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Burnham v. Wells Fargo Home Mortgage, Inc.

United States District Court, E.D. Michigan, Southern Division

February 13, 2018





         In this action, Plaintiffs Julia and Bruce Burnham have sued Defendant Wells Fargo Home Mortgage, Inc. (“Wells Fargo”), which owned and ultimately foreclosed on a mortgage on their home, and Defendant Federal Home Loan Mortgage Corporation (“Freddie Mac”), which purchased their home at the foreclosure sale. Plaintiffs assert claims of illegal foreclosure, breach of contract, and fraud. They also argue that their Complaint alleges a claim under the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2605.

         Before the Court is Defendants' Motion to Dismiss. For the reasons set forth below, each of Plaintiffs' asserted claims is both untimely and insufficient to state a claim for relief. Accordingly, the Court will grant Defendants' Motion to Dismiss.

         I. Background

         A. Factual Allegations

         Plaintiffs filed this action on October 5, 2017 in the 6th Circuit Court for the County of Oakland. (ECF No. 1, Notice of Removal Ex. A, Summons and Complaint at Pg ID 19-183 (“Compl.”).) The following is a summary of the factual allegations pled in the Complaint.

         This lawsuit concerns real property at 927 Hillsborough Drive in Rochester Hills, Michigan. (Id. ¶ 4.) Plaintiffs obtained fee simple ownership of the subject property in the summer of 1999. (Id. ¶ 8; Ex. 1, Warranty Deed.) Three and a half years later, Plaintiffs refinanced the property by borrowing $259, 000 from Defendant Wells Fargo. The loan was represented by a promissory note dated January 27, 2003 (Compl. ¶ 9), and secured by a mortgage on the subject property dated January 27, 2003 and recorded on March 5, 2004. (Id. ¶ 11; Ex. 2, Mortgage.)

         After Plaintiff Julia Burnham lost her job in July 2008, she contacted Wells Fargo to explain her concern that she and her husband would fall behind in their payments, and was directed to “write a letter to Wells Fargo explaining her situation so that she may qualify for a moratorium.” (Compl. ¶¶ 14-15.) She faxed a letter to Wells Fargo on July 26, 2008, and then a follow-up letter three days later. (Id. ¶ 16; Ex. 4, July 26, 2008 Fax; Ex. 5, July 29, 2008 Fax.) From July 29, 2008 until January 29, 2009, Ms. Burnham worked with Wells Fargo on an application for a loan modification. (Compl. ¶ 17.)

         The Complaint alleges, however, that during this time, and “[u]nbeknownst to Plaintiffs, Defendant [Wells Fargo] was beginning foreclosure proceeding[s] against them, evidenced by the publication of a foreclosure notice in the Oakland County Legal News on January 15, 2009.” (Id. ¶ 18; Ex. 6, Foreclosure Notice.) The foreclosure notice stated that there would be a sheriff's sale of the subject property on February 17, 2009. (Foreclosure Notice at 1, Pg ID 69.)

         Meanwhile, Wells Fargo informed Ms. Burnham that she might qualify for a “debt-to-income” program, and she faxed certain requested documents to Wells Fargo on January 29, 2009. Her fax included an explanation of the union grievance proceedings regarding her termination that were then underway, documents evidencing unemployment assistance, and a letter from Plaintiffs' niece representing that she would loan Plaintiffs between $1000 and $1200 per month to assist with their mortgage payments. (Compl. ¶ 20; Ex. 7, January 29, 2009 Fax.)

         Plaintiffs allege that they did not hear from Wells Fargo until Ms. Burnham contacted them again in June 2009, at which time an agent of Wells Fargo told her that to qualify for a loan modification, she would have to pay $8, 900. (Compl. ¶¶ 21-22.) On June 30, 2009, she sent two money orders to Wells Fargo totaling $8, 900. (Compl. Ex. 8, Western Union Receipts.) Plaintiffs allege that Ms. Burnham “was led to believe that the $8, 900 would bring her current on her loan.” (Compl. ¶ 24.)

         Between June 30, 2009 and July 30, 2009, Plaintiffs then allege, Ms. Burnham faxed various documents to Wells Fargo at its request, including tax returns and other financial information. (Id. ¶ 25; Ex. 9, Loan Modification Documents.)

         In July 2009, Wells Fargo presented Plaintiffs with a Home Affordable Modification Program Loan Trial Period plan (“Trial Period Plan” or “TPP”). (Compl. ¶ 26.) The TPP provided that if Plaintiffs made certain representations, and those representations “continue[d] to be true in all material respects, ” then Wells Fargo would “provide [Plaintiffs] with a Loan Modification Agreement . . . that would amend and supplement (1) the Mortgage on the Property, and (2) the Note secured by the Mortgage.” (Compl. Ex. 10, Trial Period Plan at 1, Pg ID 102.) In signing the TPP, Plaintiffs agreed to certain representations, including the following:

A. I am unable to afford my mortgage payments for the reasons indicated in my Hardship Affidavit and as a result, (i) I am either in default or believe I will be in default under the Loan Documents in the near future, and (ii) I do not have access to sufficient liquid assets to make the monthly mortgage payments now or in the near future;
B. I live in the Property as my principal residence, and the Property has not been condemned;
C. There has been no change in the ownership of the Property since I signed the Loan Documents;
D. I am providing or already have provided documentation for all income that I receive . . .;
E. Under penalty of perjury, all documents and information I have provided to Lender pursuant to this Plan, including the documents and information regarding my eligibility for the program, are true and correct; and
F. If Lender requires me to obtain credit counseling, I will do so.

(Id. at 1-2, Pg ID 102-03.)

         In the TPP, Plaintiffs agreed to pay Wells Fargo three “Trial Period Payments” of $1, 301.33 each. (Id. at 2, Pg ID 103.) The TPP provided that Wells Fargo would “suspend any scheduled foreclosure sale” as long as Plaintiffs continued to meet their obligations under the TPP, but that “any pending foreclosure action will not be dismissed and may be immediately resumed from the point at which it was suspended if this Plan terminates, and no new notice of default, notice of intent to accelerate, notice of acceleration, or similar notice will be necessary” to continue the foreclosure action, with “all rights to such notices being hereby waived to the extent permitted by applicable law.” (Id.) The TPP further provided that “the Loan Documents will not be modified and this Plan will terminate” if one of three events occurred: “(i) the Lender does not provide me a fully executed copy of this Plan and the Modification Agreement; (ii) I have not made the Trial Period payments required under . . . this Plan; or (iii) the Lender determines that my representations . . . are no longer true and correct.” (Id.) Finally, the TPP provided that after Wells Fargo was able to determine the “final amounts of unpaid interest and any other delinquent amounts (except late charges)” to be added to the loan balance (and after Wells Fargo deducted amounts paid under the TPP from that balance), Wells Fargo would “determine a new payment amount” and would thereafter “send [Plaintiffs] a Modification Agreement for [their] signature which will modify [their] Loan Documents as necessary to reflect this new payment amount and waive any unpaid late charges accrued to date.” (Id. at 3, Pg ID 104.) Plaintiffs signed the TPP on July 28, 2009, and faxed it to Wells Fargo two days later. (Id. at Pg ID 104-05.)

         Plaintiffs made the three payments required of them under the TPP. (Compl. ¶ 28; Ex. 11, TPP Payments.) In a September 30, 2009 letter, Wells Fargo acknowledged this, but stated that Plaintiffs still had yet to submit certain required documents: a “[c]opy of the two most recent pay stubs, ” a “Hardship Affidavit for Co-Borrower, ” and a “[c]opy of the most recent bank statement.” (Compl. ¶ 29; Ex. 12, September 30, 2009 Letter at Pg ID 126.) Wells Fargo stated in the letter that the trial period would be extended by two months to permit Plaintiffs to submit these documents, during which time two more trial period payments of $1, 301.33 would be required. (Compl. ¶ 30; September 30, 2009 Letter at Pg ID 126.) Plaintiffs allege that they made both payments. (Compl. ¶ 31; Ex. 13, December 2009 Payment.)

         Plaintiffs received another letter from Wells Fargo on or around December 22, 2009. (Compl. ¶ 32; Ex. 14, December 22, 2009 Letter.) In it, Wells Fargo reminded Plaintiffs that they were “still in the Trial Period Plan of this program, which requires you to make three timely trial period payments and provide specific documentation to complete your qualification for this program.” (December 22, 2009 Letter at 2, Pg ID 134.) Specifically, Wells Fargo requested copies of the most recent federal tax return as well as a profit or loss statement of each self-employed borrower, and the most recent federal tax return as well as benefits documentation for “each borrower who has income such as social security, disability or death benefits, pension, public assistance, or unemployment.” (Id.) The letter contained the following statement in capitalized letters: “We are in the process of trying to move your modification to the next stage and find that we are either missing information or need clarification.” (Id.) Wells Fargo requested that Plaintiffs fax the documents no later than December 27, 2009, and also that they call Wells Fargo within 24 hours of sending the fax to confirm receipt. (Id.)

         Plaintiffs allege that they continued to make payments under the TPP, and an exhibit attached to the Complaint reflects that they made payments of $1, 301.33 in February, March, and April of 2010. (Compl. ¶ 33; Ex. 15, 2010 Payments.)

         According to the Complaint, on or about May 2, 2010, Plaintiffs became aware of a pending sheriff's sale of the subject property that was scheduled for May 4, 2010. (Compl. ¶ 34.) “Unsure of why there would be a sale on their home when they were brought current by the $8, 900 payment in June of 2009, and had been making payments to Wells Fargo since July of 2009, ” Plaintiffs allege that they contacted Wells Fargo “and were told that Wells Fargo hadn't received some of Plaintiffs' information.” (Id. ¶ 35.) Plaintiffs allege that Wells Fargo never told them that more information was needed. (Id. ¶ 36.) Plaintiffs further allege that they immediately sent the requested information to Wells Fargo, and that they “faxed Wells Fargo additional information on May 4, 2010.” (Id. ¶¶ 37-38; Ex. 16, May 2, 2010 Fax; Ex. 17, May 4, 2010 Fax.)

         Plaintiffs allege on information and belief that a foreclosure sale was held on May 4, 2010, at which Defendant Freddie Mac “bid the total amounts due on the loan, making the amount required to redeem the property from the sale $250, 867.36.” A Sheriff's Deed was issued to Freddie Mac on May 4, 2010, and recorded on May 18, 2010. (Compl. ¶¶ 12, 39; Ex. 3, Sheriff's Deed.)

         On May 13, 2010, Plaintiffs faxed Wells Fargo a request to rescind the foreclosure sale because Plaintiffs were in a TPP and had been making payments since the previous July. (Compl. ¶ 40; Ex. 18, May 13 Fax.) In a letter dated May 24, 2010, Wells Fargo denied the request, providing the following explanation:

On April 19, 2010 your loan was removed from the Home Affordable Modification Program (HAMP) because the documents we had requested from you had not been received. We had last spoken with you on March 12, 2010. At that time you said you would be sending the requested documents. Documents were finally received on May 03, 2010 but receiving documents 1 day prior to the foreclosure sale does not permit Loss Mitigation with enough time [sic] to review the documents and make a decision.
As of today's date, the loan is 15 payments past due and is due for the March 01, 2009 payment. The terms of the Note and Mortgage/Deed of Trust outline the conditions under which we can accelerate the collection of the debt. As these conditions were met, our foreclosure action is valid.

(Compl. Ex. 19, May 24, 2010 Letter; Compl. ¶¶ 41-42.)

         Plaintiffs allege that “[b]etween June 30, 2009, and May of 2010, Plaintiffs paid Wells Fargo no less than $20, 611.97 - $8, 900 plus nine payments of $1, 301.33.” (Compl. ¶ 43 (citing Exs. 8, 11, 13, 15).) Plaintiffs further allege that “[i]t is not possible that Plaintiffs were 15 payments behind on their mortgage.” (Id. ¶ 44.)

         On December 21, 2010, Freddie Mac filed an eviction action in Michigan's 52nd District Court. (Compl. ¶ 45; Ex. 20, District Court Summons and Complaint.) An eviction order was issued on May 10, 2011, and posted on May 12. (Compl. Ex. 21, Register of Actions at 2, Pg ID 182.) The eviction order was issued pursuant to a consent judgment of possession that had been signed by Plaintiffs and entered on February 17, 2011. (Id.; ECF No. 2, Defs.' Mot. Ex. 3, District Court Judgment.)

         Plaintiffs allege that they “always provided [Wells Fargo] with all information and documents requested of them in a prompt and timely manner, ” while Wells Fargo “routinely lost documents, misrepresented payment figures and account information, and illegally charged Plaintiffs with excessive fees and interest.” (Compl. ¶¶ 47-48.) Plaintiffs allege that through the entire loan modification review process, Wells Fargo represented that their application was complete and they should “be patient and . . . wait for a decision, ” but that no such decision was ever relayed to Plaintiffs. (Id. ¶¶ 49-50.) Plaintiffs allege that they relied to their detriment on Wells Fargo's assurances that Plaintiffs would receive a permanent loan modification in exchange for making payments and taking other actions, and Wells Fargo never delivered on those assurances. (Id. ¶¶ 51-53.) Plaintiffs further allege that they were qualified at all times for “outside” and “in-house” loan modifications, and that they “at all times were, and still are, able to afford a reasonable monthly mortgage payment were [Wells Fargo] to work with them in good faith to modify the loan.” (Id. ¶¶ 54-56.) Lastly, Plaintiffs allege that Wells Fargo never advised Plaintiffs that they had been denied for any loan modification options, thereby depriving them of the right to appeal any such adverse decision. (Id. ¶ 57.)

         Plaintiffs seek various forms of compensatory damages, damages for emotional distress, and redress for the “personal and economic harm” caused to them by the negative credit reporting that they allege Wells Fargo engaged in. (Id. ¶¶ 58-60.) Plaintiffs also seek an accounting of all sums paid. (Id. ¶ 61.)

         B. Procedural History

         Plaintiffs first filed suit against Wells Fargo in the 6th Circuit Court for Oakland County on April 21, 2017. (ECF No. 7, Pls.' Resp. Ex. 22, April 2017 Complaint.) That ...

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