CLASS ACTION

Votaw v. Countrywide Home Loan Servicing, L.P., et. al., 2:06-CV-00036 (D. Utah)(Complaint Filed 1/11/06)

Plaintiff’s Counsel: Lester A. Perry, Hoole & King, LC, 4276 Highland Drive, Salt Lake City, UT 84124)

Summary: Plaintiffs allege that they timely tendered all payments due and owing under the terms of a forbearance agreement and thereafter the servicers wrongfully rejected monthly mortgage payments. They allege that the servicers improperly assessed attorney’s fees and costs, late charges in excess of amount permitted by the contract, inspection fees, and BPO fees to their account. They further assert that the servicers failed to provide notice to them prior to conducting and assessing charges for inspections. The Plaintiffs state that the servicers assessed unreasonable inspection and BPO fees and assessed them too frequently. They also allege that the costs were assessed but not actually incurred. The Plaintiffs state that one of the servicers adjusted the interest rate without notice and applied the monthly payments to improper escrow advances. They further state that one of the servicers improperly assessed payoff fees.

Plaintiffs allege that servicers: (1) violated RESPA for failing to respond to qualified written requests, (2) violated FDCPA §1692e and 1692f) by attempting to and collecting items “not authorized by agreement or permitted by law; (3) breached the terms of the loan documents and the implied covenant of good faith and fair dealing; (4) negligently serviced the loan; and (5) were unjustly enriched.

Case Status: Defendants have yet to be served.

Pettway v. Harmon Law Offices, 03-10932 (D. Mass.)(Amended Complaint filed 10/17/05)

Plantiffs’ Counsel: Gary Klein, Elizabeth Ryan, John Roddy, Roddy Klein & Ryan, 727 Atlantic Avenue, 2nd Floor, Boston, MA 02111; Stuart Rossman, Odette Williamson, National Consumer Law Center, 77 Summer Street, 10th Floor, Boston, MA 02110

Summary: Plaintiffs allege that in connection with reinstatement and payoff quotations, counsel for mortgagee “routinely attempts to collect and does collect foreclosure attorney fees that are unreasonable and not legally due from the mortgagor.” They also allege that counsel for the mortgagee “routinely attempts to collect and does collect other fees, including sheriff service fees and certified mail fees in amounts that exceed the actual cost” to the firm. Plaintiffs allege that Defendant “had no time records or other back-up information necessary to support the amount of fees it charged to” Plaintiffs and demanded fees “that it had not yet earned as well as foreclosure costs that it had not yet expended.” The letters provided that “the quoted legal fees and costs are estimates through the date you have requested.”

Plaintiffs allege that Defendant: (1) violated §1692e and f of the FDCPA; (2) violated the Massachusetts Debt Collection Law “by attempting to collect a debt in an unfair, deceptive, or unreasonable manner;” (3) were unjustly enriched; (4) intentionally misrepresented the loan information to Plaintiffs.

Case Status: Settlement pending, pursuant to which parties are to submit a model reinstatement and payoff letter to the court for consideration.

Kahn v. Option One Mortgage Corporation, 2:05 CV 05268-MMB (E.D. PA)

Plaintiffs’ Counsel: Stuart Eisenberg, McCullough & Eisenberg, P.C., Suite 201, 530 West Street Road, Warminster, PA 18974.

Summary: Plaintiffs allege that servicer “routinely assesses and seeks to collect and does collect . . . improper fees, costs, and charges, including those termed as ‘recoverable corporate balances,’ ‘recoverable corporate advances,’ or the like, representing fees that are not legal due. . .” Plaintiffs further allege that the alleged improper charges “represent attorney’s fees and costs and other charges ostensibly incurred by defendant in the alleged enforcement of mortgage obligations, but . . . which have not been incurred.” They assert that a foreclosure action was initiated by the servicer and thereafter they sold the mortgaged premises. They allege that the payoff quote “was loaded with charges that were not incurred and were not earned.” The quotation included “FC Fees and costs 5/20/05 of $4,941.00, Sheriff’s Commission 5/20/05 of $3,467.86, Borrower interview of $48.00, and BPO 5/20/05 $200.00.” Plaintiffs claim that the first figure “includes a $2,000.00 charge and a $20.00 charge for listing a sheriff’s sale. . . There was no sheriff’s sale ever listed.” They allege that the sheriffs commission “would have been incurred had the property been listed for sheriff’s sale and the sale was canceled because the property was sold prior to a . . . sale. However, there was never a scheduled . . . sale.” They claim that a BPO could not have been conducted on 5/20/05 as the sale took place prior to that date.

Plaintiffs included a count for breach of contract, for violation of the state unfair trade practices statute, for common law intentional misrepresentation, breach of duty of good faith and fair dealing, and unjust enrichment.

Case Status: Defendant’s Motion to Dismiss and to Compel Arbitration Granted on 1/16/06.

Orser v. Select Portfolio Servicing, Inc., 2:05-CV-01507 (W.D. Wash.)

Plaintiff’s Counsel: Mark A. Griffin, Keller Rohrback, L.L.P, 1201 Third Avenue, Suite 3200, Seattle, WA 98101.

Summary: Plaintiffs allege that the mortgage documents executed by Plaintiffs do not permit Defendant to assess charges in connection with the payoff of the mortgage loans. They allege that Defendant included fees in the sum of $50.00 that were entitled “payoff statement fee” and that the class members paid the fee “in order to obtain a reconveyance of the deeds of trust or satisfaction of mortgages serviced . . . by Defendant.” Plaintiffs further allege that Defendant charged class members recording fees that exceeded the actual cost of recording the reconveyances of deeds of trust or satisfactions of mortgages. Plaintiff seeks to certify a nationwide class based upon Defendant’s alleged breach of contract and unjust enrichment and a sub-class of Washington state residents based upon alleged violations of the Washington Consumer Protection Act. Plaintiff also seeks injunctive relief.

Case Status: Amended Complaint filed 2/1/06.

Davis v. Homecomings Financial, 2:05-CV-1466 (W.D. Wash.)

Plaintiff’s Counsel: Rob Williamson, Beckett Law Offices, PLLC, 811 First Avenue, Suite 620, Seattle, WA 98104; David A. Leen, 520 East Denny Way, Seattle, WA 98122; Mark A. Griffin, Keller Rohrback, L.L.P, 1201 Third Avenue, Suite 3200, Seattle, WA 98101.

Summary: Plaintiff alleges that the form mortgage document that she executed provides that “upon payment of all sums secured by this Security Instrument, . . . Trustee shall reconvey the Property without warranty to the person . . . legally entitled to it. Such person or persons shall pay any recordation costs.” Plaintiff further alleges that “Defendant illegally demanded a ‘fee to expedite stmt’ of $25.00 not authorized by the Deed of Trust, as part of the amount necessary to pay the loan off in full.” She claims the fee “is neither permitted nor secured by the Deed of Trust.” Plaintiff seeks to certify a nationwide class based upon Defendant’s alleged breach of contract and unjust enrichment and a sub-class of Washington state residents based upon alleged violations of the Washington Consumer Protection Act. Plaintiff also seeks injunctive relief.

Case Status: The parties entered into a Stipulation and Protective Order on 1/26/06.

Dougherty v. Wells Fargo Home Loans, Inc., 04-CV-4820-RBS (E.D. Pa.)

Plaintiff’s Counsel: Stuart A. Eisenberg, McCullough & Eisenberg, P.C., Suite 201 530 West Street Road, Warminster, PA 18974.

Summary: Plaintiff executed a mortgage in favor of G.E. Capital and filed a chapter 13 on 3/31/00. Thereafter G.E. Capital transferred servicing of the loan to Wells Fargo. On 6/30/00, GE Capital filed a proof of claim, and on 7/11/00, plaintiff filed an objection thereto. The objection was settled, and GE Capital reduced its claim for fees from $4,607.50 to $2,361.00. The plan was confirmed on 10/13/00. On 5/19/04, Dougherty refinanced her obligation. The payoff statement furnished by Wells Fargo included “corporate advances” of $3,678,50, which alleged represented attorney’s fees and costs. That figure exceeded the figure in the POC by $1,317.50, and Plaintiff alleges that the overage represents post-petition attorney’s fees and costs.

Plaintiff’s Legal Theories:

• FDCPA: Plaintiff alleges that Wells Fargo violated 15 U.S.C. §1692e by using “false, deceptive, or misleading representations or means in connection with the collection of any debt.” She claims that using the phrase “recoverable corporate balances” is deceptive. She further alleges that it is a deceptive practice to assess attorney’s fees and costs to an account without notice and to assess such fees without first seeking court approval. Plaintiff also asserts that the conduct of Wells Fargo constitutes a violation 15 U.S.C. §1692f(1), which prohibits “the collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law.”

• Bankruptcy Code: Plaintiff asserts that “pursuant to 11 U.S.C. §506(b), any bankruptcy-related attorney’s fees and costs assessed by the defendant after the bankruptcy petition is filed are not allowed without application to and approval by the Bankruptcy Court.” She further argues that “in order for bankruptcy-related fees and costs to be approvable, the following criteria must be met: (1) the creditor must be oversecured; (2) the mortgage documentation must provide for fee-shifting for the specific activities for which the charges are to be imposed; (3) the charges must be ‘reasonable’; and (4) the charges must be permitted by applicable state law. She maintains that the court is empowered to enter an order granting injunctive relief and damages under 11 U.S.C. §105.

• Breach of Contract: Dougherty states that “Wells Fargo has breached its contractual authority by charging for attorney’s fees and costs ostensibly incurred preceding and during bankruptcy proceedings not specifically authorized by the standard, uniform, language of the mortgage documentation. At best, there was no reasonable threat to Lender’s interests. Furthermore, contractually the fees charged were not necessary. Even if the contract permitted such attorney’s fees, the lack of application to and approval by the bankruptcy [court] is fatal to the invocation of the contractual right because of preemption of federal law at least to the extent of the necessity to comply with the Code as to contractual compliance, allowance, reasonableness, and enforceability. Wells Fargo further breached the contract by not providing any appropriate and applicable and timely notice of the fee-shifted charges.”

• Unfair Trade Practices: Dougherty alleges that Wells Fargo engaged in unfair or deceptive acts or practices (1) making false statements of fact, by silence and otherwise, in writing and otherwise; (2) knowingly misrepresenting that the sums charged and that are the basis of this complaint are permissible, lawful and contractually appropriate; (3) imposing these illegal attorney’s fees and costs without court approval; (4) imposing these illegal attorney’s fees and costs without having provided such legal services; (5) utilizing false and misleading characterizations for the amount claimed to be due, intending to mislead the consumer.”

Servicer’s Motion to Dismiss: Wells Fargo argues that “”Everything that plaintiff complains of WFHM doing occurred while she was in bankruptcy. Because the Bankruptcy Code is exclusive as to such activities, that statutory scheme precludes a claim under the FDCPA.” Wells Fargo relies upon Walls v. Wells Fargo Bank, N.A., 276 F.3d 502 (9th Cir. 2002). Wells Fargo further argues that “no claim for violation of section 1692f(1) can be stated because ‘in interpreting the language in paragraph 7 of the mortgage courts have concluded that the language permits a mortgagee to charge a mortgagor for the mortgagee’s attorney’s fees and other expenses incurred during the mortgagor’s bankruptcy.” Wells Fargo cited Dawson v. Dovenmuehle Mortgage, Inc., 2002 WL 501499 (E.D. Pa. 2002). As to the claim under the Bankruptcy Code, Wells Fargo argues that “section 506 expressly rejects the notation that a creditor must file a proof of claim, or otherwise obtain bankruptcy court approval, to maintain a lien for obligations owing under the mortgage, including the attorney’s fees obligation.” Wells Fargo further asserts that a private cause of action does not exist under the Bankruptcy Code.

Plaintiff’s Response: “This case presents a second issue unlike any of the other cases in the ‘pipeline’: As Defendant was a ‘debt collector’ . . . did Defendant violate . . . the FDCPA. Preceding that question, however, is the issue of whether the FDCPA . . is preempted by the United States Bankruptcy Code.”

Analysis:

• Circuit Court Split on FDCPA Claims: There is a split between the 9th and 7th Circuits regarding whether a consumer can maintain an FDCPA claim based upon a violation of the Code. In Randolph v. IMBS, Inc., the 7th Circuit Court of Appeals analyzed the issue as follows:

The regime under §362 tracks that for other proceedings in the nature of contempt of court. The regime under the FDCPA sets a lower standard of liability and provides lower damages. It also deals specifically, as §362 does not, with matters such as class actions, maximum recovery, attorneys' fees, and the period of limitations. It is not sound to call §362 of the Code "comprehensive"; the FDCPA comes closer to that mark. It would be better to recognize that the statutes overlap, each with coverage that the other lacks--the Code covers all persons, not just debt collectors, and all activities in bankruptcy; the FDCPA covers all activities by debt collectors, not just those affecting debtors in bankruptcy. Overlapping statutes do not repeal one another by implication; as long as people can comply with both, then courts can enforce both.

368 F.3d 726, 731 (7th Cir. 2004).

Private Cause of Action for §506 Violations: See the summary of the Joubert case set forth below, in which the 3rd Circuit held that a private cause of action does not exist under the Code.

• NJ Litigation: In In re Dunklin, 04-41631 (Bankr. D. N.J.), the chapter 13 trustee filed an objection to the servicer’s proof of claim, alleging, in part, that the servicer assessed bankruptcy-related attorney’s fees without filing an application for the same and for services that were ministerial only and therefore not properly characterized as an “attorney’s fee.” The hearing on the objection has been continued to 3/22/06. An adverse ruling could result in additional actions relating to the assessment of post-confirmation bankruptcy attorney’s fees. Also, several trustees are attempting to include language in model plans providing that servicers must apply for all bankruptcy-related fees and costs before discharge.

Case Status: Awaiting ruling on Motion to Dismiss.

Eversole v. EMC Mortgage Corporation, 5:05-CV-00124 (E.D. Ky)

Plaintiff’s Counsel: John A. Yanchunis, James, Hoyer, Newcomer & Smilganich, 4830 West Kennedy Boulevard, Suite 550, Tampa, FL 33609; Mark Fistos, 3301 Thomasville Road, A200, Tallahassee, FL 32308; Steven Jaffe, Aronovitz Trial Lawyer, Suite 2700, Museum Tower, 150 West Flagler Street, Miami, FL 33130; Robert Sparks, Parry Deering Futscher & Sparks, P.S.C., 411 Garrard Street, Covington, KY 41011.

Summary: Plaintiff alleges, in part, that defendant “expressly or by implication standardized mortgage-related oral and written representations to consumers, containing material, false and misleading debt collection information, relating to required payments, application of mortgage payments, or delinquencies or delinquency-related penalties on their mortgages.” They further allege that defendant claimed, attempted, or threatened “to enforce debts, including foreclosure or collection actions against consumers, when [servicer] knew or should have known that the debts were not legitimate.” They assert that defendant “deprived consumers from the benefit of reduced principal and interest under their mortgages and imposing unwarranted interest payments on consumers by: (1) Placing or suspending all or part of consumers’ mortgage payments in accounts it creates, other than ones to reduce principal and interest or for escrow purposes, as called for under consumers’ mortgages; (2) Applying consumer mortgage payments to cover unwarranted delinquency-related fees or arrearage, rather than to principal and interest; and (3) Failing to promptly or accurately credit timely mortgage payments to principal and interest, leading to the imposition of unwarranted delinquency-related fees, greater interest and principal being owed and paid over the life of the loan. Plaintiffs allege that servicer violated the Kentucky Consumer Protection Act, breached the contract, and were unjustly enriched.

Case Status:

Koller v Litton Loan Servicing, 3:04-CV-05227 (N.D. Ca.)(Complaint filed 10/28/04)(Remanded 5/20/05)

Plaintiffs’ Counsel: Daniel Mulligan, Jenkins & Mulligan, 660 Market Street, Third Floor, San Francisco, CA 94104.

Summary: Plaintiffs allege that defendant: (1)imposed and collected late fees when loan payments were made on a timely basis; (2) Obtained forced placed coverage when borrowers had coverage in place; (3) Imposed and collected escrow fees that were unauthorized; (4) Assessed and collected NSF fees on “good funds”; (5) Improperly initiated foreclosure proceedings; (6) Demanded costs incurred in connection with improper foreclosure proceedings.

Plaintiffs asserted that the above-listed practices violate California’s Unfair Business and Practices Act (Business and Professions Code §17200).

Case Status: Can be found at http://www.sftc.org/Scripts/Magic94/mgrqispi94.dll?APPNAME=IJS&PRGNAME=ROA&ARGUMENTS=-ACGC04435880.

Freitag v. Option One Mortgage Corporation, No. 04-L-809 (Madison County, IL Circuit Court (Complaint filed 7/28/04)

Plaintiffs’ Counsel:

Analysis: Plaintiffs allege that servicer included anticipated per diem interest in its payoff quotations and improperly retained “extra anticipated per diem interest.” Plaintiffs state that the servicer’s payoff quote included a sum certain and included the following language: “TOTAL AMOUNT TO PAY LOAN IN FULL.” Plaintiffs included a count for breach of contract and a count under the Illinois Consumer Fraud and Deceptive Business Practices Act.

Case Status: Case Management Conference set for 4/26/06.

Goewey v. First Union Home Equity Bank, 3:2005-CV-00237 (S.D. Ill)

Plaintiffs’ Counsel: Stephen M. Tillery, Lisa R. Kernan, Korein Tillery, 10 Executive Woods Court, Belleville, IL 62226

Summary: Plaintiffs allege that they executed mortgages that require Defendant to apply payments “first, to interest under on the note, second to principal, and then to other charges, if any, due on the note” but that Defendant failed to apply payments as required. Plaintiffs further allege that “Defendants incorrectly denominated an unapplied payment as being held in suspense status” and assessed late charges and other charges. They allege that Defendant was unjustly enriched and breached the terms of the contract.

Case Status:

Kahle v. Litton Loan Servicing, L.P, 1:05_CV-00756 (S.D. Ohio)

Plaintiff’s Counsel: Colleen Hegge, Statman, Harris, Siegel & Eyrich, LLC, 255 East Fifth Street, 2900 Chemed Center, Cincinnati, OH 45202

Summary: Plaintiff alleges that personal information (name, social security number, residence address, etc.) “kept by the Defendant was stolen, misappropriated and/or otherwise obtained by third persons as a result of a break-in at Defendant’s Atlanta office.” She asserts that Defendant “had a duty to maintain the confidentiality and privacy rights of the Personal Information such that the Personal Information would remain secure and be used only for Defendant’s legitimate business purpose.” Plaintiff claims that Defendant unreasonably delayed notifying its borrowers of the theft. Plaintiff included counts for negligence, invasion of privacy, breach of confidentiality, fraud, unauthorized use of computer, and violation of the Consumer Sales Practice Act.