Shea v. Ditech Financial LLC

Citations: 208 F. Supp. 3d 380; 2016 U.S. Dist. LEXIS 129783; 2016 WL 5334654Docket: Civil Action No. 16-11488-NMG

Court: District Court, D. Massachusetts; September 22, 2016; Federal District Court

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Plaintiff Karen M. Shea initiated legal action against Ditech Financial LLC and Wilmington Savings Fund Society, FSB, seeking a preliminary injunction to prevent a scheduled foreclosure sale of her residence. The background reveals that in 1996, Shea and her then-husband acquired the property, later refinancing their mortgage in 2006 with a $400,000 loan. This mortgage was transferred through multiple assignees, ultimately reaching Ditech. Shea faced payment difficulties in 2009 and entered a Forbearance Agreement with BAC, which required reduced payments. Although Shea claims to have adhered to the agreement, BAC later issued a notice of impending foreclosure due to an alleged default. Following further complications with payments and a divorce-related deed transfer, Ditech filed a notice of foreclosure in July 2016. Subsequently, Shea filed for an injunction to halt the sale, which the court has held in abeyance while encouraging dispute resolution. As the parties did not reach an agreement, the court is now set to decide on the merits of the motion for a preliminary injunction, which seeks to restrain Wilmington from proceeding with the foreclosure.

To obtain a preliminary injunction, the moving party must demonstrate: 1) a reasonable likelihood of success on the merits, 2) potential for irreparable harm if the injunction is denied, 3) a favorable balance of hardships, and 4) the effect on public interest. Among these factors, the likelihood of success typically carries the most weight. Courts may accept well-pleaded allegations and uncontroverted affidavits as true and can consider otherwise inadmissible evidence, including hearsay. Issuing a preliminary injunction is considered an extraordinary remedy, not granted as a matter of right.

In this case, the plaintiff's complaint consists of five counts, but only Counts I and II will be analyzed for the injunction because Counts III, IV, and V do not support an injunction against Wilmington regarding foreclosure. Count I alleges that BAC breached the Forbearance Agreement by initiating foreclosure while the plaintiff continued timely payments. The relevant clause of the Forbearance Agreement states that foreclosure will be suspended as long as the plaintiff meets her obligations. The plaintiff argues that Wilmington, as BAC's assignee, is liable for this breach. However, Wilmington contends it is not bound by the Forbearance Agreement since it was not a party to it and the agreement lacks language indicating it binds successors or assigns. Additionally, Wilmington asserts it did not assume the Forbearance Agreement, and the agreement was not recorded, so Wilmington had no notice of it.

Wilmington became liable to the plaintiff for breaching the Forbearance Agreement upon its assignment of the mortgage, as indicated in the assignment document that does not limit successor liability. Shea claims that the Forbearance Agreement modified the original mortgage, making Wilmington liable for BAC’s obligations. However, Section D of the Forbearance Agreement clarifies it does not modify the Loan Documents, which include the mortgage and note, contradicting Shea's argument. While BAC may be liable for breaching the Forbearance Agreement, Wilmington did not assume that liability. 

Count II alleges BAC violated M.G.L. ch. 244. 35A by only providing a 30-day notice to cure default instead of the required 90 days. Wilmington argues that BAC did not proceed with foreclosure, allowing Shea ample time to cure her default. Additionally, Wilmington asserts that Ditech followed all statutory notice requirements for the scheduled foreclosure sale, undermining Shea's claim of success on the merits. 

Although Shea may face irreparable harm and the balance of hardships may favor her, the likelihood of success on the merits is crucial for injunctive relief. Past case law indicates that without a reasonable possibility of success, interim relief will not be granted. Consequently, the court denies Shea's motion for a preliminary injunction.