Lucien v. Fed. Nat'l Mortg. Ass'n

21 F.Supp.3d 1379

Marie LUCIEN, Plaintiff

v.FEDERAL NATIONAL MORTGAGE ASSOCIATION and Green Tree Servicing LLC, Defendants.

Case No. 13–CV–62399.

United States District Court, S.D. Florida.

Signed May 23, 2014.

Yechezkel Rodal, Aaron David Silvers, Loan Lawyers, LLC, Plantation, FL, for Plaintiff.

David Bruce McCrea, Shutts & Bowen, Miami, FL, George N. Andrews, Shutts & Bowen LLP, Fort Lauderdale, FL, for Defendant.

ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS

PAUL C. HUCK, District Judge.

Once again, a borrower facing foreclosure has invoked technical requirements under the Truth in Lending Act (“TILA”) against her lender, and once again this Court is called upon to construe TILA's confusing and often conflicting statutory scheme, which has resulted in fractured decisions in this district. Despite the questionable nature of this suit, which seeks damages and attorneys' fees for a failure to provide loan payoff information that is now moot, the Court finds that TILA does provide for liability against lenders for servicing violations like the one at issue here. Therefore, for the reasons discussed below, the Motion to Dismiss is GRANTED as to Defendant Green Tree Servicing LLC (“Green Tree”), and DENIED as to Defendant Federal National Mortgage Association (“Fannie Mae”).

I. FACTS

On August 2, 2007, Plaintiff Marie Lucien borrowed $188,000 from National City Bank, secured by a mortgage on Lucien's property. Mot. to Dismiss at 3. Fannie Mae now owns the loan which is serviced by Green Tree. On or about November 13, 2012, Lucien, through counsel, sent Green Tree a written request to provide an accurate statement of the total outstanding balance that would be required to satisfy the mortgage in full. Compl. ¶ 18. Green Tree did not respond with the payoff information. In June 2013, Green Tree, as servicer for Fannie Mae, commenced foreclosure proceedings contending that Lucien was in default of her mortgage. Mot. to Dismiss at 3.¹ A month after being served in the foreclosure action, Lucien commenced this action.

Lucien has sued Defendants based on Green Tree's alleged failure to timely provide an accurate payoff statement for the mortgage following Lucien's demand pursuant to Regulation Z, which implements TILA.² 12 C.F.R. § 226.36(c)(1)(iii). Lucien seeks to hold Green Tree liable for failing to timely provide the payoff statement, and Fannie Mae, the mortgage owner, vicariously liable for Green Tree's acts. Lucien seeks declaratory judgment and statutory damages.

Defendants move to dismiss. They argue that the provision of Regulation Z at issue here pertains only to high cost loans, and Lucien failed to plead that her mortgage meets the definition of “high cost” prescribed by 15 U.S.C. § 1602(aa). As to Green Tree, Defendants argue that a servicer cannot be liable under TILA unless it also owns the loan. Defendants also argue that there is no private right of action for violation of Regulation Z (12 C.F.R. § 226.36(c)(1)(iii) ) for violations by either Green Tree or Fannie Mae. Defendants further argue that as an assignee of the original lender, Fannie Mae's liability under TILA is limited to two circumstances, neither of which is present here. Additionally, Defendants argue that even if the Court were to find assignee liability under TILA, Fannie Mae cannot be held vicariously liable for Green Tree's actions. Finally, Defendants argue that declaratory judgment is either legally precluded or superfluous.

The Southern District of Florida is divided on almost every issue Defendants raise. Furthermore, the parties represent that to the best of their knowledge no cases dealing with these issues are currently pending in the Eleventh Circuit or any Federal Court of Appeals. [D.E. No. 49]. The courts' divergence on these issues stems from an astounding lack of clarity in the statute. The differing outcomes reflect a tension between construing TILA and Regulation Z to give effect to the apparent remedies they create and construing the statute literally to preclude those remedies, despite Congress's likely (though not explicit) intent. As discussed more fully below, the Court finds, along with the majority of courts in this and other districts, that TILA liability extends to mortgagees like Fannie Mae in this case.

II. ANALYSIS

The purpose of TILA is to “assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit, and to protect the consumer against inaccurate and unfair credit billing and credit card practices.” 15 U.S.C. § 1601. “... TILA creates a private cause of action for actual and statutory damages for certain disclosure violations, 15 U.S.C. § 1640(a).” Khan v. Bank of N.Y. Mellon, 849 F.Supp.2d 1377, 1378 (S.D.Fla.2012). “TILA is a consumer protection statute, and as such must be construed liberally in order to best serve Congress' intent.” Ellis v. Gen. Motors Acceptance Corp., 160 F.3d 703, 707 (11th Cir.1998).

The provision of TILA that creates a private cause of action provides,

Except as otherwise provided in this section, any creditor who fails to comply with any requirement imposed under this part, including ... subsection (f) or (g) of section 1641 of this title ... with respect to any person is liable to such person in an amount equal to the sum of—

(1) any actual damage sustained by such person as a result of the failure;

(2)(A) ... (iv) in the case of an individual action relating to a credit transaction not under an open end credit plan that is secured by real property or a dwelling, not less than $400 or greater than $4,000;

...

(3) in the case of any successful action to enforce the foregoing liability ... the costs of the action, together with a reasonable attorney's fee as determined by the court ...

15 U.S.C. § 1640(a) (emphasis added).

Plaintiff brings this action under Regulation Z, which was promulgated to implement TILA. 12 C.F.R. § 226.36. Regulation Z provides, in relevant part,

(c) Servicing Practices.

(1) in connection with a consumer credit transaction secured by a consumer's principal dwelling, no servicer shall—

...

(iii) Fail to provide, within a reasonable time after receiving a request from the consumer or any person acting on behalf of the consumer, an accurate statement of the total outstanding balance that would be required to satisfy the consumer's obligation in full as of a specific date.

12 C.F.R. § 226.36(c)(1)(ii).

Courts in this district have reached different conclusions about both whether a private right of action exists for violations of Regulation Z and whether creditors can be held vicariously liable for their servicers' violations. One court has also held that Regulation Z applies only to “high-cost” mortgages.

A further wrinkle in this case is that TILA distinguishes between original creditors and their assignees. The term “creditor” applies only to “the person to whom the debt arising from the consumer credit transaction is initially payable on the face of the evidence of indebtedness....” 15 U.S.C. § 1602(g). Fannie Mae is not the original creditor, but an assignee of the original creditor, National City Bank. Fannie Mae argues that TILA limits assignee liability, and that the alleged failure to provide an accurate payoff statement does not fall within the limited categories of assignee liability available under TILA. As with the issues presented above, courts in this district are split on the issue of assignee liability. Each issue is addressed below.

A. Servicer liability under TILA's civil damages provision, 15 U.S.C. § 1640

Green Tree, as servicer, cannot be held liable under 15 U.S.C. § 1640. The text of TILA's civil damages provision only provides for creditor liability—not servicer liability. 15 U.S.C. § 1640(a) (“... any creditor who fails to comply with any requirement imposed under this part ...”). Courts applying TILA uniformly hold that there is no servicer liability under TILA.³ E.g., Khan, 849 F.Supp.2d at 1379 (“TILA, however, does not impose liability on servicers, but rather provides a private cause of action against ‘creditors who fail [ ] to comply with any requirement imposed under ... section 1635 of this title [and] subsection (f) or (g) of section 1641 ’ ”); Runkle v. Fed. Nat'l Mortg. Assoc., 905 F.Supp.2d 1326, 1331 (S.D.Fla.2012) (partially vacated on other grounds) (same); Galeano v. Fed. Home Loan Mortg. Corp., No. 12–CV–61174, 2012 WL 3613890 (S.D.Fla. Aug. 21, 2012) (same). Because servicers cannot be held liable under TILA, and, by extension, regulations promulgated thereunder, Plaintiffs' claims against Green Tree are dismissed.

Green Tree also cannot be held liable as an assignee. As evidenced by Green Tree's response to Plaintiff's document request, Fannie Mae, not Green Tree, owns Lucien's mortgage. Compl. Ex. B.

B. Applicability of the payoff statement requirement in 12 C.F.R. § 226.36(c)(1)(iii)

Defendants argue that 12 C.F.R. § 226.36(c)(1)(iii) only applies to high cost mortgages. Only one court in this district has so held, and dismissed the claim where a plaintiff failed to plead that her loan fell within TILA's definition of a high-cost loan. Montano v. Wells Fargo N.A., No. 12–CV–80718, 2012 WL 5233653, at *6 (S.D.Fla. Oct. 23, 2012). No other court has followed Montano on this point, and this Court also declines to do so. See Runkle, 905 F.Supp.2d at 1330–31 ; Cenat v. U.S. Bank, N.A., 930 F.Supp.2d 1347 (S.D.Fla.2013) ; Danier v. Fed. Nat'l Mortg. Assoc., No. 12–cv–62354, 2013 WL 462385, at *4 (S.D.Fla. Feb. 7, 2013).

The Montano court states that the Federal Reserve Board promulgated the payoff statement requirement in Regulation Z pursuant to 15 U.S.C. § 1639(l )(2) (Renumbered to § 1639(p)(2) ), which provides,

(2) Prohibitions

The Bureau, by regulation or order, shall prohibit acts or practices in connection with—

(A) mortgage loans that the Bureau finds to be unfair, deceptive, or designed to evade the

...