Court: District Court, C.D. California; March 25, 2016; Federal District Court
Denise Estrada, a homeowner whose mortgage is serviced by Caliber Home Loans, Inc., initiated legal action against Caliber and Summit Management Company, LLC after receiving a notice of default on her home. Following a previous dismissal of her initial complaint, she filed a First Amended Complaint (FAC) alleging breach of contract, promissory estoppel, violations of the federal Real Estate Settlement Procedures Act (RESPA), California’s Homeowners’ Bill of Rights (HBOR), and California’s Unfair Competition Law (UCL). The court has partially granted and denied the defendants’ motion to dismiss, allowing the claims against Caliber to proceed while granting leave to amend for those against Summit.
Ms. Estrada purchased her home in Fullerton, California, in 1998, and in 2007, secured a mortgage from HSBC. Following her husband's death in 2012, she faced financial difficulties, leading to her disability and job loss. Her daughter provided financial support to help maintain their home. In 2013, a representative from HSBC stated that Ms. Estrada could only qualify for a loan modification if her account was current. In an effort to save her home, she provided HSBC with a substantial payment, which led to an oral approval for a temporary loan modification allowing lower monthly payments. After making these payments successfully, Ms. Estrada was notified in 2014 that her mortgage had been transferred to Caliber, which then demanded a higher payment amount that contradicted her existing modification agreement.
Despite continued payments based on the original modification, Caliber did not credit her account properly, resulting in a delinquency. A Caliber representative incorrectly advised her that to receive a lower payment, she needed to be delinquent. Subsequently, she ceased payments in hopes of securing a more favorable resolution. Caliber later sent her a Loss Mitigation Package, requesting various documents to evaluate her modification application, signaling ongoing attempts to resolve her mortgage issues.
On October 21, 2014, Caliber acknowledged receipt of documents from Ms. Estrada, indicating they would be evaluated. Three days later, Caliber requested four additional documents. By November 10, Ms. Estrada submitted all documents she believed were necessary for her loan modification decision. On November 12, she received two letters from Caliber—one detailing her loan balance and another discussing foreclosure alternatives without mentioning her pending loss mitigation application. On November 14, she received further correspondence indicating that some documents were still outstanding and additional information was requested, which she did not respond to directly. However, she had two phone conversations with Caliber representatives in December 2014 and January 2015, providing all required documents each time. On January 13, 2015, Summit, as trustee for Caliber, recorded a Notice of Default (NOD) on her property. In February 2015, after a third call to Caliber where she was informed that specific documents were still missing, Ms. Estrada sought legal representation.
Legal standards for a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) are outlined, emphasizing that the court evaluates the legal sufficiency of claims without determining whether the claimant will prevail. It requires acceptance of all material allegations as true and consideration in favor of the non-moving party. The standard permits dismissal only if the plaintiff has not alleged sufficient facts to suggest a plausible claim for relief.
Ms. Estrada claims breach of contract and promissory estoppel against Caliber, asserting that Caliber failed to honor an agreement made with HSBC, which involved a monthly payment of $2,532 through the end of 2014. She alleges that HSBC committed to reviewing her for a loan modification contingent on her making her account current and submitting a modification packet. After making a lump-sum payment of $43,439 to bring her account current and submitting the necessary materials, HSBC reviewed her application in good faith, adjusted her payments to $2,532, and allowed her to continue paying this amount through 2014.
Ms. Estrada claims that after HSBC transferred her loan to Caliber, Caliber breached the inherited contract by improperly applying her $43,439 payment and unilaterally increasing her monthly payments to $3,337. She argues that her submission of a loan modification application at HSBC's request constitutes adequate consideration for the contract, referencing case law that supports this notion. HSBC also provided adequate consideration by agreeing to review her application and allowing her to make reduced payments of $2,532. Estrada's contract claim is deemed sufficiently pled.
Her promissory estoppel claim, based on the same facts, does not require consideration but must demonstrate a clear promise, breach, reliance, and resulting injury. HSBC allegedly promised her that her loan would be reinstated upon her account becoming current, which they acted upon by accepting her payments. Estrada relied on this promise by making a significant payment and submitting the application, which she believed would lead to a favorable review. This reliance was found to be reasonable and foreseeable, especially given HSBC's representations.
Defendants argue that HSBC's agreement to accept the payments is unenforceable under the statute of frauds, which applies to agreements that prevent foreclosure on property. However, Estrada anticipates obtaining documentation during discovery that could satisfy this statute. The court finds it plausible that a sufficient writing exists that supports the modified payment arrangement based on her submitted loan modification package.
Ms. Estrada claims that a loan modification was granted based on her $43,439 payment and a completed application, supported by common banking practices that would require documentation to be in HSBC or Caliber’s possession. She argues that there was no obligation to attach a document meeting the statute of frauds to her complaint, referencing Nava v. JP Morgan Chase Bank, N.A. Defendants retain the right to seek summary judgment if she fails to provide the necessary documentation during discovery.
Under RESPA regulations, specifically 12 C.F.R. 1024.41, mortgage servicers are required to review loss mitigation applications according to specific rules. If a borrower provides all required documents, the application is considered facially complete. If additional documentation is needed, the servicer must request it without treating the application as incomplete until the borrower has a chance to comply. Ms. Estrada asserts that her application was complete or at least facially complete, noting that she received a letter from Caliber on October 24, 2014, stating that four documents were missing. She provided three of the requested documents by November 10, 2014, and contends that the fourth document, concerning rental agreements, was irrelevant as she had no tenants.
Once her application was deemed facially complete, Defendants were prohibited from filing a Notice of Default (NOD) until they either informed her of ineligibility for loss mitigation, she rejected all options, or she failed to comply with an agreement. Defendants argue that Ms. Estrada was given a reasonable timeframe to complete her application and failed to do so, noting a November 14, 2014 letter that required her to submit specific documents within 30 days. The letter was criticized for being unclear about the missing documentation.
Ms. Estrada did not respond to Caliber’s November 14 letter due to her prior submission of requested documents on November 10 and the unclear nature of Caliber's request. Defendants claim she failed to provide necessary documents before a Notice of Default (NOD) was recorded on January 13, 2015. However, Ms. Estrada contacted Caliber on December 5, 2014, and was informed that her application was incomplete due to missing paystubs and a letter from her daughter authorizing a credit check. Despite having submitted the paystubs earlier, Ms. Estrada complied with the request. On January 21, 2015, another call revealed that a hardship letter and the authorization letter were still missing, prompting her to resend these documents. Frustrated by ongoing requests for documents she believed she had already submitted, Ms. Estrada felt she was being misled.
The court found that Ms. Estrada’s allegations indicate she had attempted to fulfill all requests from Caliber, yet a NOD was recorded without completing required loss mitigation procedures as outlined in 12 C.F.R. 1024.41(f)(2). Therefore, Ms. Estrada has adequately alleged that Caliber violated the Real Estate Settlement Procedures Act (RESPA). Furthermore, according to the Homeowner Bill of Rights (HBOR), servicers must acknowledge receipt of a complete loan modification application within five days and inform borrowers of any deficiencies. Ms. Estrada claims Caliber violated this requirement by failing to accurately communicate the deficiencies in her application and by not providing receipts for submitted documents, which further supports her allegations of statutory violations.
Ms. Estrada alleges that Defendants violated California's Unfair Competition Law (UCL) under Business and Professions Code §17200 by engaging in unlawful practices such as breach of contract and violations of federal and state regulations. To establish standing under the UCL, a plaintiff must demonstrate an ‘injury in fact’ and loss of money or property due to the unfair competition. Although Estrada has not lost property as the foreclosure has not occurred, she claims financial loss from increased loan payments and improper crediting of a $43,439 payment.
The complaint faces criticism for not distinguishing between the two defendants, which fails to meet Rule 8(a) pleading requirements. Despite prior warnings from the Court, the allegations remain vague, prompting Defendants to seek dismissal of Summit from the case. Estrada's brief inadequately addresses the arguments for dismissal and continues to reference both defendants collectively. Consequently, the Court denies the motion to dismiss concerning Caliber but grants it regarding Summit, allowing Estrada to amend her complaint by April 15, 2016, to clarify her claims against Summit.
