Hammer v. Residential Credit Solutions, Inc.

Alena W. Hammer Plaintiff, v. Residential Credit Solutions, Inc., Defendant.

No. 13 C 6397

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

September 11, 2014

Judge Thomas M. Durkin

MEMORANDUM OPINION AND ORDER

Alena Hammer ("Hammer") brought this lawsuit against Residential Credit Solutions ("RCS") on September 6, 2013, alleging that RCS caused her damages resulting from breach of contract and violations of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692; the Illinois Consumer Fraud Act ("ICFA"), 815 ILCS § 505/1; and the Real Estate Settlement Procedures Act ("RESPA"),12 U.S.C. §§ 2605 & 2609. RCS moves to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). R. 30. For the reasons explained below, RCS's motion to dismiss is granted in part and denied in part.

BACKGROUND¹

Hammer obtained a 30-year home mortgage loan for $220,000 in 2003. R. 1 ¶ 19. The loan required Hammer to pay her taxes and maintain hazard insurance separately from the mortgage loan. Id. ¶ 21. Hammer opted out of any escrowrequirement for the loan, which was effective as long as she remained current on her taxes and insurance. Id. ¶ 22. As of August 2009, that loan was being serviced by AmTrust Bank ("FDIC/AmTrust"). Id. ¶¶ 23, 27. In February 2009, Plaintiff was laid off from her job and fell behind on her principal and interest payments on the loan. Id. ¶ 26. In August 2009, FDIC/AmTrust declared Hammer's loan in default. Id. ¶ 27. On September 9, 2009, FDIC/AmTrust filed a foreclosure against the subject property and against Hammer in DuPage County, Illinois in the case known as AmTrust Bank v. Hammer, 2009 CH 3951 ("Foreclosure Case # 1"). Id. ¶ 28.

In December 2009, the Federal Deposit Insurance Corporation ("FDIC") was appointed as receiver for FDIC/AmTrust. Id. ¶ 29. In January 2010, Hammer received a call from Theresa Holk of the FDIC/AmTrust about a potential loan modification. R. 1 ¶ 31. Holk explained that Hammer's modified loan amount would be the principal balance on the loan before the FDIC takeover of FDIC/AmTrust, and that all past-due amounts would be waived. Id. ¶ 32. Holk told Hammer she would receive correspondence in the mail with instructions on how to complete the modification. Id. ¶ 33. Hammer received a letter from FDIC/AmTrust providing her with a loan modification application and checklist of documents to be submitted no later than February 26, 2010. Id. ¶ 34. On February 2, 2010, Hammer submitted the application and documentation. Id. On June 21, 2010, Holk notified Hammer that her modification was officially approved with a total principal balance of $207,176.99. Id. ¶ 35. Holk told Hammer that all future dealings should be throughHammer's new contact person, Chris Pelaci, and that all loan modification payments should be sent to Sandy Beauregard at FDIC/AmTrust. Id.

Hammer received the loan modification agreement—which was dated June 8, 2010—on June 28, 2010. Id. ¶ 36. The modification agreement noted that it should be returned no later than June 25, 2010, and instructed Hammer to send her new monthly payment of $749.88 to FDIC/AmTrust by July 1, 2010. Id.. ¶ 37. It also included a miscellaneous fee of $2,303.30, increasing the modified balance from $207,176.99 to $209.471.59. Id. ¶ 38.

When Hammer received the agreement on June 28, she called Pelaci to request additional time to review and sign the modification agreement since she received it three days after the due date in the cover letter. Id. ¶ 39. Hammer also disputed the additional fees added to the modified balance. Id. Pelaci said she would look into the added fees and told Hammer that she still needed to send in the first $749.88 payment by July 1, 2010, but did not need to sign the document until Pelaci called her back regarding the unknown fees. Id. ¶ 40. Hammer sent her first payment in the amount of $749.88 to FDIC/AmTrust on June 28, 2010, which FDIC/AmTrust cashed on July 1, 2010. Id. ¶ 41, R. 1-2 at 2. When Hammer did not receive a response from Pelaci regarding the fees, she both called and wrote FDIC/AmTrust to dispute the fee and obtain an explanation and further instruction. R. 1 ¶ 42.

On July 23, 2010, Hammer received a RESPA Notice of Assignment stating that effective on August 1, 2010, FDIC/AmTrust would no longer accept paymentsfor her loan and that she should make her payments to RCS beginning on that date. The letter advised Hammer of her right to send a RESPA Qualified Written Request² ("QWR") dispute within 60 days. Id. ¶ 43. On July 28, 2010, Hammer made her second payment (due August 1, 2010) on the loan modification in the amount of $749.88³ to FDIC/AmTrust which FDIC/AmTrust cashed on July 30, 2010. Id. ¶ 44, R. 1-3 at 2.

On August 2, 2010, RCS applied $1,499.76—the two payments of $749.88—to Hammer's account. Id. ¶ 45. On or about August 14, 2010, Pelaci spoke with Hammer over the phone and told Hammer that the fees in her modification were assessed in error. Id. ¶ 46. Pelaci instructed Hammer to cross out the $2,303.30 fee, write in the correct principal balance of $207,176.99, initial and sign the contract in front of a notary, and return the executed copy to RCS, attention "Jim Bass." Id.Hammer wrote the amounts and then signed, notarized, and mailed the document to Bass as instructed. Id.

Upon receiving the document, Bass called Hammer and told her that the modification "did not exist at the time the loan was transferred to [RCS]" and therefore was not valid. Hammer alleges that Bass threatened to take her home and swore at her to the point where she became very distraught. Id. ¶ 47. On August 19, 2010, RCS sent Hammer a notice erroneously stating that her real estate taxes were delinquent and that RCS would set up an escrow account to pay the delinquent taxes. Id. ¶¶ 49-50.

On August 31, 2010, Hammer disputed the debt in writing, sending a QWR and a Fair Debt Dispute Letter addressed to Beauregard at FDIC/AmTrust. Id. ¶ 51. The letters stated that Hammer was sending the money to FDIC/AmTrust because RCS claimed it had no knowledge of the modification. Id. On September 1, 2010, Hammer sent her third loan modification payment to FDIC/AmTrust in the amount of $749.88, which FDIC/AmTrust forwarded to RCS. Id. ¶ 52.

On September 19, 2010, Hammer's hazard insurance policy automatically renewed for a twelve-month period. Id. ¶ 54. Hammer alleges that at all times since obtaining the underlying loan in 2003, she has paid her taxes in full and has maintained proper and adequate hazard insurance. Id. ¶ 14. Also on September 19, 2010, RCS force-placed insurance⁴ on Hammer's property. Id. ¶ 54. Beginning inSeptember 2010, RCS billed Hammer's account certain unexplained fees on multiple occasions including in October 2010, and February, April, and May through August of 2011. Id. ¶¶ 53, 57, 69, 74, 76, 79, 81-83, 88, 91.

On September 30, 2010, Hammer sent FDIC/AmTrust another Fair Debt Dispute Letter along with her fourth modification payment in the amount of $749.88. Id. ¶ 55. The letter stated that Hammer had a loan modification contract with FDIC/AmTrust. Id. On October 15, 2010, Hammer received a letter from FDIC/AmTrust telling her that her loan had been transferred to RCS more than 60 days earlier and returning her most recent payment "which needs to be paid directly to [RCS]." Id. ¶ 56. The letter included Hammer's October 2010 payment check but not her September 2010 payment check. Id. On October 29, 2010, Hammer sent a check to RCS in the amount of $749.88 for her November 2010 payment, also including a third Fair Debt Dispute Letter with her check which stated, "Also, the November payment enclosed as per contract w/FDIC/AmTrust bank prior to transfer to RCS." Id. ¶ 58. RCS received the payment on November 1, 2010 and returned the payment on November 5, 2010, without cashing it. Id. ¶ 59.

On November 5, 2010, RCS force-placed insurance on Hammer's account for a second time in the amount of $2,615 which RCS "deducted" from Hammer's escrow account, creating a negative escrow balance. Id. ¶ 60. On December 1, 2010, Hammer sent a check to RCS in the amount of $749.88 which RCS did not cash but

.instead returned to Hammer. Id. s 62. After December 1, 2010, Hammer continued to send her monthly payments to RCS via certified mail each month through the filing of her complaint. Id. RCS cashed two of Hammer's payments—for August 2011 and September 2012. Id. However, RCS returned all the other checks after holding them for time periods of several weeks to several months. Id.

On or about December 3, 2010, Hammer received a letter from RCS that it had not received proof of her insurance policy on the subject property. Id. ¶ 63. As a result, they secured force-placed insurance for the third time on her behalf through American Modern Home. Id. ¶ 63. The letter also stated that the cost of the policy would be paid out of her loan escrow account, which would be set up if it did not already exist and would result in an increase in her mortgage payment and "future insurance policies." Id. In response, Hammer sent RCS proof of her insurance again.⁵ Id. ¶ 64. RCS assessed a third "escrow disbursement" of $2,516 for force-placed insurance from Hammer's account on January 4, 2011. Id. ¶ 65.

On January 5, 2011, Hammer filed a motion to dismiss Foreclosure Case # 1, alleging that there was a valid and enforceable loan modification agreement with an effective date of July 1, 2010, and that all payments had been timely tendered. Id. ¶ 66. On January 11, 2011, Hammer sent RCS her fourth Fair Debt Dispute Letter requesting information as to why RCS was not cashing her checks and disputing thecredit reporting on her account.⁶ Id. s 67. Hammer enclosed copies of her credit report for reference and proof of hazard insurance. Id. RCS never responded to her dispute letter or corrected the credit reporting. Id.

On March 18, 2011, DuPage County, Illinois, Circuit Judge Gibson heard...