfer of ownership of the debt is recorded; and (E) any other relevant information regarding the new creditor.” (My emphasis.)
360MG fought back against the claim that it had failed to comply with 15 U.S.C. § 1641(g) "by not indicating the location of the place where transfer of ownership of the debt is recorded." In the servicer’s view, Scott’s claim was deficient because the Complaint "fails…to consistently allege Defendant holds the Note/Mortgage…”
And the Court held that 360MG was correct!
The Court dismissed the Count II claim.
Why?
Because Scott had failed to "consistently" allege that 360 Mortgage Group was in fact the Holder of the Note and the Owner the loan!
Scott’s allegation was that the servicer had failed to comply “by not indicating the location of the place where transfer of ownership of the debt is recorded.”
The Court cited a case where the Defendant, as a servicer of the note, could not be an assignee under TILA unless the Plaintiff alleged facts sufficient to show that Defendant must be or must have been the owner of the note. Therefore, Plaintiff needed to allege facts plausibly showing that the Defendant is or was the owner of the obligation.[ii]
The only allegation in the Complaint relating to whether 360MG was the actual owner of Scott’s mortgage was that 360MG, in its response to Scott’s April 29, 2017 letter, indicated that it was "the 'Holder' of the note and the 'Owner' of the loan." But the Court did not equate this allegation by itself as an allegation by Scott that 360MG is in fact the owner of his mortgage. Indeed, according to the Court, it is the contrary, since Scott appears to allege, as the basis of the Complaint, that there is no public record to confirm the assignment of Scott’s mortgage to 360MG.
Some people might call this circular reasoning; others call it the law.
Scott’s only allegation relating to whether the servicer was the owner of the loan was his assertion that 360 Mortgage Group, in a response to one of his letters, had stated that it was the “Holder” of the note and the “Owner” of the loan.
Now, it would seem the servicer’s admission that it was the Holder of the note and the Owner of the Loan would be a sufficient premise. But the Court refused to equate this allegation to an allegation that 360 Mortgage Group was in fact the owner of Scott’s loan, since – and here’s the rub! – the crux of Scott’s complaint was that no public record had confirmed the assignment of his loan to 360 Mortgage Group.
There is a lesson here: Scott should have known that the applicable statute required him to specifically allege 360MG's ownership.
Under the law, a partial allegation is hardly an allegation at all!
Under the law, a partial allegation is hardly an allegation at all!
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