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Bowen v. Ditech Financial LLC

United States District Court, D. Maine

September 19, 2017

MARK A. BOWEN, Plaintiff,



         The plaintiff brings this action against the owner of his loan and the loan servicer for unfair and misleading debt collection attempts in violation of statutory and common law. The defendants moved to dismiss the complaint and, in support of their motion, they have attached several documents. The Court grants in part and denies in part the defendants' motion to dismiss (ECF No. 66).


         On April 5, 2016, Mark A. Bowen filed a complaint against Ditech Financial LLC (Ditech), f/d/b/a Green Tree Servicing LLC (Green Tree), and the Federal National Mortgage Association (Fannie Mae) alleging common law and statutory violations for “repeated coercive and harassing attempts to collect on monies not owed by [him].” Compl. at 1 (ECF No. 1). Ditech and Fannie Mae answered on June 3, 2016. Defs.' Answer and Affirmative Defenses (ECF No. 11).

         On November 18, 2016, Mr. Bowen filed a motion for leave to amend his Complaint due to newly discovered facts and evidence, Pl.'s Mot. for Leave to Amend Compl. at 1 (ECF No. 25), which the Court granted without objection on December 13, 2016. Order (ECF No. 28). Mr. Bowen filed the First Amended Complaint on December 14, 2016. First Am. Compl. (ECF No. 29) (Am. Compl.). The Amended Complaint contains six counts: Count I-Fraud and Fraudulent Misrepresentation; Count II-violations of the Maine Unfair Trade Practices Act (MUTPA), 5 M.R.S. §§ 205-A et seq.; Count III-violations of the Maine Fair Debt Collection Practices Act (MFDCPA), 32 M.R.S. §§ 11001 et seq.; Count IV-violations of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. §§ 1692 et seq.; Count V-violations of the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. §§ 2601 et seq.; and Count VI-Breach of Fiduciary Duty. Id. The Amended Complaint contains thirty-three exhibits as attachments. Id. Attachs. 1-33.

         On January 13, 2017, the Defendants moved to dismiss Mr. Bowen's First Amended Complaint. Mot. to Dismiss First Am. Compl. (ECF No. 48). Four days later, both parties notified the Court of their intent to file summary judgment motions. Ditech Financial LLC f/d/b/a Green Tree Servicing LLC and Federal National Mortgage Association Pre-Conference Filing (ECF No. 49); Pl.'s Pre-Filing Conference Mem. (ECF No. 50). At the Rule 56(h) pre-filing conference on January 30, 2017, the Court suggested that instead of briefing three separate dispositive motions, the parties submit the case to the Court on a stipulated record. Procedural Order at 1-2 (ECF No. 59). Counsel initially agreed, pending approval from their clients, and so the Court dismissed without prejudice the Defendants' Motion to Dismiss the First Amended Complaint. Id. at 2-3. However, after consulting with their clients, the parties informed the Court during a teleconference on February 7, 2017 that they preferred to proceed with traditional dispositive motions, and the Court vacated its earlier procedural order. Further Procedural Order (ECF No. 63).

         On February 8, 2017, the Defendants refiled the motion to dismiss, including eight exhibits, and requested oral argument. Mot. to Dismiss First Am. Compl. (ECF No. 66) (Defs.' Mot.); Mot. for Oral Arg./Hr'g (ECF No. 67). Neither these eight exhibits nor the exhibits attached to the Amended Complaint included a document the Defendants relied upon in their motion to dismiss-namely, the parties' April 24, 2015 confidential settlement agreement and release with regard to the Defendants' foreclosure action, captioned Green Tree Servicing LLC v. Mark A. Bowen, et al., No. AUSBSC RE 2014-00044 (State of Maine Superior Court, Androscoggin). See Defs.' Mot. Attachs. 1-8. On March 10, 2017, Mr. Bowen objected to the motion to dismiss. Pl. Mark A. Bowen's Opp'n to Defs.' Mot. to Dismiss (ECF No. 82) (Pl.'s Opp'n).[1]


         A. Background

         On December 20, 2005, Mr. Bowen and his now-ex-wife, Nancy E. Bowen, executed and delivered to Bank of America, N.A. (BOA) a promissory note in the amount of $204, 422.00. Am. Compl. ¶ 20. To secure the promissory note, Mr. Bowen and Nancy Bowen executed a mortgage deed in favor of BOA securing the property located at 17 Orchard Lane, Minot, Maine 04258. Id. ¶ 21. As a part of the mortgage, BOA created an escrow account to pay real estate taxes and hazard insurance on the property, and BOA used a portion of Mr. Bowen's monthly payment to fund the escrow account. Id. ¶¶ 22-23.

         B. Loan Modification Agreement

         In 2012, Mr. Bowen fell behind on the loan due to his divorce from Nancy Bowen, and he applied for a loan modification through BOA. Id. ¶¶ 26-27. Mr. Bowen received a Fannie Mae Trial Period Plan in February 2013, which required three payments of $928.24 due on March 1, April 1, and May 1, 2013. Id. ¶¶ 27-28. The Plan stated that if Mr. Bowen made the trial plan payments on time and continued to meet all of the eligibility requirements of the modification program, his mortgage would be permanently modified. Id. ¶ 29. Mr. Bowen accepted the Trial Period Plan offer and made all three payments to BOA on time. Id. ¶ 30.

         On May 30, 2013, BOA sent Mr. Bowen a permanent Fannie Mae Loan Modification Agreement with an effective date of July 1, 2013. Id. ¶ 31. Under the Modification Agreement and Clarity Commitment, the new monthly payment on the loan would be $930.67 and would include principal, interest, taxes, and insurance. Id. Additionally, according to the terms of the Modification Agreement, $38, 495.97 would be capitalized into the loan for a new modified principal balance of $217, 698.97 to bring the loan current. Id. ¶ 32. The modification allowed for $65, 309.66 of the new principal balance to be deferred, interest free. Id. The Modification Agreement stated that of the $38, 495.97 capitalized amount, $8, 202.81 would be applied to past due interest, $26, 662.46 would be applied to servicing expenses, and $3, 630.70 would be applied to taxes and insurance that had been advanced by BOA. Id. ¶ 33.

         Mr. Bowen signed and returned the Modification Agreement to BOA in a timely manner. Id. ¶ 34.

         C. Transfer of Loan Servicing

         BOA transferred servicing of the loan to Green Tree effective June 1, 2013, and the mortgage deed was eventually assigned to Green Tree on June 18, 2013. Id. ¶¶ 25, 35. Green Tree was responsible for servicing the loan on behalf of and under the authority and direction of Fannie Mae. Id. ¶ 36. Green Tree was obligated to follow the Fannie Mae Single Family Servicing Guide in servicing Mr. Bowen's loan. Id. ¶ 37. Additionally, Green Tree was responsible for the handling and maintenance of the escrow account on the loan. Id. ¶ 38.

         D. Green Tree's Underfunding of the Escrow Account

         Green Tree did not implement the loan modification and treated Mr. Bowen's loan as if it were in default when it began servicing the loan. Id. ¶ 39. On or around the end of January 2014, Green Tree did capitalize at least $38, 495.97 in interest, servicing expense, and escrow advances to the unpaid principal balance of the loan. Id. ¶ 40. However, in this process, Green Tree failed to properly apply the correct amounts per the Clarity Commitment and Loan Modification Agreement to the escrow account. Id. ¶ 41. Mr. Bowen alleges, upon information and belief, that more servicing fees had accrued than were accounted for on the Clarity Commitment and that Green Tree made the unilateral decision to pay themselves back about $27, 521.86 in servicing fees and then allocate the remaining $2, 384.66 to the escrow account. Id. ¶¶ 42, 43. This decision contradicted the agreed-upon terms of the Clarity Commitment and was done without Mr. Bowen's consent or knowledge. Id. ¶ 44. The amount allocated to the escrow account was short of the $3, 630.70 the Clarity Commitment stated would be allocated to the escrow account, and the account was underfunded by $1, 246.04. Id. ¶ 45.

         Per the terms of Mr. Bowen's mortgage, monthly payments are to be applied in the following order: interest, then principal, then escrow. Id. ¶ 46. If the payment is not enough to cover all three, it is placed in unapplied funds until another payment makes up the difference. Id. Because the monthly payment is not applied to the month in which it is received, the loan is considered past due and eventually in default. Id. By disregarding the Clarity Commitment and Loan Modification and “secretly applying the capitalized funds to their own questionable servicing fees first, ” Ditech thereby left a deficiency in the escrow account that, two years later, it would seek to recoup as part of an increased monthly payment. Id. ¶ 47. In doing so, Ditech put Mr. Bowen's loan at risk of default. Id. Because this was not disclosed to Mr. Bowen, he was not able to dispute any of the extra undisclosed servicing fees. Id. ¶ 48.

         E. Foreclosure Action & Settlement Agreement

         On March 10, 2014, Green Tree initiated a foreclosure action captioned Green Tree Servicing LLC v. Mark A. Bowen, et al., No. AUSBSC RE 2014-00044 (State of Maine Superior Court, Androscoggin) (foreclosure action) that should not have been initiated due to the permanent loan modification. Id. ¶ 49. Mr. Bowen amended his answer to the foreclosure action and added counterclaims on January 5, 2015. Id. ¶ 50. As alleged in Mr. Bowen's counterclaims in the foreclosure action, including claims for fraud and negligent misrepresentations and violations of the MFDCPA, FDCPA, RESPA, and MUTPA, Green Tree failed to properly implement the permanent modification that brought the loan current, and Green Tree continued to attempt to collect on the pre-modified terms of the loan and monies not owed by Mr. Bowen. Id. ¶ 50.

         The foreclosure action was transferred to the Maine Business and Consumer Court on January 22, 2015, and the docket number changed to BCD-RE-15-01. Id. ¶ 51. On April 17, 2015, the parties entered into a confidential settlement agreement and release. Id. ¶ 52. The parties filed a Stipulation of Dismissal of the foreclosure action dated April 30, 2015, stating that “[e]ach party shall bear its own costs and attorneys' fees.” Id. ¶ 53.

         F. Reinstatement Quote & Green Tree's Improper Fee Collection

         After the effective date of the settlement, Green Tree, through their attorneys at Shapiro and Morley, provided Mr. Bowen a reinstatement quote of $21, 056.30 good through May 12, 2015 to reinstate the loan per the terms of the permanent loan modification. Id. ¶ 54. The loan was considered in foreclosure status at the time the reinstatement quote was issued. Id. ¶ 55.

         The itemization of the reinstatement amount included (a) twenty-three past due payments, including principal, interest, and escrow amounts for taxes and insurance, from July 1, 2013 through May 1, 2015 per the terms of the loan modification, (b) late fees of $37.53, and (c) unpaid amounts in the loan's suspense account of $386.64. Id. ¶ 56. The reinstatement quote did not include any funds allegedly owed for any additional advanced escrow amounts or make any reference to any escrow deficiency. Id. ¶ 57. Green Tree failed to provide a history of the escrow account within ninety days of the reinstatement. Id. ¶ 60.

         On May 8, 2015, Mr. Bowen hand-delivered a check in the amount of $21, 056.30 to counsel for Green Tree to effectuate the reinstatement. Id. ¶ 58. In a mortgage statement dated June 14, 2015, Green Tree acknowledged receipt of the $21, 056.30 payment and reflected the terms of the loan modification in the regular monthly payment due of $930.67 for principal, interest, and escrow. Id. ¶ 59. In addition, Green Tree attempted to collect $35.70 in “Total Fees and Charges Due” for a grand total of $966.37. Id. Mr. Bowen made a payment of $966.37 to Green Tree on or around June 25, 2015 for July to cover the additional $35.70 charge. Id. ¶ 61.

         In a mortgage statement dated July 14, 2015, Green Tree again attempted to collect $35.70 in “Total Fees and Charges Due.” Id. ¶ 62. Mr. Bowen made a payment of $966.37 to Green Tree on or around July 28, 2015 for August. Id. ¶ 63.

         Mr. Bowen contacted Green Tree to dispute the $35.70 charge several times by phone, explaining that the fees were part of a settlement and he should not have to pay them. Id. ¶ 64. In a letter dated July 28, 2015, Green Tree claimed the $35.70 was a proper fee on the account. Id. ¶ 65. When Green Tree failed to correct the error, Mr. Bowen retained counsel to assist him with his dispute. Id. ¶ 66.

         Through counsel, on August 3, 2015, Mr. Bowen delivered a Qualified Written Request (QWR), including a Notice of Error (NOE) and Request for Information (RFI), to Green Tree explaining that Mr. Bowen did not owe the fees and charges Green Tree was attempting to collect. Id. ¶ 67. Green Tree received the letter on August 10, 2015. Id.

         In a mortgage statement dated August 14, 2015, Green Tree again attempted to collect $35.70 in “Total Fees and Charges Due.” Id. ¶ 68. However, in a letter dated August 20, 2015, Green Tree stated that it had determined that the additional monthly fee of $35.70 was improper and would be removed from the loan. Id. ¶ 69. Enclosed with the letter was a document entitled “Advances, ” which showed a series of amounts paid from the account that include attorney's fees, legal costs, filing fees, and foreclosure costs. Id.

         Even though it had determined that the fee was improper, in a letter dated August 26, 2015, Green Tree stated that it would take out a payment from Mr. Bowen's bank account that included the $35.70 fee. Id. ¶ 70. Green Tree did take this money from Mr. Bowen's account. Id. ¶ 71.

         G. Ditech Continues to ...

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