# Abston v. New Penn Financial LLC d/b/a Shellpoint Mortgage Servicing

> District Court, S.D. Ohio · May 19, 2020

URL: https://www.frixlaw.com/law-library/cases/10375551

## Case

- **Court:** District Court, S.D. Ohio
- **Decided:** May 19, 2020
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10375551

## How later opinions describe it (automated extraction)

- holding that “the final decision for res judicata purposes was the court’s denial of [the] motion for relief from judgment, not the underlying default judgment”

## Opinion text

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION
DONALD C. ABSTON,
:
Plaintiff,

v.
: Case No. 3:19-cv-195
NEW PENN FINANCIAL LLC,
JUDGE WALTER H. RICE
d/b/a SHELLPOINT MORTGAGE
SERVICING, et. al., :
Defendants.

DECISION AND ENTRY SUSTAINING THE MOTION TO DISMISS OF
DEFENDANT NATIONSTAR MORTGAGE LLC (DOC. # 9) AS TO
COUNT IV AND OVERRULING AS TO COUNT I; SUSTAINING THE
MOTION TO DISMISS OF DEFENDANT NEWREZ LLC, F/K/A NEW
PENN FINANCIAL, LLC, D/B/A SHELLPOINT MORTGAGE
SERVICING (DOC. # 11); AND SUSTAINING THE MOTION TO
DISMISS OF DEFENDANT FEDERAL HOME LOAN MORTGAGE
CORPORATION (DOC. #12)

The case before this Court concerns a May 31, 2018, entry of a default
judgment in a state court foreclosure action against Plaintiff, Donald C. Abston,
(“Plaintiff”). Following that judgment, Plaintiff timely filed a motion, pursuant to
Ohio R. Civ. P. 60(B), for relief from the default judgment of foreclosure. This
motion was denied by the state trial court on December 17, 2018. Plaintiff then
filed an appeal in the Second District Court of Appeals on January 4, 2019, and on
July 26, 2019, the state appellate court issued its decision affirming the trial court.
Before the state appellate court’s decision was issued, however, Plaintiff filed his
Complaint in this Court, on June 25, 2019. Doc. #1.

The Complaint names three Defendants: Nationstar Mortgage LLC,
(“Nationstar”); NewRez LLC, f/k/a New Penn Financial, LLC, d/b/a Shellpoint
Mortgage Servicing (“Shellpoint”); and Federal Home Loan Mortgage Corporation
(“Freddie Mac”). Four causes of action are alleged against these Defendants: (1)
Count I, the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2601, et
seq., and Regulation X, 12 C.F.R. §§ 1024.41 et seq., against Nationstar; (2) Count

II, the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692, against
Shellpoint; (3) Count III, breach of contract against Freddie Mac; and (4) Count IV,
the Equal Credit Opportunity Act (“ECOA”), 15 U.S.C. § 1691, et seq., and
Regulation B, 12 C.F.R. § 202 et seq., and 12 C.F.R. § 1002 et seq., also against
Nationstar.

This matter is before the Court pursuant to the following motions to
dismiss: (1) Motion to Dismiss filed by Nationstar, pursuant to Fed. R. Civ. P.
12(b)(6), Doc. #9; (2) Motion to Dismiss filed by Shellpoint, pursuant to Fed. R. Civ.
P. 12(b)(1) and (6), Doc. #11; and (3) Motion to Dismiss filed by Freddie Mac
pursuant to Fed. R. Civ. P. 12(b)(1) and (6), Doc. #12. Plaintiff has filed a

Memorandum in Opposition to the Motion to Dismiss of Nationstar, Doc. #10, and
a Memorandum in Opposition to the Motion to Dismiss of Shellpoint and Freddie
Mac, Doc. #17. Replies were filed by Nationstar, Doc. # 13, and Shellpoint and
Freddie Mac, Doc. #18. The matter is now ripe for decision.
I. Standard of Review
Federal Rule of Civil Procedure 8(a) provides that a complaint must contain

“a short and plain statement of the claim showing that the pleader is entitled to
relief.” The complaint must provide the defendant with “fair notice of what the. . .
claim is and the grounds upon which it rests.” , 550
U.S. 544, 555 (2007) (quoting , 355 U.S. 41, 47 (1957)).
Federal Rule of Civil Procedure 12(b)(6) allows a party to move for dismissal of a
complaint on the basis that it “fail[s] to state a claim upon which relief can be

granted.” The moving party bears the burden of showing that the opposing party
has failed to adequately state a claim for relief. , 487 F.3d
471, 476 (6th Cir. 2007) (citing , 946 F.2d 451, 454-55 (6th Cir.
1991)). The purpose of a motion to dismiss under Rule 12(b)(6) “is to allow a
defendant to test whether, as a matter of law, the plaintiff is entitled to legal relief

even if everything alleged in the complaint is true.” , 988 F.2d 635,
638 (6th Cir. 1993). In ruling on a 12(b)(6) motion, a court must “construe the
complaint in the light most favorable to the plaintiff, accept its allegations as true,
and draw all reasonable inferences in favor of the plaintiff.”
695 F.3d 531, 538 (6th Cir. 2012) (quoting , 487 F.3d at 476).

Nevertheless, to survive a motion to dismiss under Rule 12(b)(6), the complaint
must contain “enough facts to state a claim to relief that is plausible on its face.”
, 550 U.S. at 570. Unless the facts alleged show that the plaintiff’s claim
crosses “the line from conceivable to plausible, [the] complaint must be
dismissed.” Although this standard does not require “detailed factual
allegations,” it does require more than “labels and conclusions” or “a formulaic

recitation of the elements of a cause of action.” at 555. “Rule 8 . . . does not
unlock the doors of discovery for a plaintiff armed with nothing more than
conclusions.” , 556 U.S. 662, 678-79 (2009). Although legal
conclusions “must be supported by factual allegations@ that give rise to an
inference that the defendant is, in fact, liable for the misconduct alleged,” . . .he
tenet that a court must accept as true all of the allegations contained in a

complaint is inapplicable to legal conclusions.” . at 678-79.
In ruling on a Rule 12(b)(6) motion, a court generally only considers the
plaintiff’s complaint. If, however, “… a plaintiff references or quotes certain
documents, … a defendant may attach those documents to its motion to dismiss,
and a court can then consider them in resolving the Rule 12(b)(6) motion without

converting the motion to dismiss into a Rule 56 motion for summary judgment.”

., 905 F. 3d 421, 425 (6th Cir. 2018) (quoting
, 769 F.3d 455, 466 (6th Cir. 2014).
, No. 3:08-cv-408, 2010 WL 1372401, *4-5 (S.D.

Ohio Western Division, March 29, 2010) (citing
, 551 U.S. 308, 127 S.Ct. 2499, 168 (2007).
A challenge to the subject matter jurisdiction of the United States District
Court under Rule 12(b)(1) of the Federal Rules of Civil Procedure may either be
facial or factual. , 673 F.3d 430, 440 (6th Cir.2012).
A facial challenge requires all the plaintiff's allegations to be accepted as true,

“much as with a Rule 12(b)(6) motion.” . In contrast, a factual challenge to the
court's subject matter jurisdiction allows the court to “weigh evidence to confirm
the existence of the factual predicates for subject matter jurisdiction,” without
presuming the truth of the allegations. . (citing
., 78 F.3d 1125, 1134 (6th Cir.1996)). Here, Respondent’s
challenges to the Court's subject matter jurisdiction are purely legal. As such, the

Court will assume all of Plaintiff’s factual allegations to be true, as with the
standard of review for a motion made under Rule 12(b)(6).

II. Background Facts
On February 15, 2013, Plaintiff financed certain residential real property

located at 408 Hadley Avenue in Dayton, Ohio (“Home”). Plaintiff signed a
promissory note (“Note”) and he and his former wife both executed a mortgage
(“Mortgage”) with PNC Bank (collectively the “Mortgage Loan”). Doc. #1,
PAGEID#5. In 2014, however, Plaintiff and his wife filed a Dissolution Decree and
Separation Agreement in Montgomery County, Ohio. , PAGEID#6. Thereafter,

Plaintiff’s ex-wife executed a quit claim deed to Plaintiff, on October13, 2014,
which was then filed with the Montgomery County Recorder on October 22, 2014.
, PAGEID#6. The Complaint alleges that at some unspecified time, PNC
transferred the Mortgage Loan to Freddie Mac and servicing rights were assigned
to Nationstar.

In mid to late 2017, Plaintiff contacted Nationstar for help with his Mortgage
Loan and on September 15, 2017, Nationstar offered Plaintiff a “Trial Period Plan”
(“TPP”), as a step to permanently modify the Mortgage Loan. The TPP
required Plaintiff to make three monthly payments in the amount of $954.48,
beginning in October 2017. Plaintiff alleges that he made all three of these
payments.

On October 20, 2017, however, Nationstar filed a foreclosure Complaint in
the Common Pleas Court of Montgomery County, Ohio, Case No. 2017 CV 04923
(the “Foreclosure Action”). , PAGEID#7. As part of the Foreclosure Action,
Nationstar filed its Preliminary Judicial Report which showed, among other
things, that Plaintiff’s former wife had executed a quit claim deed transferring her

interest in the Home to Plaintiff. On December 6, 2018, the Foreclosure Action
was administratively dismissed, subject to reactivation.
In January 2018, Nationstar sent Plaintiff a Freddie Mac document entitled
“Flex Modification Agreement” (“Modification Agreement”) which listed both
Plaintiff and his ex-wife as borrowers. Following receipt of this agreement,

Plaintiff allegedly called Nationstar and asked why his ex-wife’s name was on the
Modification Agreement. Plaintiff alleges that he was orally instructed to sign
the Modification Agreement and send it and a copy of the divorce decree to
Nationstar. , PAGEID#8. Plaintiff signed and sent Nationstar the executed
Modification Agreement. He alleges that he never received any written request
from Nationstar to send a copy of the divorce decree.

In February 2018, Plaintiff made his monthly payment to Nationstar in the
amount of $982.82, as listed in the Modification Agreement. On February 20,
2018, Nationstar sent Plaintiff a letter congratulating him on the successful
completion of his loan modification (the “February Letter”). The February
Letter stated Plaintiff’s monthly payment would increase to $1,153.99, beginning
for the month of May. Although Plaintiff made his March and April 2018

monthly payments, Nationstar refused to accept Plaintiff’s April monthly payment.
., PAGEID#9.
In early May 2018, Plaintiff called Nationstar to confirm the increased
monthly payment and learned that the Modification Agreement was denied,
because it was not signed by his ex-wife. , PAGEID#9. Plaintiff alleges that

sometime in May 2018, he called Nationstar approximately 30 times regarding the
denial of the Modification Agreement and to find out how to resolve the issue.
On May 7, 2018, Nationstar instructed Plaintiff to send a copy of a divorce
decree via email and gave him an email address. On May 9, 2018, Plaintiff
complied with this request by emailing Nationstar the Dissolution Decree and

Separation Agreement. , PAGEID#10. On May 9, 2018, Nationstar filed a motion
in state court to reactivate the Foreclosure Action, and on May 16, 2018,
Nationstar moved for default judgment in that Action. Plaintiff alleges that,
although he spoke with Nationstar on May 22, 2018, to confirm their receipt of the
Dissolution Decree and Separation Agreement, he was not told by them that the
Foreclosure Action had been resumed. During this call, Plaintiff learned that

Nationstar had previously given him the wrong email address. It was confirmed
during the May 22 ca ll, however, that Nationstar did have the documents.
Plaintiff was told that he would have to re-apply for loss mitigation.
On May 31, 2018, a default judgement was entered in favor of Nationstar in
the Foreclosure Action. , PAGEID#11. On July 13, 2018, Plaintiff filed a motion
for relief from judgment, pursuant to Ohio R. Civ. P. 60(B) (“Rule 60(B)”). Doc.

#11-1, PAGEID#275.
On September 17, 2018, servicing of the Mortgage Loan was transferred
from Nationstar to Shellpoint. According to the Complaint, Shellpoint has
treated the Mortgage Loan as if it were in default, and has sent multiple monthly
statement and notices demanding payment and threatening to commence

foreclosure. , PAGEID#11. Plaintiff alleges that Shellpoint has threatened to
take legal action that it is not entitled to take, and that the notices and statements
it has sent to Plaintiff contain amounts that are not authorized under the terms of
the Note, Mortgage, and Modification Agreement.
On December 17, 2018, the state trial court denied the Rule 60(B) m otion.

Doc. #11-1, PAGEID#304. Plaintiff filed an appeal of the trial court’s judgment
overruling his motion and, on July 26, 2019, the judgment was affirmed by the
Second District Court of Appeals. Doc. #11-1, PAGEID#331.
, No. 28252, 2019 WL 3381799 (Ct. App. Ohio Second District, July
26, 2019), 2019-Ohio-3003. The appellate court agreed with the trial court that the
Modification Agreement was not a binding contract.

Plaintiff has alleged that due to the actions of Shellpoint, Nationstar and
Freddie Mac, he has suffered damages including excessive fees, costs, interest
and charges that have been assessed against the Loan. He also alleges that he
has suffered loss of credit, severe emotional distress, anxiety and stress due to
the pending loss of his Home and equity and has incurred legal fees. ,
PAGEID#11.

Before analyzing Nationstar’s motion to dismiss the RESPA and ECOA
claims alleged against it, the Court will conside r the motions to dismiss filed by
Shellpoint for its alleged violation of the FDCPA and Freddie Mac on Plaintiff’s
alleged breach of contract claim.

III. Legal Analysis
A. Plaintiff’s Claim Against Shellpoint for Violation of the FDCPA (Count II)
and Freddie Mac for Breach of Contract (Count III)

1. Introduction
According to the Complaint, the state trial court entered the default
judgment of foreclosure against Plaintiff on May 31, 2018, and Shellpoint began
servicing the Mortgage Loan in September 2018. Plaintiff alleges that Shellpoint is
liable under the FDCPA because it failed to recognize the Modification Agreement
and incorrectly treated Plaintiff as if he were in default of the Note. As such, the
Complaint alleges that the statements and notices that Shellpoint sent to Plaintiff
stated the wrong amount and that it had no right to foreclose on the Home. Doc.

#1, PAGEID##10-11.
With respect to Freddie Mac, Plaintiff alleges that this Defendant breached
its contract by failing to honor the Modification Agreement negotiated through
Nationstar, its loan servicer. , PAGEID##15 and 16.
Shellpoint and Freddie Mac have both filed motions for dismissal of the
Complaint pursuant to Fed. R. Civ. P. 12(b)(1) and (b)(6). The Court will first

address the arguments of these Defendants that this Court lacks subject matter
jurisdiction under Rule 12(b)(1) due to the Rooker-Feldman Doctrine. The Court
will then review whether Plaintiff has failed to state a claim under Rule 12(b)(6).
2. The Rooker-Feldman Doctrine and Fed. R. Civ. P. 12(b)(1)
Shellpoint and Freddie Mac have both filed motions, pursuant to Fed. R.

Civ. P. 12(b)(1), arguing that this Court lacks subject matter jurisdiction pursuant to
the Rooker-Feldman Doctrine. In general, this doctrine bars “lower federal courts
from conducting appellate review of final state-court judgments because 28 U.S.C.
§ 1257 vests sole jurisdiction to review such claims in the Supreme Court
- F.3d - , Nos. 19-1091/1127/1128, 2020

WL 913288 (6th Cir., Jan. 29, 2020)(citing , 688 F.3d 290, 298 (6th
Cir. 2012); see , 460 U.S. 462, 103 S.Ct. 1303,
(1983); ., 263 U.S. 413, 44 S.Ct. 149 (1923)). Shellpoint
and Freddie Mac contend that because “[T]he Rooker-Feldman doctrine bars re[-]
litigation of claims actually raised in state-court proceedings as well as claims that
are inextricably intertwined with claims asserted in those proceedings,” the

application of this doctrine precludes this Court from considering Plaintiff’s claims
for violation of the FDCPA and breach of contract.
., LLC, No. 3:16-cv-137, 2016 WL 4400758, at *1 (S.D. Ohio Aug. 18, 2016),
report and recommendation adopted, No. 3:16-cv-137, 2016 WL 4733159 (S.D.
Ohio Sept. 8, 2016), citing , 142 F.3d 279, 293 (6th Cir. 1998).
In response to Shellpoint and Freddie Mac’s motions to dismiss for lack of

jurisdiction, Plaintiff argues that the Rooker-Feldman Doctrine is limited in scope
and that this Court has jurisdiction because the claims alleged in this case are
independent of the state court judgment.
., 544 U.S. 280, 293, 125 S.Ct. 1517 (2005) (“If a federal plaintiff presents an
independent claim, even one that denies a state court’s legal conclusion… there is

jurisdiction.”); , 474 F.3d 324, 330 (6th Cir. 2007).
Under Rooker–Feldman, federal district courts lack jurisdiction only if (1) the
case is brought by parties unsuccessful in state court and the injuries complained
of are caused by state-court judgments, (2) the state-court judgment is rendered
prior to the commencement of the district court proceedings and (3) the parties

are seeking a review by the district court to reject the state-court judgment.
544 U.S. at 284 (2005). As stated by the Sixth Circuit, “[I]n
, the Supreme Court made clear
that the Rooker-Feldman doctrine—which prohibits the lower federal courts from
reviewing appeals of state-court decisions—applies only to an exceedingly narrow
set of cases. 544 U.S. 280, 125 S.Ct. 1517, 161 L.Ed.2d 454 (2005).” ,

2020 WL 913288, at *1.
In , the plaintiffs alleged that writs of garnishment filed by the
defendants violated the FDCPA and Michigan consumer law. The district court
dismissed, stating that the court lacked jurisdiction under the Rooker-Feldman
Doctrine. The Sixth Circuit, however, reversed the district court, stating that the
garnishment proceeding was not a judgment but a “ministerial process”

performed by the clerk of the state court who has a “nondiscretionary obligation
to issue the writ if the request ‘appears to be correct.’” , at *4 (citations
omitted). Additionally, the Court noted that the plaintiff’s injuries stemmed from
the defendant’s conduct since the complaint, by alleging a violation due to
“’calculating post [-] judgment interest [in the writs of garnishment] at a rate

higher than’ Michigan law allows.” . Accordingly, the Court determined that the
plaintiffs had alleged injuries that were separate and independent from the
underlying state court judgment and, thus, the Rooker-Feldman Doctrine did not
apply.
3. Freddie Mac and Shellpoint’s Motions to Dismiss Pursuant to Fed. R.
Civ. P. 12(b)(1)

With respect to the Plaintiff’s claim for breach of contract alleged against
Freddie Mac, the Court lacks jurisdiction under the Rooker-Feldman Doctrine.
Plaintiff’s Complaint alleges that Freddie Mac, through the actions of its loan
servicer, Nationstar, breached its contract by failing to honor the Modification
Agreement that Nationstar negotiated with Plaintiff. In the Order Denying Motion

for Relief from Judgment” (“Order”) filed by Plaintiff, the state trial court found
that Plaintiff lacked a meritorious claim under Ohio R. Civ. P. 60(B) because
Nationstar, a/k/a “Mr. Cooper,” had not entered into a Loan Modification with
Plaintiff.
The Sept. 15 letter also clearly provided that a permanent loan
modification would be effective upon the following: Abston timely
making the three TPP payments, Abston signing and returning the
Modification Agreement, . In
addition, Abston was told that he would need to provide a copy of his
divorce decree. While the evidence shows that Abston timely made
the three TPP payments and signed and returned the Agreement, it
also shows that Abston did not provide a copy of his divorce decree.
Consequently, Mr. Cooper did sign the Agreement, but rather
mailed a new copy of the Agreement to Abston. Abston, however,
did not return the new copy of the Agreement, nor did he provide a
copy of his divorce decree. Accordingly, Mr. Cooper mailed Abston a
letter advising him that he had not been approved for the loan
modification. Thereafter, Mr. Cooper waited more than one month
before moving to reactivate the proceedings and for default
judgment.

Doc. 12-1, PAGEID#406 (emphasis in original).

Although Plaintiff’s claim in this case is against Freddie Mac and not
Nationstar, there is no dispute but that Nationstar represented Freddie Mac in the
Foreclosure Action and, as such, is in privity with them.
., 193 F.3d 415, 422 (6th Cir.1999)(defining a privy as
a successor in interest, a nonparty who controlled the original suit, and a nonparty
who is adequately represented by a party in the original suit).
In , 451 F.3d 382 (6th Cir. 2006), the plaintiff
brought a § 1983 claim and a state-law action against the administrator and past

administrator of her father's estate alleging an unlawful seizure of real property
conveyed to her by her mother prior to her parents' divorce proceeding. The
plaintiff in also brought a separate § 1983 action against the receiver
and homeowner’s insurer alleging unlawful seizure of the property and of the
proceeds of an insurance policy. The district court dismissed all claims for lack of
subject matter jurisdiction. In affirming the dismissal, the Court of Appeals held

that the Rooker-Feldman Doctrine barred the plaintiff’s claim against the receiver
and homeowner’s insurer alleging that the order of receivership itself violated due
process since there was privity between the daughter and the losing party in the
state court case.
The question then becomes whether the Rooker–Feldman doctrine
should apply to a federal plaintiff in privity with a party in the state
court proceeding . . .Under a more moderate interpretation, a person
in privity with the actual party who loses in state court may be
deemed a state-court loser. We find that the latter interpretation is
appropriate. The Rooker–Feldman doctrine prevents a party who
loses in state court from appealing that decision to the lower federal
courts, as only the Supreme Court has appellate jurisdiction over
state court decisions. It would be inconsistent to disallow the party in
the state suit to raise a federal claim but to allow his privy to bring
the exact same claim. A state party may not circumvent the Article III
jurisdictional provisions simply by substituting a privy's name for his
own in the federal claim

., at 395-396.

Similarly, it would be inconsistent to permit Plaintiff, a state court loser as
to Nationstar for breach of contract, to file a federal suit against Freddie Mac, the
principal of Nationstar and in privity with it, in federal court. Accordingly, Freddie
Mac’s motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(1) for lack of subject

matter jurisdiction is sustained.
The Rooker-Feldman Doctrine, however, does not apply to the FDCPA claim
asserted by Plaintiff against Shellpoint. Shellpoint was not a party to the
Foreclosure Action, and the source of Plaintiff’s alleged injury is not the judgment
in the Foreclosure Action but Shellpoint’s alleged subsequent violation of the
FDCPA.

The inquiry then is the source of the injury the plaintiff alleges in the
federal complaint. If the source of the injury is the state court
decision, then the Rooker–Feldman [D]octrine would prevent the
district court from asserting jurisdiction. If there is some other source
of injury, such as a third party's actions, then the plaintiff asserts an
independent claim.

., at 393.

Because Plaintiff’s claims against Shellpoint are independent and
subsequent to the state court Order, the Rooker-Feldman Doctrine does not
deprive this Court of jurisdiction in this case. Shellpoint’s motion to dismiss
pursuant to Fed. R. Civ. P. 12(b)(1) is overruled.
4. Fed. R. Civ. P. 12(b)(6) and Issue Preclusion
Shellpoint next argues that because the state court proceedings determined
that the Modification Agreement was not a binding contract, Plaintiff’s FDCPA
claim against Shellpoint cannot be relitigated in federal court. In making this
argument, Defendant asserts that the doctrine of collateral estoppel or issue
preclusion applies.1 ,
422 Fed. Appx. 497, 500 (6th Cir. May 11, 2011). Issue preclusion “refers to the

effect of a judgment in foreclosing relitigation of a matter that has been litigated
and decided,” , 462 F.3d 521, 528 n.5 (6th Cir.
2006), and “bars successive litigation of an issue of fact or law actually litigated
and resolved in a valid court determination essential to the prior judgment, even if
the issue recurs in the context of a different claim.” , 553 U.S.
880, 892, 128 S.Ct. 2161, (2008) (internal quotation marks and citation omitted).

Ohio law determines whether Shellpoint and Freddie Mac prevail under
preclusion principles. ., 544 U.S. at 291-292.
For issue preclusion to apply under Ohio law, Defendant must establish
four elements:
(1) A final judgment on the merits in the previous case after a full and
fair opportunity to litigate the issue; (2) The issue must have been
actually and directly litigated in the prior suit and must have been
necessary in the final judgment; (3) The issue in the present suit must
have been identical to the issue in the prior suit; [and] (4) The party
against whom estoppel is sought was a party or in privity with the
party to the prior action.

, 658 Fed.Appx. 268, 278-279 (6th Cir.
2016)(unpublished)( , 229 B.R. 411, 415–16 (Bankr. N.D. Ohio
1998); ., 179 Ohio App.3d 365, 371
(2008).

1 Although styled in the motions to dismiss as “res judicata,” Shellpoint argues “issue
preclusion” in its motion. Doc. #11, PAGEID#263; Doc. #12, PAGEID#365.
Shellpoint contends that all four elements of issue preclusion are
established. It asserts that the state court entry of default judgment and the Order

are final judgments and that the Order establishes that Plaintiff had a full and fair
opportunity to litigate. Doc. #11-1, PAGEID##304-312. Defendant argues that the
Order also shows that the issue of whether the Modification Agreement was a
binding contract was “actually and directly litigated” in state trial court and was
considered by the appellate court and, therefore, necessary in deciding the Rule
60(B) motion. Finally, Shellpoint asserts, and Plaintiff does not suggest otherwise,

that the issue of the validity of the Modification Agreement is identical in both this
case and the state court case and that the parties are the same or are in privity.
Plaintiff argues, however, that issue preclusion “is not proper” in this case
and that “res judicata is not a shield to protect the blameworthy.”
, 93 Ohio St. 3d 488, 492 (2001). He contends that the default

judgment of foreclosure provided him no opportunity to litigate whether
Shellpoint breached the Modification Agreement. Finally, Plaintiff asserts that the
issue of whether the Modification Agreement was a binding contract was not
“actually and directly litigated” in the state court case and if it was, it was not
necessary to the Order. , 658 Fed. Appx. at 279.

In reviewing the elements of issue preclusion, the Court finds that both the
entry of default judgment of foreclosure and the Order are final judgments on the
merits. , 574 Fed.Appx. 599, 602 (6th Cir. 2014) (“Ohio law
recognizes that a default judgment is a valid and final judgment on the merits.”)
, 2012 WL 949951, at *5 (Ohio Ct. App.) (“A judgment
entry denying a Civ. R. 60(B) motion for relief from judgment is final and

appealable, and, where a party fails to file a timely appeal ... res judicata applies to
bar further litigation of the issues”); , 483
Fed.Appx. 967, 971 (6th Cir. 2012) (holding that “the final decision for res judicata
purposes was the court’s denial of [the] motion for relief from judgment, not the
underlying default judgment”).
The next element of issue preclusion, did Plaintiff have a full and fair

opportunity to litigate whether the Modification Agreement was a binding
contract, is also established. Plaintiff’s Rule 60(B) motion included as exhibits
Plaintiff’s affidavit, cancelled checks and correspondence to and from Plaintiff
regarding the Mortgage Loan and Modification Agreement. Doc. ##11-1 and 12-1.
Plaintiff argued in his motion that he had “meritorious defenses to present,”

stated that he and Nationstar had entered into a “loan modification” and that “a
contract was formed.” Doc. #11-1, PAGEID##278-279. (“When Mr. Abston and Mr.
Cooper entered into a loan modification a contract was formed. Mr. Abston was
making all of his payments timely and therefore was not in default when the
foreclosure was filed nor when the case was reinstated. (See Ex. D at ¶¶ 6, 8 and

11). Thus, the foreclosure action was improper from the beginning.”) In the
alternative, Plaintiff argued in his Rule 60(B) motion that promissory estoppel
applied. Based on the Court’s review of Plaintiff’s Rule 60(B) motion, Plaintiff had
a full and fair opportunity to litigate whether the Modification Agreement was a
binding contract. ., No. 2:10-cv-01044, 2011 WL
2970915 *8 (S.D. Ohio, July 20, 2011) (finding that the filing of a Rule 60(B) motion

raising ownership in a foreclosure proceeding and later ruling on the motion
established that the issue was expressly adjudicated).
Issue preclusion also requires that the issue be “actually and directly
litigated” and that its determination be necessary in reaching the final judgment.
In considering this element of issue preclusion, Plaintiff must have had “a fair
opportunity to fully litigate and to be ‘heard’ in the due process sense.”

., 2 Ohio St. 3d 193, 201 (1983).
“Accordingly, an absolute due process prerequisite to the application of collateral
estoppel is that the party asserting the preclusion must prove that the identical
issue was actually litigated, directly determined, and essential to the judgment in
the prior action.” .; ., 456 U.S. 461, 482, 102 S.Ct.

1883 (1982) (as a constitutional minimum, state-court proceedings must “satisfy
the applicable requirements of the Due Process Clause” for their decisions to
warrant preclusive effect).
Plaintiff argued in his Rule 60(B) motion that he was not in default under the
terms of his Mortgage Loan and had a “meritorious defense” because the

Modification Agreement with Nationstar was a binding contract. As seen from the
Order, however, Plaintiff’s arguments, both as to the Loan Modification and
promissory estoppel, were rejected.2

Based on the Court’s review of the state court proceedings, including the
Rule 60(B) motion and Order, the Court finds that issue preclusion applies and
that the Modification Agreement was not a binding contract. Because there was
no binding Modification Agreement, Plaintiff was in default as found by the state
trial court when it entered the default judgment of foreclosure against Plaintiff on
May 31, 2018, and when the appellate court affirmed on July 26, 2019. As such,

Plaintiff has failed to state a claim against Shellpoint for a violation of the FDCPA
as alleged in Count II. Accordingly, Defendant Shellpoint’s Rule 12(b)(6) motion to
dismiss Count II, for violation of the FDCPA is sustained.

B. Plaintiff’s Claims Against Nationstar Under RESPA and Regulation X
(Count I)

Plaintiff alleges that Nationstar violated RESPA, Regulation X, and 12 C.F.R.
§ 1024.41(“Loss mitigation procedures”). RESPA is a consumer protection statute
that governs the real estate settlement process for certain residential mortgage
loans. Regulation X sets forth mortgage servicing rules for those loans. As a
servicer of Plaintiff’s loan, Nationstar was required to follow these rules.

2 The trial court explained that “[T]he Court will refer to this document by its title –
Freddie Mac Flex Modification Agreement, or Modification Agreement or agreement, for
short. Such reference does not imply any finding or conclusion that the parties entered
into an agreement to modify Abston’s loan.” Doc. #11-1, PAGEID#305.
Count I of the Complaint alleges that Plaintiff “had a complete Application,”
as defined in 12 C.F.R. § 1024.41, and that Nationstar committed eight different

violations under this section. Doc. #1, PAGEID##12-13. The loss mitigation
procedures that Nationstar allegedly violated consist of the following: (1) failing to
exercise reasonable diligence in obtaining documents and information to
complete the application (12 C.F.R. § 1024.41(b)(1)); (2) failing to provide Plaintiff
with the correct notices (12 C.F.F. § 1024.41(b)(2)(i)(B)); (3) failing to identify what
additional documents Plaintiff needed to submit (12 C.F.R. § 1024.41(b)(2)(i)(B));

(4) failing to provide Plaintiff with notice of a reasonable date to submit additional
documents (12 C.F.R. §1024.41(b)(2)(ii) and 12 C.F.R. § 1024.41(c)(3)(i)(E));
(5) failing to provide a reasonable period of time to fulfill all requirements after
Plaintiff made TPP payments (12 C.F.R. §1024.41(e)(2)(ii)); (6) failing to send
Plaintiff notice of the specific reasons that Nationstar denied him for a permanent

loan modification (12 C.F.R. § 1024.41(d)); (7) failing to inform and provide Plaintiff
the right to appeal the denial of the permanent loan modification (12 C.F.R. §
1024.41(h)(2) and C.F.R. § 1024.41(c)(1)(ii)); and (8) by moving for default
judgment (12 C.F.R. § 1024.41(g)).
Nationstar moves for dismissal under Fed. R. 12(b)(6), asserting that it did

not violate RESPA in its handling of Plaintiff’s Modification Agreement. It
contends that five of the alleged violations of the loss mitigation procedures,
§§ 1024.41(b)(1), 1024.41(b)(2)(i)(B), 1024.41(b)(2)(ii), 1024.41(c)(3)(i)(E) and
1024.41(e)(2)(ii)), as stated in paragraphs 100-104 of the Complaint, are
inapplicable to this case. This is so, according to Nationstar, because these loss
mitigation procedures pertain to the loss mitigation application, option or trial

loan modification plan and not to the permanent loan modification that Plaintiff
was seeking. Defendant contends that the allegations of the Complaint establish
that Plaintiff had already been approved (“pre-approved”) for and accepted the
TPP in October 2018. As support for its position that these sections are
inapplicable, Nationstar cites ., S.D. Ohio No. 17-cv-
648, 2019 U.S. Dist. LEXIS 23460, at *22 (Feb. 13, 2019) (“Defendant's handling of

the Required Documents submitted to obtain a permanent modification is not
under the purview of § 1024.41(b)(1), because Plaintiff's loss mitigation
application had already been approved.”).
With respect to the remaining alleged loan mitigation procedure violations,
§§1024.41(d), 1024.41(h)(2), 1024.41(c)(1)(ii) and 1024.41(g), referenced in

paragraphs 105-107 of the Complaint, Nationstar argues that findings from the
state appellate court decision, , have
determined that no violation by Nationstar occurred. Finally, Defendant’s motion
to dismiss asserts that Plaintiff has failed to plead either actual or statutory
damages as required by RESPA. Specifically, Nationstar contends that the

Complaint fails to allege facts establishing a “causal connection” between his
alleged damages and Nationstar’s alleged RESPA violations. Doc. #9, PAGID#139.
In his response to Nationstar’s motion to dismiss, Plaintiff argues that he
had a “loss mitigation application” and that this was alleged in the Complaint.
Doc. 10, PAGEID#208. “He reached out to Nationstar for help on his mortgage,”
Doc. #1, PAGEID#6, “expressed an interest in applying for loss mitigation” and

“Nationstar offered Mr. Abston a TPP.” .
Plaintiff further argues that his “[loss mitigation] application was complete”
and that this fact is evidenced “[w]hen Nationstar offered Mr. Abston a TPP
without requesting any additional documents.” Nationstar had,”at least at
that time, all the information it required to evaluate him for available loss
mitigation options.” ., PAGEID#208-209. Plaintiff further argues that

Even if Mr. Abston did not have an application when Nationstar
offered the TPP, he had an application when he submitted the
dissolution decree in May. Nationstar blurs the lines by claiming Mr.
Abston had already been approved and that the dissolution
agreement was merely something he needed to submit to obtain the
Loan Modification.

.
Because Plaintiff “properly pled facts supporting that (1) he had an
application, (2) it was complete, and (3) Nationstar determined it needed
additional documents,” Doc. #1, PAGEID##6-8, he contends that RESPA was
violated by Defendant. Plaintiff’s response does not address Defendant’s
arguments regarding his allegations of violations of the Loss mitigation
procedures in §§1041(c)(3)(i)(E), 1024.41(e)(2)(ii), 1024.41(h)(2) and
1024.41(c)(1)(ii). The response does assert, however, that the Complaint alleges
violations of the Loss mitigation procedures in § 1024.41(d) (failing to provide
notice of the specific reason for denial of the permanent loan modification),
§ 1024.41(h)(2) (failing to inform and provide Plaintiff the right to appeal the denial
of the permanent loan modification) and § 1024.41(g) (moving for a default
judgment of foreclosure). Plaintiff argues that the Complaint alleges that he was

not given notice by Nationstar of the specific reason for denial of his Loan
Modification and that none of the exceptions in § 1024.41(g) excuse Nationstar
from moving for a default judgment of foreclosure on May 31, 2018. Plaintiff
further argues that the state court appellate decision does not apply, since it did
not address any violations of Regulation X which are asserted in this case against
Nationstar, and that, finally, Defendant “has confused the doctrine of issue

preclusion with claim preclusion.” Doc. #10, PAGEID#213. With respect to
Defendant’s arguments concerning damages, Plaintiff argues that his Complaint
adequately pleads damages and that a causal link exists since, based on the facts
alleged, “reasonable inferences” can be made that Plaintiff suffered certain
damages. Additionally, statutory damages based on “pattern and practice”

allegations have been properly pled, according to Plaintiff, since he has alleged
that Defendant violated RESPA “at least seven times or more.” ., PAGEID#218.
RESPA, a remedial statute expanded in 1990 to encompass loan servicing,
“is construed broadly to effectuate its purposes.” ,
736 F.3d 711, 719 (6th Cir. 2013) (debtor sufficiently alleged damages flowing from

servicer's response to qualified written request and stated a claim under RESPA)
(citations omitted). A loss mitigation application is defined in the regulations as
“an oral or written request for a loss mitigation option that is accompanied by any
information required by a servicer for evaluation for a loss mitigation option.”
§ 1024.31. Said applications are “considered expansively .” 12 C.F.R. § 1024.41,
Supp. I, cmt 41(b)(1), para. 2. Accordingly, loss mitigation applications “include

any ‘prequalification’ for a loss mitigation application.” . If a “borrower
expresses an interest in applying for a loss mitigation option and provides
information the servicer would evaluate in connection with a loss mitigation
application[,] the borrowers’ inquiry or prequalification request has become a loss
mitigation application” . § 1024.41.
Based on the allegations of the Complaint, Plaintiff has pled that he had a

loss mitigation application and in response was offered a TPP which “typically
does not create a promise or binding agreement”
, 2d Dist. Champaign No. 2016-CA-23, 2017 WL 2223018, *4.
Instead, a TPP “simply memorializes only a temporary deviation from the
payment terms of the note and Mortgage pending approval of a permanent

modification.” , No. 13AP–330, 2014 WL 1713125,
*4. Plaintiff has pled that the TPP was a “step to permanently modify his
Mortgage Loan.” Doc. #1, PAGEID#6. Because Plaintiff has pled that he submitted
a loss mitigation application, the Court does not find that the allegations of the
Loss mitigation procedures in §§ 1024.41(b)(1), 1024.41(b)(2)(i)(B), 1024.41(b)(2)(ii),

paragraphs 100, 101, 102 and 102, are inapplicable.3

3 Because the Court finds that Plaintiff has pled that he submitted a loss mitigation
application, the analysis of the court in is not relevant to this case.
With respect to Nationstar’s alleged violations of §§ 1024.41(d) (failing to
provide notice of the specific reason for denial of the permanent loan

modification), 1024.41(h)(2) (failing to inform and provide Plaintiff the right to
appeal the denial of the permanent loan modification and 1024.41(g) (moving for
a default judgment of foreclosure), Defendant argues that no RESPA violation
exists, because of “issue preclusion.” Doc. #9, PAGEID#136; Doc. #13,
PAGEID##433-435. Although Defendant identifies certain factual issues that it
asserts were decided by the decision of the state appellate court, it fails to address

the elements of issue preclusion, including whether the issues were actually and
directly litigated and necessary to the final judgment. ,
658 Fed.Appx. at 278-279; 179 Ohio App.3d at 371.
Accordingly, because the Court does not find that the “applicable requirements of
the Due Process Clause” have been satisfied, it will not apply issue preclusion to

the alleged violations of RESPA in §§ 1024.41(d), 1024.41(h)(2) and 1024.41(g).
, 456 U.S. at 482.
Because Plaintiff’s response does not address Nationstar’s motion to
dismiss regarding §§ 1024.41(c)(3)(i)(E), 1024.41(e)(2)(ii), 1024.41(h)(2) and
1024.41(c)(1)(ii), the Court finds that these claims have been abandoned.

, 507 F.3d 998, 1007(6th Cir. 2007) (claims not raised in response to a
motion to dismiss deemed abandoned); ., 62
Fed.Appx. 77, 79 (6th Cir.2003) (appellate court need not consider discrimination
claim based on learning disability where plaintiff failed to argue said claim to the
district court).

Finally, the Court finds that Plaintiff has sufficiently pled actual damages
under RESPA. , LLC, 793 Fed. Appx. 398 (6th Cir.
2019) (mortgagor’s deposition testimony of “exceptionally high mortgage
balance” and “interest that has accrued with the misapplied or non-applied
payments” sufficiently stated actual damages for purposes of her RESPA claim).
Accordingly, Nationstar’s motion to dismiss Count I pursuant to Rule

12(b)(6) is overruled.

C. Plaintiff’s Claim Against Nationstar for Violation of the ECOA (Count IV)
Plaintiff has also alleged a claim against Nationstar under the ECOA,
asserting that his Modification Agreement was denied because his ex-wife did not

sign the document, a violation of Regulation B, 12 C.F.R. § 202.7(d) and 12 C.F.R.
§ 1002.7(d). Doc. #1, PAGEID#16. Nationstar, however, argues no violation
occurred because (1) the Loan Modification is not a “credit instrument” or an
“extension of credit,” since Plaintiff was in default when he was offered the Loan
Modification and (2) the ECOA does not apply when used by a creditor “to make a

rational decision about an applicant's credit worthiness.” .,
135 F.3d 389, 406 (6th Cir. 1998) (quoting 12 C.F.R.§ 202.2(c)(2)(ii)). Defendant also
argues that no ECOA violation exists, since the state appellate court found that
Plaintiff was not required to obtain his wife’s signature and could complete the
Loan Modification if he provided a copy of his divorce decree.

Plaintiff responds that because the Loan Modification gave Plaintiff the right
to defer payment of the Mortgage Loan, it is a “credit instrument” and “squarely
falls within the definitions under Regulation B and as further articulated by the
CFPB[Consumer Financial Protection Bureau].” Doc. #10, PAGEID#221. Plaintiff
further argues that pursuant to the Sixth Circuit, all that is required to state a claim
under Section 1002.7(d) is to allege that the creditor required the signature of

another person where the applicant was otherwise individually creditworthy.
, 754 F.3d
380, 389 (6th Cir. 2014).
In ruling on a motion to dismiss, the Court is required to accept the
allegations of the Complaint as true. , 695 F.3d at 538 (6th Cir. 2012)

(quoting , 487 F.3d at 476). 745 F.3d 380, 389. In this case, the Complaint
alleges that the Modification Agreement listed both Plaintiff and his ex-wife as
borrowers and that when Plaintiff called Nationstar and asked why his ex-wife was
listed on the Modification Agreement, Nationstar “instructed Mr. Abston to sign
the Modification Agreement and send it to Nationstar” and “to send in a copy of

[the] divorce decree.” Doc. #1, PAGEID#8. The Complaint does not allege that
Defendant required the signature of Plaintiff’s ex-wife. Accordingly, Regulation B,
which “prohibits a creditor from requiring the signature ‘of a spouse [or other
person] as a general matter, regardless of whether the creditor’s motivation is
benign or invidious,” has not been violated. RL BB Acquisiton, 754 F.3d. at 389
(citing 12 C.F.R. § 202.7(d)(1), (5), 12 C-F.R. § 1002.7(d)(1), )).
Accordingly, Nationstar’s motion to dismiss Count IV pursuant to Rule
12(b)(6) is sustained.

IV. Conclusion
For the reasons set forth above, the Court SUSTAINS the Motion to Dismiss
of NewRez, LLC, f/k/a New Penn Financial, LLC, d/b/a Shellpoint Mortgage
Servicing, Doc. #11, pursuant to Fed. R. Civ. P. 12(b)(6), and OVERRULES its
Motion to Dismiss, pursuant to Fed. R. Civ. P. 12(b)(1). The Court SUSTAINS the
Motion to Dismiss of the Federal Home Loan Mortgage Corporation, Doc. #12,
pursuant to Fed. R. Civ. P. 12 (b)(1) and OVERRULES its Motion to Dismiss, Doc.
#12, pursuant to Fed. R. Civ. P. 12 (b)(6) as moot. The Court SUSTAINS the
Motion to Dismiss of Nationstar Mortgage LLC, pursuant to Fed. R. Civ. P. 12(b)(6),
Doc. #9, as to Count IV and OVERRULES its Motion to Dismiss, Doc. #9, as to
Count I.
Plaintiff's claim against Nationstar in Count I for a violation under RESPA
remains for adjudication.

Date: May 18, 2020 Bosc thor Bere thst see
WALTER H. RICE
UNITED STATES DISTRICT JUDGE

29

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10375551. Public record. Not legal advice.