United States District Court, E.D. Michigan, Southern Division
ORDER DENYING PLAINTIFFS' MOTION FOR LEAVE TO
FILE THEIR SECOND AMENDED COMPLAINT [#59] AND GRANTING
DEFENDANT'S MOTION FOR SANCTIONS [#58]
Gershwin A. Drain United States District Court Judge
the Court is Plaintiffs' Motion for Leave to File Their
Second Amended Complaint. Dkt. No. 59. Plaintiffs request
this Court grant them leave to add two new claims to their
complaint. The first proposed claim alleges negligence
against Defendant Nationstar Mortgage LLC
(“Nationstar”) in regard to its investigation
into the complaint that Mr. Christy submitted against it. The
second proposed claim alleges that Defendant breached its
contract with Freddie Mac, causing Plaintiffs to suffer
damages. Also before the Court is Defendant's Motion for
Sanctions. Defendant requests that this Court impose Rule 11
sanctions and sanctions under 28 U.S.C. §1927 against
Plaintiffs for allegedly fraudulently submitting two
documents that they attached as exhibits to their First
Amended Complaint. Dkt. No. 58.
to E.D. Mich. LR 7.1(f)(2), this Court has determined that
oral argument is not necessary and will cancel the hearing
scheduled for these Motions. For the reasons discussed below,
the Court will deny Plaintiffs' Motion for Leave to File
Their Second Amended Complaint. The Court will grant
Defendant's Motion for Sanctions.
12, 2015, Plaintiffs Cynthia and Nicholas Christy obtained a
$136, 000.00 loan to purchase vacation property located in Au
Gres, Michigan. Dkt. No. 64, pg. 8 (Pg. ID 2493). Plaintiffs
signed a mortgage as security for the loan. Id.
Freddie Mac owned the mortgage and Defendant Nationstar
serviced the mortgage until December 16, 2017 when Wells
Fargo began service of the mortgage. Id. at pg. 9
(Pg. ID 2494).
October of 2017, Mr. Christy informed Defendant that his
primary residence in Florida had been damaged by a hurricane
and asked for assistance in making payments on his vacation
property. Id. Defendant offered Plaintiffs a
forbearance plan, where Plaintiffs could forego their
mortgage payments for October and November 2017 if they made
both payments, and their December payment, on December 1,
2017. Dkt. No. 20-3, pg. 2 (Pg. ID 460). Plaintiffs assert
that under this forbearance plan, Defendant promised that it
would not report adverse credit information to credit
reporting agencies as long as Plaintiffs made their required
payments in a timely manner. Dkt. No. 59, pg. 11 (Pg. ID
1806). The letter describing the forbearance plan states:
Credit Reporting: As a result of this
reduction of payments, you will become delinquent on your
mortgage. We will not report your entry into a Forbearance
Plan or the delinquency status of your loan to credit
reporting agencies for the duration of the Forbearance
Period. Credit scoring may consider whether there is an
increased credit risk due to the lack of reporting. We are
uncertain as to the impact on your credit score, particularly
if you are current on your mortgage or otherwise have a good
Dkt. No. 20-3, pg. 5 (Pg. ID 463).
December 1, 2017, Defendant informed Plaintiffs in a letter
that they were delinquent on their forbearance plan payments.
Dkt. No. 20-5. Defendant offered Plaintiffs a payment plan
that would allow them to cure their delinquency by paying
increased monthly payments for six months, from December 2017
until May 1, 2018. Id. at pg. 3 (Pg. ID 471). The
last page of Defendant's letter stated that:
The status of your Loan will be reported monthly to all
respective credit reporting agencies for the duration of this
Agreement and thereafter. Accordingly, for the duration of
this Agreement and thereafter, we will report your loan as
delinquent if your Loan is not completely current under your
Loan Documents, even if you make timely payments to Lender in
accordance with this Agreement, if any. This Agreement does
not constitute an agreement by Lender to waive any reporting
of the delinquency status of your Loan payments.
Id. at pg. 5 (Pg. ID 473).
state that they have complied with the increased payment
plan, but that Defendant reported to Equifax and TransUnion
that Plaintiffs had been delinquent in making their mortgage
payments. Dkt. No. 20, pg. 6 (Pg. ID 438); see also
Dkt. No. 20-8 (Nationstar reporting that Plaintiffs were
“60 days late” on their mortgage payments).
Plaintiffs also contend that Defendant violated the mandate
issued by Freddie Mac when it reported adverse credit
information to the agencies. Dkt. No. 59, pg. 12 (Pg. ID
1807). Plaintiffs state that they were unable to obtain a
mortgage from Goldwater Bank (“Goldwater”) to
purchase a house in Grand Blanc, Michigan as a result of
Defendant's adverse reporting to credit agencies.
Id. Plaintiffs therefore withdrew approximately
$215, 000.00 from Mrs. Christy's Individual Retirement
Account in order to purchase the residence. Id. This
resulted in additional tax liabilities for Plaintiffs in the
approximate amount of $48, 930.00. Id.
April 25, 2018, Mr. Christy complained to Defendant about its
reporting of adverse credit information to credit reporting
agencies. Dkt. No. 66-2, pg. 15 (Pg. ID 2895). Defendant
advised that it would conduct an investigation. Id.
On May 21, 2018, Mr. Christy called Defendant and requested
that it correct the adverse credit information because he was
applying for a new mortgage and the adverse information was
affecting his interest rate. Id. at pg. 18 (Pg. ID
2898). On June 12, 2018, Mr. Christy called Defendant to
check the status of the investigation. Id. at pg. 29
(Pg. ID 2900). Defendant advised Mr. Christy that it had
suppressed adverse credit reporting during the plan, but it
was still required to report a final payment rating to credit
bureaus after it transferred the loan to Wells Fargo.
Id. at pg. 21 (Pg. ID 2901). Defendant informed Mr.
Christy that it could not adjust the adverse report because
the loan account was inactive after its transfer to Wells
filed their initial complaint against Defendant on November
1, 2018. Plaintiffs filed their First Amended Complaint
(“FAC”) on February 25, 2019. Dkt. No. 20. The
FAC alleges: 1) negligent violation of the Fair Credit
Reporting Act (“FCRA”); 2) willful violation of
the FCRA; 3) breach of contract for Defendant's alleged
violation of the forbearance plan it had with Plaintiffs; and
4) promissory estoppel. Dkt. No. 20.
state that on June 6 and 7, 2019, their counsel traveled to
Texas to take depositions of five Nationstar employees. Dkt.
No. 59, pg. 3 (Pg. ID 1798). Plaintiffs' counsel also
took the deposition of a Nationstar employee on June 13,
2019. Id. Plaintiffs learned from these depositions
that their forbearance plan was a disaster relief forbearance
plan and that Defendant Nationstar was therefore required to
follow the mandates of Freddie Mac. Id. The Freddie
Mac Seller/ Servicer Guide (“Guide”) disaster
reporting requirements state that “[t]he Servicer must
not report a Borrower who is on a disaster-related
forbearance plan, repayment plan[, ] or Trial Period Plan to
the credit repositories.” Dkt. No. 66-3, pg. 10 (Pg. ID
2920). This provision took effect on March 2, 2016.
on this alleged newly-discovered information, Plaintiffs
filed the present Motion for Leave to File Their Second
Amended Complaint on June 17, 2019, along with a proposed
Second Amended Complaint. Dkt. Nos. 59, 59-1. Plaintiffs
request leave to add two claims to their complaint. Proposed
Count V alleges breach of contract for Defendant's
alleged failure to abide by Freddie Mac's mandate. Dkt.
No. 59-1, pg. 25 (Pg. ID 1840). Proposed Count VI alleges
negligence for Defendant's alleged failure to properly
investigate and respond to Plaintiffs' complaints that
Nationstar wrongfully reported adverse credit information to
credit reporting agencies. Id. at pg. 28 (Dkt. No.
1843). Defendant opposed Plaintiffs' Motion on July 1,
2019. Dkt. No. 64, arguing that any amendment ...