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Christy v. Nationstar Mortgage LLC

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

August 8, 2019

Christy, et al., Plaintiffs,
v.
Nationstar Mortgage LLC, Defendant.

          ORDER DENYING PLAINTIFFS' MOTION FOR LEAVE TO FILE THEIR SECOND AMENDED COMPLAINT [#59] AND GRANTING DEFENDANT'S MOTION FOR SANCTIONS [#58]

          Hon. Gershwin A. Drain United States District Court Judge

         I. Introduction

         Before 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.

         Pursuant 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.

         II. Factual Background

         On May 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).

         In 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 credit score.

Dkt. No. 20-3, pg. 5 (Pg. ID 463).

         On 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).

         Plaintiffs 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.

         On 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 Fargo. Id.

         Plaintiffs 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.

         Plaintiffs 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. Id.

         Based 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 ...


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