Hahn v. Select Portfolio Servicing, Inc., Case No. 18-cv-05629-JSC

424 F.Supp.3d 614

Roy HAHN, et al., Plaintiffs,

v.SELECT PORTFOLIO SERVICING, INC., Defendant.

Case No. 18-cv-05629-JSC

United States District Court, N.D. California.

Signed January 8, 2020

James McCarty Braden, Law Offices of James M. Braden, San Francisco, CA, for Plaintiffs.

Bao M. Vu, Bryan Lakeith Hawkins, Thomas Andrew Woods, Stoel Rives LLP, Sacramento, CA, for Defendant.

ORDER RE: DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

RE: DKT. NO. 52

JACQUELINE SCOTT CORLEY, United States Magistrate Judge

Roy Hahn, Linda Montgomery, and The Roy E. Hahn and Linda G. Montgomery Living Trust (the "Trust") (collectively, "Plaintiffs") sue Select Portfolio Servicing, Inc. ("SPS" or "Defendant") for alleged violations of federal and state laws arising out of Defendant's processing of Plaintiffs' loan modification applications.¹ Defendant's motion for summary judgment, or in the alternative, partial summary judgment is pending before the Court. (Dkt. No. 52.)² After careful consideration of the parties' briefing and having had the benefit of oral argument on December 19, 2019, the Court GRANTS Defendant's motion.

BACKGROUND

The gravamen of Plaintiffs' First Amended Complaint is that SPS's failure to properly consider Plaintiffs' loan modification applications (also known as loss mitigation applications) resulted in SPS filing an "illegal" Notice of Trustee's Sale, forcing Plaintiffs to sell their home to avoid foreclosure.

I. Factual Background

A. Plaintiffs' Mortgage and Default

Mr. Hahn and Ms. Montgomery are husband and wife. (Dkt. No. 62-1 at ¶ 2.) At all times relevant to this action they were self-employed accounting professionals. (See Dkt. Nos. 54-1, Ex. 9 at 4:4-5:2 & 54-2, Ex. 10 at 3:17-24.) In August 2001, they purchased a condominium located at 765 Market Street, Unit 34-F, San Francisco, CA 94103 (the "Residence"), in a building known to the public as the Four Seasons Residences. (Id. ; see also Dkt. No. 64, Ex. 1 at 2.) The purchase price was $2,650,000. (Dkt. No. 64, Ex. 1 at 2.) Mr. Hahn and Ms. Montgomery "together owned the Residence," and "held title to the Residence under the terms of [the Trust]." (Dkt. No. 62-1 at ¶ 2.)

In September 2005, Plaintiffs executed a 30-year mortgage loan (the "Note") with Washington Mutual Bank, FA ("Washington Mutual") in the amount of $2,450,000. (Dkt. No. 65, Ex. 17.) The Note was secured by a Deed of Trust (the "Deed") on the Residence. (Id. , Ex. 19.) JP Morgan Chase Bank ("Chase") subsequently acquired the Note after Chase acquired Washington Mutual around 2008. (See Dkt. No. 1-2, Ex. A at 25 ¶ 4.)

In January 2012, the IRS notified Mr. Hahn that it had assessed approximately $9,000,000 in penalties against him for "failure to register a tax shelter" related to an investment program he "designed and offered" to clients in 2001. (See Dkt. No. 1-2, Ex. A at 52 ¶ 84; see also Dkt. Nos. 54-1, Ex. 9 at 8:6-19 & 64, Ex. 8 at 91.) The IRS placed immediate liens on the Residence. (Dkt. No. 1-2, Ex. A at 52 ¶ 86; see also Dkt. Nos. 54-1, Ex. 9 at 7:19-25 & 64, Ex. 9.) The liens negatively affected Mr. Hahn's employment as investment manager by "prevent[ing] potential institutional investors from considering" retaining him. (Dkt. No. 1-2, Ex. A at 52 ¶¶ 84-86.) Further, Plaintiffs incurred "significant" legal fees in defending against the IRS assessment. (Id. at ¶ 84.) As a result, Plaintiffs "began to suffer severe financial distress in December 2013," primarily due to the IRS assessment against Mr. Hahn and resulting liens on the Residence. (Id. ; see also Dkt. No. 54-1, Ex. 9 at 7:19-20 (testifying that "After [the effects of the global financial crisis in 2008], the Internal Revenue Service matters were the primary problem.").)

Plaintiffs defaulted on the Note around December 2013. (Dkt. No. 54-1, Ex. 9 at 6:17-19.) In January 2014, Chase sent correspondence to Plaintiffs regarding the default and notifying Plaintiffs that they may be eligible for "mortgage assistance options." (Dkt. No. 65, Ex. 21 at 67.) Chase instructed Plaintiffs to complete and return an enclosed "Request for Mortgage Assistance Form" and send financial documents to Chase to determine eligibility. (Id. )

B. Plaintiffs' Loss Mitigation Applications

In February 2014, Plaintiffs submitted the mortgage assistance form and financial documents to Chase. (Dkt. No. 65, Ex. 26.) By letter dated March 4, 2014, SPS notified Plaintiffs that servicing of the Note was transferred from Chase to SPS effective March 1, 2014. (Dkt. No. 65, Ex. 27.) SPS and Plaintiffs thereafter engaged in a year of back and forth correspondence. SPS continually asserted that certain necessary information was missing and thus the loss mitigation application was not complete, and Plaintiffs repeatedly responded that they had already provided the information on multiple occasions and that the application was complete. Plaintiffs also sometimes provided additional information. (See, e.g., Dkt. Nos. 56-4, Ex. D; 56-5, Ex. E; 56-6, Ex. F; 56-7, Ex. G; 56-8, Ex. H; 66, Exs. 28, 32, 34-36, 38-40, 43, 45, 47, 49.)

1. The March 2015 Complete Loss Mitigation Application

On March 12, 2015 SPS finally advised Plaintiffs by letter that it "ha[d] received a complete Assistance Review Application, including all required information and documentation required to evaluate your account for loss mitigation assistance." (Dkt. No. 56-9, Ex. I at 2.) SPS's letter further states, in pertinent part: "We will evaluate your complete application for all loss mitigation options available to you and the results will be sent to you within thirty (30) days of this letter." (Id. ) The letter also advised that SPS "may order" an appraisal in connection with its loss mitigation review. (Id.)

SPS's "Contact History Report" for Plaintiffs' account ("Account Report") includes an entry dated March 30, 2015, noting that an appraisal is needed to proceed with the loss mitigation review, but that attempts to gain access to the Residence had failed. (Dkt. No. 56-1, Ex. A at 63.) On April 7, 2015, SPS sent Plaintiffs a letter stating, in pertinent part: "[SPS] received your request for loss mitigation assistance, but due to your request or inactivity, we consider the assistance request withdrawn" because "[a]fter initially asking to be considered for assistance, you withdrew that request on 04/06/2015." (Dkt. No. 56-10, Ex. J at 2.) Mr. Hahn responded by fax on April 12, 2015, disputing that Plaintiffs withdrew their loan mitigation and stating, in pertinent part: "Show me the purported letter from me that asks for a withdrawal!" (Dkt. No. 66, Ex. 54 at 98.)

On June 29, 2015, SPS sent a letter to Plaintiffs notifying them that the Residence was "close to being referred to foreclosure," that they were in default of the Note in the amount of $347,898.83, and that the last payment had been received on November 15, 2013. (Dkt. No. 66, Ex. 55 at 100.) The letter further states, in pertinent part: "We have been unable to contact you to consider you for a loan modification." (Id. at 101.) The next day, SPS sent Plaintiffs an "Assistance Review Application" letter identifying the "Required Information" necessary for loss mitigation assistance review. (Dkt. No. 66, Ex. 57 at 109.)

2. Plaintiffs' Continued Loss Mitigation Efforts

Mr. Hahn responded to SPS's June 29 letter by fax on July 11, 2015, stating, in pertinent part:

[Y]ou have continually failed to respond to the multitude of respon[ses] and information I have furnished to you at your request. Instead I received form letters asserting my formal withdrawal of an application (plainly untrue) and my failure to communicate with you (blatantly untrue given my written responses all of which you refuse to acknowledge). I again request that you review the information I have previously furnished.

(Dkt. No. 66, Ex. 56 at 106.) On July 17, 2015, SPS sent a Required Information Notice requesting the same federal tax information it had previously requested, as well as a "Hardship Affidavit." (Dkt. No. 56-11, Ex. K at 2-3.) Mr. Hahn responded by fax on August 1, 2015, referencing SPS's letters, Mr. Hahn's July 11 fax, and stating, in pertinent part: "Having now submitted multiple requests for loan modifications and provided every single document requested, timely and completely, I am unable to understand why my prior requests have been ignored." (Dkt. No. 66, Ex. 57 at 108.) Mr. Hahn's fax further "incorporate[d] all prior responses to SPS," and "again request[ed] a loan modification." (Id. )

The following month SPS responded to Mr. Hahn's August 1 fax, noting that "review initiated on March 13, 2014 remains closed" but stating that "a new Loss Mitigation Review was initiated on July 16, 2015." (Dkt. No. 66, Ex. 58 at 116.) The letter further states, in pertinent part: "In order for us to complete the review for loss mitigation assistance you are first required to submit a complete loss mitigation application." (Id. ) The letter lists the specific "required documentation," and asks Plaintiffs to provide it "as soon as possible." (Id. )

Plaintiffs filed a complaint against SPS with the Consumer Financial Protection Bureau ("Consumer Bureau") on October 6, 2015, asserting that SPS had failed to process Plaintiffs' "complete and timely" loss mitigation application. (Dkt. No. 66, Ex. 59 at 121.) The Consumer Bureau forwarded the complaint to SPS. (Id. ) The same day Plaintiffs filed their Consumer Bureau complaint, Mr. Hahn responded by fax to SPS's September 15 letter, disputing the closure of Plaintiffs' initial loss mitigation application. (Dkt. No. 66, Ex. 60 at 127.)

On October 14, 2015, SPS responded to Mr. Hahn's October 6 fax, explaining that SPS closed the initial loss mitigation application because SPS was unable to contact Plaintiffs to "obtain access to the property to complete the [walk-through] BPO." (Dkt. No. 66, Ex. 61 at 129.) The letter further states, in pertinent part:

We do not send out a letter requesting to gain access to the property, but we

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