1024.41(b)(2)(i)(B), which requires that an acknowledgment letter be sent within five days of receipt of a loss mitigation application; 12 C.F.R. Id. To satisfy the numerosity requirement, the proposed class must be so numerous that "joinder of all members is impracticable." Specifically, the loan servicer failed to honor borrowers' loan modification agreements. In Frank v. J.P. Morgan Chase Bank, N.A., No. Where Accrued Financial addresses a different scenario with a different remedy, the Court does not find that it requires that the testimony of an expert witness paid on contingency fee basis must be excluded. The commonality requirement is also met. 19-303.4 cmt.3. 1024.41(c)(1)(i) and (d), because the Robinsons made no showing that the Rule 23 requirements were met. Joint Record ("MCC JR") 0907. 1984), and has upheld the certification of a class with as few as 18 members, Cypress v. Newport News Gen. & Nonsectarian Hosp. Nationstar filed a notice of settlement and a joint motion to proceed before a magistrate . 12 U.S.C. Nationstar, the fourth-largest mortgage servicer in the U.S., is set to pay $91 million to settle claims brought by the Consumer Financial Protection Bureau and state attorneys general alleging that the company failed to honor mortgage forbearance agreements and unfairly foreclosed on homeowners. Id. Nationstar to Pay $110 Million to Settle Borrower Claims On February 16, 2017, the Court referred the case to United States Magistrate Judge Charles B. Discovery Order, ECF No. Since Regulation X explicitly does not require a loan servicer to provide a loan modification, the Robinsons' claim that they suffered damages because they did not receive a loan modification is not cognizable under the statute. Reg. 702. Johnson, 374 F. App'x at 873; Keen v. Ocwen Loan Servicing, LLC, No. 1967). An "unfair or deceptive" trade practice includes a "false . Law 13-316(c), the Court will grant class certification as to those class members and claims. Corp. ("McLean I"), 595 F. Supp. . For example, since default fees are often paid by sources other than the borrower, such as in a short sale or refinancing, Nationstar challenges Oliver's assessment that fees identified through LSAMS can be deemed to constitute damages from RESPA violations, because the software does not reflect who paid the fee. In Accrued Financial, the United States Court of Appeals for the Fourth Circuit held that where commercial real estate tenants assigned their potential claims against their landlords to a commercial real estate auditor under an arrangement through which the auditor would receive a percentage of any recovery in litigation, the assignments violated public policy because where the auditor's employees could testify in such litigation, the assignments "provide for supplying expert testimony for a contingent fee." Thus, the Court concludes that common computerized analysis can largely answer the question of whether Nationstar violated these RESPA provisions with respect to individual borrowers. Moreover, because borrowers often submit multiple loan modification applications, and because Nationstar's data is stored at the loan level, not at the application level, Nationstar claims that it is not possible to tell from the data alone, without reviewing the files, whether a status or code change is in response to a specific loan modification application. P. 23(b)(3). Instead, the Robinsons assert that Nationstar has not affirmatively proven that it conducted such reviews. Because such a common question would have to be resolved in many if not all individual cases, it advances, rather than undermines, the argument in favor of predominance. . While the Nationstar employee who conducts the initial processing of an application may refer it to an underwriter based on its facial completeness, the underwriter makes the final determination of whether the application is complete and is responsible for obtaining any additional required documentation. The "Maryland Subclass" consists of "[a]ll persons in the State of Maryland that submitted a loss mitigation application to Nationstar after January 10, 2014, and through the date of the Court's certification order." Nationstar said in a statement that its settlements were based on "loan-servicing practices" that the company used between 2010 and 2015 and has since discontinued. See 12 C.F.R. In 2017, the CFPB fined Nationstar $1.75 million for failing to report accurate data about its mortgage transactions. . The Class is represented by Rafey S. Balabanian of Edelson PC. Gariety v. Grant Thornton, LLP, 368 F.3d 356, 366 (4th Cir. Regulation X's effective date reflected "an intent not to apply it to conduct occurring prior to that date." Nationstar to pay $91 million to settle claims of it harmed - CNBC See Lierboe v. State Farm Mut. Delaware Attorney General Kathleen Jennings said the settlements, Several states also fined Nationstar in 2018, Kwame Raoul, attorney general of Illinois, latest research from the Mortgage Bankers Association. Here, even though the Robinsons' March 7, 2014 loss mitigation application was not the Robinsons' first such application, it was their first submitted after the effective date of Regulation X. or other representation . But, Nationstar is correct that Owens-Benniefield may Ballard v. Blue Shield of S.W. Distribution of funds to Class Members, however, could not occur because a member of the Class filed an objection to the Settlement and a subsequent appeal to the U.S. Court of Appeals for the Fourth Circuit. That notice must be provided within 30 days of receiving the complete loss mitigation application. For the Regulation X provisions that require the servicer to communicate specific information to a borrower, Oliver's methodology involves reviewing a sample of loan files and identifying a specific communication to a borrower based on the file name. Id. Throughout discovery, Nationstar repeatedly stated that it could not produce the data on loss mitigation or loan modification applications from its databases in the form requested by the Robinsons. 2019) (noting that the purpose of certifying a class "is not to identify every class member at the time of certification, but to define a class in such a way as to ensure that there will be some administratively feasible [way] for the court to determine whether a particular individual is a member at some point" (internal citation omitted) (quoting EQT Production Co. v. Adair, 764 F.3d 347, 358 (4th Cir. Furthermore, the Robinsons have made a sufficient showing that a central computerized analysis of Nationstar data would substantially, if not completely, resolve questions of whether RESPA violations occurred. In focusing on whether RESPA violations can be established through computerized analysis rather than individual file review, the parties lose track of the fact that because statutory damages are predicated on a finding that there has been a pattern or practice of RESPA violations, that issue common to almost any individual claim plays an outsized role in the predominance analysis. Local R. 105.6. 2605(f), caused by the violation, which likely consist of administrative fees and costs, the individual recovery available for each class member would likely be low, far below the cost of litigating the claims themselves. Likewise, although Mrs. Robinson expended time corresponding with Nationstar, she was not working for pay at the same time, and the Robinsons have not provided evidence to quantify the loss to Mr. Robinson, the only viable plaintiff here. R. Civ. . 12 C.F.R. Wesleyan Coll. The plaintiff's claim "cannot be so different from the claims of absent class members that their claims will not be advanced by" proof of the plaintiff's own individual claim. The servicer "is liable for any economic damages caused by the violation." Nationstar claims that manual review of each file would take about 60 to 90 minutes per file. After this missed payment, Nationstar assessed a late fee. Subsequent to the Court's approval, one of the objectors to the settlement filed an appeal. This is not the first time Nationstar has been the subject of federal and state investigations. A separate Order shall issue. Because Oliver analyzed proprietary databases and data specifically disclosed for this litigation pursuant to a protective order, such that Oliver's peers lack access to the same information, Oliver's expert testimony is not of the type that ordinarily would be subject to peer review, and it would be unfair to require "general acceptance within a relevant scientific community." Mot. Under subsections (f) and (g), a loan servicer is not permitted to begin foreclosure proceedings or move for foreclosure judgment if "a borrower submits a complete loss mitigation application" except in certain circumstances. P. 23(a)(4); Ward v. Dixie Nat'l Life Ins. In contrast, the Court finds that there is a genuine issue of material fact whether the administrative costs and fees incurred by the Robinsons resulted from Nationstar's RESPA violations. Nationstar denies all allegations of wrongdoing and no judgment or determination of wrongdoing has been made. 2007)), aff'd sub nom. 1024.41(b)(2)(B). 3d 712, 728 (S.D. Id. Law 13-316(c). For example, it was undisputed that on May 30, 2014, Mr. Robinson, in response to Nationstar's requests for additional information, resubmitted the same information sent with his March 2014 loan modification application. Likewise, he concluded that for approximately 53 percent of sampled loans, Nationstar failed to comply with the requirement of acknowledging receipt of the application within five days. Ass'n, No. 2605(f)(1). When considering whether expert testimony is reliable or should be excluded, the court considers the following factors: "When an expert's report or testimony is 'critical to class certification,'" the district court "must make a conclusive ruling on any challenge to that expert's qualifications or submissions before it may rule on a motion for class certification." Under a provision of Regulation X entitled "Loss mitigation procedures," mortgage servicers must take certain steps when a borrower applies for loss mitigation measures, such as the loan modifications sought in this case. 2d 873, 883 (D. Md. Where the PaCE consulting fee was a one-time fee to advise the Robinsons in their interactions with Nationstar paid in August 2013, several months before they first submitted the March 2014 loan modification application, this cost was incurred "whether or not [Nationstar] complied with its obligations." 1024.41(c) and (d) impose obligations on a loan servicer once it receives a "complete loss mitigation application" and once the completed application is denied. A dispute of material fact is only "genuine" if sufficient evidence favoring the nonmoving party exists for the trier of fact to return a verdict for that party. Nationstar employees use four software applications and databases to store and track electronic information relating to loans: (1) Loan Services and Accounting Management System ("LSAMS"), Nationstar's primary loan servicing software, which contains data for loans, including the permanent records of the accounting history, communication logs, and letters documented with codes that were sent to the borrower; (2) Remedy Star, Nationstar's proprietary loss mitigation and loan modification management system, which, among other tasks, tracks the status and timeline of a loan modification and links to documents stored in FileNet; (3) LPS Desktop ("LPS"), an application which Nationstar uses to track and manage foreclosure processes and communicate with outside attorneys; and (4) FileNet, a platform that houses PDF images of documents, including letters sent to borrowers by Nationstar. Moreover, even if the fee arrangement violated the ethical rules for attorneys, "it does not follow that evidence obtained in violation of the rule is inadmissible." Gunnells v. Healthplan Serv., Inc., 348 F.3d 417, 458 (4th Cir. The Court will therefore deny the Motion for Summary Judgment as to this argument. Thus, a loan servicer could not have complied with Regulation X for a loss mitigation application submitted before January 10, 2014 because there was no regulation in effect with which to comply. Class Action Claims Nationstar Mortgage Unlawfully Failed to Pay 2001) (striking expert testimony because of a contingent fee arrangement), aff'd, 43 F. App'x 547 (4th Cir. While Mrs. Robinson stated that she was conducting bookkeeping for Green Earth Services during the relevant time frame, she testified that her work was less than six hours per week, and the Robinsons have not shown that her time spent communicating with Nationstar "resulted in actual pecuniary loss" to Mr. Robinson or the business. Thus, the Court concludes that, while Nationstar may have defenses as to some borrowers, the common proof that establishes the asserted violations, as well as the common question of whether the Robinsons can prove a pattern-or-practice violation by Nationstar, will predominate over the individual issues as to these claims. Fed. Law 13-301 and 13-303, and that Mr. Robinson therefore may not assert such claims on behalf of the class, Mr. Robinson's remaining claims and defenses are typical of the class members. Finally, the named plaintiff must "fairly and adequately protect the interests of class" without a conflict of interest with the absent class members. A complete loss mitigation application is "an application in connection with which a servicer has received all the information that the servicer requires from a borrower in evaluating applications for the loss mitigation options available to the borrower." cause[d] damages retroactively" and "transmogrifie[d]" the costs that predate the RESPA violation into damages. The Robinsons do not address this argument in their Opposition. After an additional period of expert discovery relating to the class certification motion, discovery closed on December 30, 2018. Nationstar's Motion will be denied as to this claim. Particularly where a class may be certified even if individualized damages calculations would be necessary, the incomplete nature of the damages analysis does not provide a basis for striking Oliver's expert testimony. For the following reasons, the Motion for Summary Judgment will be GRANTED IN PART and DENIED IN PART; the Motion to Strike will be DENIED; and the Motion for Class Certification will be GRANTED IN PART and DENIED IN PART. Class Certif. While it is not necessary to identify every class member at the time of certification for a class to be "ascertainable," a class cannot be certified if its membership must be determined through "individualized fact-finding or mini-trials." Code Ann., Com. Nationstar broke that trust by engaging in unfair and deceptive practices," Kraninger added. At different stages in the processing of a loan modification application, Nationstar employees enter certain codes into certain databases, and certain information can be stored and accessed through those applications. Indeed, since previous versions of the Maryland rule expressly stated that contingency fee arrangements for experts were forbidden, but that explicit language was removed, it is reasonable to conclude that the amendment changed the rule in Maryland to no longer bar contingency fee arrangements. At least one court has found a similar expert report by Oliver to meet the Daubert standard. McLean v. GMAC Mortg. application to Nationstar after January 10, 2014, and through the date of the Court's . 1024.41(d). Date: September 9, 2019, Civil Action No. PDF PUBLISHED - United States Court of Appeals for the Fourth Circuit Those claims arose from Nationstar's alleged Fed. Whether an application is complete depends on the requirements of the investor who holds the loan. On July 17, 2014, Nationstar informed Mr. Robinson by letter that he did not qualify for a HAMP modification and that since the March 14 loan modification offer had not been accepted, it was withdrawn. 12 C.F.R. . CFPB Takes Action Against Nationstar Mortgage for Flawed Mortgage Loan Where a contingency fee arrangement for expert witnesses is not expressly prohibited by the Maryland Rules of Professional Conduct, the Court declines to find that the fee arrangement here constituted an ethical violation. A letter noting receipt of the application is automatically generated and sent to the borrower, and a Nationstar employee checks the application's documentation to determine if it is complete based on a checklist. Mr. Robinson's counsel is experienced in complex civil litigation and class action litigation. "We will be watching the mortgage interest industry to ensure they are treating homeowners fairly and fulfilling their obligations.". For example, Nationstar's own internal procedures reveal that when a loss mitigation application is received, a processor reviews it to determine if all required information and documents have been received, and enters one code, specifically "code HMPC" in LSAMS signifying "Financial Application Complete," and a different code, specifically "code HMPA," signifying "Financial Application Incomplete." 1988) (distinguishing between a rule of professional conduct and admissibility of evidence); cf. uniformity of decision as to persons similarly situated, without sacrificing procedural fairness or bringing about other undesirable results." Maryland's Commissioner of Financial Regulation Announces Settlement 2d 452, 467 (D. Md. 10696, 10836. While class members would not be eligible for statutory damages unless actual damages are shown, see 12 U.S.C. 2013)). See MCC JR0529-31. Where the Robinsons, after discovery, cannot point to evidence that Nationstar did not even consider or evaluate the Robinsons for loss mitigation options, they have not established the existence of a genuine issue of material fact on the issue of false or misleading statements. In this photo illustration, the Nationstar Mortgage Holdings Inc. logo seen displayed on a smartphone. While Mr. Robinson signed the promissory note ("the Note"), the deed of trust ("the Deed"), and the balloon payment rider for the 2007 loan, Tamara Robinson ("Mrs. Robinson") signed only the Deed and balloon payment rider and did not sign the Note. In approving such a modification, Nationstar made a mistake: the underwriter working on the Robinsons' loan had erroneously double-counted their income. Order at 2, ECF No. Here, Mrs. Robinson signed the Deed but did not sign the Note. Nationstar's failings resulted in "substantial consumer harm," CFPB Director Kathleen Kraninger said in a statement. Because such information is stored electronically and based on objective criteria, the members of the class will be ascertainable without significant administrative burden. He was retained by the Robinsons under an arrangement through which he is to be paid a flat fee of $125,000: $62,500 up front, with an additional $62,500 to be paid if a class is certified in this case. If the application is complete "more than 37 days before a foreclosure sale," the servicer may not move for a foreclosure judgment or conduct a foreclosure sale, but instead must first "[e]valuate the borrower for all loss mitigation options available to the borrower," send to the borrower "a notice in writing stating the servicer's determination of which loss mitigation options, if any, it will offer," and include a statement of applicable appeal rights. Id. Where the deed of trust explicitly states that Mrs. Robinson is not obligated on the loan, the Court finds that she is not a borrower under RESPA and cannot bring the claim against Nationstar under Regulation X. Several states also fined Nationstar in 2018 over failing to have proper procedures in place and "unfair and deceptive" mortgage modification policies. . Reg. News Ask a Lawyer See Krakauer v. Dish Network, L.L.C., 925 F.3d 643, 658 (4th Cir. To establish an MCPA violation under this provision, a plaintiff must establish that (1) the defendant engaged in an unfair or deceptive practice or misrepresentation; (2) the plaintiff relied upon the representation; and (3) doing so caused the plaintiff actual injury. Finally, Nationstar argues that summary judgment should be entered on the RESPA claims because the Robinsons cannot establish that they have suffered actual damages as a result of Nationstar's violations of Regulation X. Summ. Finally, a loan servicer "is only required to comply with the requirements" of section 1024.41 "for a single complete loss mitigation application for a borrower's mortgage loan account." As for typicality, the named plaintiff must be "typical" of the class, such that that the class representative's claim and defenses are "typical of the claims or defenses of the class" in that prosecution of the claim will "simultaneously tend to advance the interests of the absent class members." THEODORE D. CHUANG United States District Judge. . Make your practice more effective and efficient with Casetexts legal research suite. The company has already paid about $57.5 million in restitution to affected consumers, according to the CFPB. That claim will be subject to common proof, namely sampling and analysis of loan files along the lines suggested by Oliver. Gunnells, 348 F.3d at 429 ("[T]he need for individualized proof of damages alone will not defeat class certification."). The distinction is crucial. Cal. Bouchat v. Balt. Co v. Adair, 764 F.3d 347, 359-60 (4th Cir. P. 23(a)(1). On February 10, 2022, the Court of Appeals issued a decision affirming the Final Approval Order. A settlement has been reached in a class action lawsuit alleging Nationstar Mortgage LLC ("Nationstar" or "Defendant") violated the Real Estate Settlement Procedures Act ("RESPA") by failing to adhere to its requirements with respect to its customers' loss mitigation applications and that Nationstar violated Maryland law by not timely responding See Keen, 2018 WL 4111938, at *5-6. . Id. Id. 1024.41(a). Based on the language of Regulation X, the Court finds that a loss mitigation application submitted before the effective date does not count as the single application subject to the regulation. Summary judgment will therefore be entered for Nationstar on the claims that Nationstar violated subsections (f) and (g). ("Opp'n') 13, ECF No. 2016) ("[F]ortuitous non-injury to a subset of class members does not necessarily defeat certification of the entire class, particularly as the district court is well situated to winnow out those non-injured members at the damages phase of the litigation, or to refine the class definition. PDF United States District Court Middle District of Florida Tampa Division R. Civ. 2010) (holding that a plaintiff who "was not a borrower or otherwise obligated on the . Notably, although a borrower may recover up to $2,000 in statutory damages upon a showing of a "pattern or practice of non-compliance with the requirements" of Regulation X, 12 U.S.C. The Motions are fully briefed, and no hearing is necessary to resolve the issues. at *2. The Robinsons also claim as damages interest overcharges of approximately $141,000. Once an underwriter is assigned, that employee double-checks whether the application contains all required documentation and is complete. However, if the costs are shown to have been incurred in response to the RESPA violation, the Court finds that they would be actual damages within the meaning of 12 U.S.C. Check out:Covid-19 pandemic is the first time 40% of Americans have experienced food insecurity, Don't miss:Amex Blue Cash Preferred is offering an elevated welcome bonus for a limited time, Get Make It newsletters delivered to your inbox, Learn more about the world of CNBC Make It, 2023 CNBC LLC. 218. Code Ann., Com. Id. Id. Id. If the named plaintiff satisfies each of these requirements under Rule 23(a), the Court must still find that the proposed class action fits into one of the categories of class action under Rule 23(b) in order to certify the class. Finally, the Court notes that a decision to certify a class is based on whether or not a putative class satisfies the Rule 23 factors, not on a preliminary assessment of the underlying merits of the claim. Portland, OR 97208-3560. Marchese v. JPMorgan Chase Bank, N.A., 917 F. Supp. Code Ann., Com. They have claimed $141,000 in interest; $6,147.12 in fees assessed by Nationstar; $2,275 in consulting fees; $50.58 in administrative costs; and lost time and labor of approximately 120 hours; as well as punitive and statutory damages. A "borrower" may enforce the provisions of Regulation X pursuant to 12 U.S.C. At the time, Nationstar had not completed the process of updating its systems to conform to those requirements. The Motion will be otherwise denied. These events will be represented by discrete data points in Nationstar's databases, such that these violations may be proved through that data. Thorn v. Jefferson-Pilot Life Ins. While several district courts have concluded that loss mitigation applications submitted before Regulation X's effective date do not count as the single application for which a loan servicer must comply with Regulation X, see, e.g., Farber v. Brock & Scott, LLC, No. Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 348-49 (2011) ("[A] class representative must be part of the class and possess the same interest and suffer the same injury as the class members." 1024.41(a). The fact that Oliver's methodology has not been subjected to peer review and that he has not published any articles about it does not invalidate it. Rules 19-303.4(b) (2018). Nationstar also asserts that the Robinsons have not identified evidence sufficient to support their MCPA claims. A code is entered in Remedy Star when the letter is sent. . Law 13-316(c), which requires a response to a mortgage servicing complaint or inquiry within 15 days. at 983. Many impacted consumers have already received refunds and more will be contacted by the settlement administrator in the coming weeks. Gunnells, 348 F.3d at 427-28. 1990) (citing Universal Athletic favorably for this proposition). (quoting East Tex. Because of the manner in which class discovery was conducted, see supra part II.A, Oliver did not have access to all of Nationstar's data fields for the representative sample of loans. Law 13 . MCC JR 318, 530-531. 26-1. That provision provides, in parallel, that a loan servicer which does not comply with Regulation X is liable "to the borrower." Anderson, 477 U.S. at 248. loan" did not have standing to bring a RESPA claim); Nelson v. Nationstar Mortg. PDF In the United States Court of Appeals for the Fourth Circuit The Robinsons' designated expert, Geoffrey Oliver, has offered a methodology for identifying class members and when their rights under RESPA and the MCPA have been violated. 2005))). Law 13-301 and 303. As a result, on January 29, 2018, the Magistrate Judge granted the Robinsons' Motion to Compel in which the Robinsons had sought to have the Court order Nationstar to accept and run scripts created by the Robinsons' expert to extract the relevant data from Nationstar's databases on the sample of loans from which they could test their methodology for identifying members of the proposed classes. To calculate damages, Oliver stated that he would look to data from the LSAMS application, including data tables that contain fee information, to identify fees that would not have been charged but for Nationstar's various RESPA violations, but that he was not able to evaluate this data in his report because it had not been provided to him. Id. A class action may be maintained under Rule 23(b)(3) if common questions of law or fact "predominate over any questions affecting only individual members" and a "class action is superior to other available methods for fairly and efficiently adjudicating the controversy." 2014). PDF Motion for Fees - Robinson v Nationstar - Home The Federal Rules of Evidence do not prohibit these kinds of arrangements. . Nationstar's reliance on Accrued Financial Services v. Prime Retail, Inc., 298 F.3d 291 (4th Cir. 2605(f)(1)(B), a borrower cannot recover these additional damages "without first recovering actual damages." "Mortgage servicers are entrusted with handling significant financial transactions for millions of Americans, including struggling homeowners. This abandoned high school was converted into a 31-unit apartment building, number of unlawful practices in handling mortgages following the Great Recession. A code is also added to LSAMS to put a hold on foreclosure proceedings. Where such statements in no way promise approval, the Robinsons appear to claim that such statements are false or misleading because Nationstar never intended to, and did not, evaluate the Robinsons for the various loss mitigation options. The Robinsons, however, have not identified any evidence that Nationstar did not intend to, and did not, conduct such evaluations. A Scheduling Order was first entered on November 24, 2015, and the period for discovery was extended four times between November 2015 and January 2017.