Stageman v. PHH Mortgage Corporation

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MISSOURI

EASTERN DIVISION

RUSSELL D. STAGEMAN, )

)

Plaintiff, )

)

v. ) No. 4:24-cv-00505-JAR

)

PHH MORTGAGE CORPORATION )

d/b/a PHH MORTGAGE SERVICES, )

)

Defendant. )

MEMORANDUM AND ORDER

This matter is before the Court on the motion to dismiss filed by Defendant PHH

Mortgage Corporation (PHH) in this case involving mortgage loan servicing regulations.

Plaintiff Russell Stageman asserts three counts against PHH for violations of the Real Estate

Settlement Procedure Act (RESPA), 12 U.S.C. §2605 et seq., and one count in violation of the

Truth in Lending Act (TILA),15 U.S.C. § 1639g. PHH argues that Counts I-III, which invoke

administrative regulations, are not cognizable following the U.S. Supreme Court’s recent

decision in Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024).1 For the reasons set

forth below, the motion will be denied.

BACKGROUND

The facts set forth in Stageman’s complaint are as follows. In April 2005 Stageman took

out two mortgages on his principal residence in Eureka, Missouri. PHH is a mortgage servicer as

defined by RESPA and Regulation X (12 C.F.R. § 1024.1 et seq.) and services the loans on

Stageman’s home. In 2020, fearing a decrease in his income due to the COVID-19 pandemic,

1 PHH advises the Court that it no longer seeks dismissal of Count IV invoking the Truth in

Lending Act. (Doc. 32 at 7 n.7).

Stageman accepted an offer from PHH for mortgage assistance in the form of a forbearance.

PHH offered him a trial payment plan on his first mortgage but later refused to accept payments,

stating that the offer was no longer available. Stageman also claims that PHH falsely represented

that his second mortgage was in forbearance when it was not. PHH eventually approved a loan

modification on the second mortgage but continued to demand payments and other charges on

the first one.

In January 2022, Stageman retained counsel and began to request information related to

his loans and PHH’s servicing of them. Between February and April 2022, Stageman sent a total

of 12 formal Requests for Information seeking basic information about his loans, such as an

itemized payoff statement, names and addresses of the current owner/assignee and master/current

servicer(s), transaction history, and escrow analysis. Each time, PHH refused to comply, claiming

that Stageman’s signature did not match the one on file, even after Stagemen sent notarized

requests. In June 2022, Stagemen sent PHH two formal Notices of Error citing PHH’s failure to

provide the requested information. PHH continued to ignore Stageman’s requests.

Stageman filed the instant complaint in April 2024. Counts I-III invoke RESPA § 2605(k)

and three related regulations promulgated by the Consumer Financial Protection Bureau (CFPB).

In Count I, Stageman asserts that PHH violated 12 C.F.R. § 1024.36 by failing to comply with

his written Requests for Information. In Count II, he pleads that PHH violated 12 C.F.R.

§ 1024.35 by failing to rectify the Notices of Error. In Count III, Stageman claims that PHH

violated 12 C.F.R. § 1024.41(e) by failing to allow him a reasonable period of time to fulfill any

remaining requirements of his trial payment plan, which would have permitted him to qualify for

and receive the loss mitigation option that PHH allegedly offered him. In Count IV, Stageman

asserts that PHH violated 12 C.F.R. § 1026.36(c)(3) and 12 U.S.C. § 1639g by failing to provide

him with an accurate payoff balance within a reasonable time. Stageman seeks statutory and

actual damages and attorney fees.

PHH now moves to dismiss Counts I-III for failure to state a claim, asserting that Loper

Bright precludes Stageman’s claims because they depend on regulatory interpretation rather than

statutory authority. (Doc. 24 at 5).

APPLICABLE LAW

12(b)(6) Standards

The purpose of a motion to dismiss under Rule 12(b)(6) is to test the legal sufficiency of

the complaint. A complaint must be dismissed for failure to state a claim when it does not plead

“enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly,

550 U.S. 544, 570 (2007). Pleadings must include sufficient factual information to provide notice

of the grounds on which the claims rest and must “raise a right to relief above the speculative

level.” Id. at 555; see also Schaaf v. Residential Funding Corp., 517 F.3d 544, 549 (8th Cir.

2008). This obligation requires a plaintiff to plead “more than labels and conclusions, and a

formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555.

When considering a motion to dismiss, the Court accepts as true all factual allegations contained

in the complaint and reviews the complaint to determine whether its allegations show that the

pleader is entitled to relief. Id. at 555–56; Fed. R. Civ. P. 8(a)(2).

RESPA Statutory Framework

Counts I-III of Stageman’s complaint invoke the Real Estate Settlement Procedures Act

(RESPA), 12 U.S.C. § 2605. Congress expressed its legislative intent for RESPA as follows:

(a) The Congress finds that significant reforms in the real estate settlement process

are needed to insure that consumers throughout the Nation are provided with greater

and more timely information on the nature and costs of the settlement process and

are protected from unnecessarily high settlement charges caused by certain abusive

practices that have developed in some areas of the country. […]

(b) It is the purpose of this chapter to effect certain changes in the settlement

process for residential real estate that will result--

(1) in more effective advance disclosure to home buyers and sellers of

settlement costs;

(2) in the elimination of kickbacks or referral fees that tend to increase

unnecessarily the costs of certain settlement services;

(3) in a reduction in the amounts home buyers are required to place in escrow

accounts established to insure the payment of real estate taxes and insurance;

and

(4) in significant reform and modernization of local recordkeeping of land title

information.

12 U.S.C. § 2601(a)–(b).

As relevant to Stageman’s claims, RESPA provides:

(e) Duty of loan servicer to respond to borrower inquiries

(1) Notice of receipt of inquiry

(A) In general

If any servicer of a federally related mortgage loan receives a qualified written

request from the borrower (or an agent of the borrower) for information relating to

the servicing of such loan, the servicer shall provide a written response

acknowledging receipt of the correspondence within 5 days (excluding legal public

holidays, Saturdays, and Sundays) unless the action requested is taken within such

period.

* * *

(2) Action with respect to inquiry

Not later than 30 days (excluding legal public holidays, Saturdays, and Sundays)

after the receipt from any borrower of any qualified written request under paragraph

(1) and, if applicable, before taking any action with respect to the inquiry of the

borrower, the servicer shall--

* * *

(C) after conducting an investigation, provide the borrower with a written

explanation or clarification that includes--

(i) information requested by the borrower or an explanation of why the information

requested is unavailable or cannot be obtained by the servicer; and

(ii) the name and telephone number of an individual employed by, or the office or

department of, the servicer who can provide assistance to the borrower.

(k) Servicer prohibitions

(1) In general

A servicer of a federally related mortgage shall not--

* * *

(C) fail to take timely action to respond to a borrower’s requests to correct errors

relating to allocation of payments, final balances for purposes of paying off the

loan, or avoiding foreclosure, or other standard servicer’s duties;

(D) fail to respond within 10 business days to a request from a borrower to provide

the identity, address, and other relevant contact information about the owner or

assignee of the loan; or

(E) fail to comply with any other obligation found by the Bureau of Consumer

Financial Protection, by regulation, to be appropriate to carry out the

consumer protection purposes of this chapter.

12 U.S.C. § 2605 (e) and (k) (emphasis added).

RESPA expressly creates liability to individual borrowers for failures to comply with any

provision: “Whoever fails to comply with any provision of this section shall be liable to the

borrower for each failure” in the amount of actual damages to the borrower and any additional

damages as the court may allow, up to $2,000. 12 U.S.C. § 2605(f).

Congress gave the Consumer Financial Protection Bureau (CFPB) authority “to prescribe

such rules and regulations, to make such interpretations, and to grant such reasonable exemptions

for classes of transactions, as may be necessary to achieve the purposes of this chapter.” 12 U.S.C.

§ 2617(a). Further insight into Congress’s intent for the CFPB is found in the Dodd-Frank Act,

expressing a purpose to ensure “all consumers have access to markets for consumer financial

products and services”2 and that such markets are “fair, transparent, and competitive.” 12 U.S.C.

§ 1511. The CFPB is authorized to exercise its authority under federal consumer financial law to

2 The statutory definition of “consumer financial products and services” encompasses the

extending of “credit and servicing loans,” applicable to mortgage servicers. 12 U.S.C. § 5481 (15)(A)(i).

ensure that consumers are provided with timely information and protected from unfair, deceptive,

or abusive practices. Id. The Director of the CFPB “may prescribe rules and issue orders and

guidance, as may be necessary or appropriate to enable the Bureau to administer and carry out the

purposes and objectives of the Federal consumer financial laws.” 12 U.S.C. § 5512.

Related Regulations

Pursuant to the foregoing statutory authority, the CFPB created several regulations that

Stageman alleges PHH violated, specifically 12 C.F.R. §§ 1024.35, 1024.36, and 1024.41(e). As

relevant to Count I, § 1024.36 states in part:

A servicer shall comply with the requirements of this section for any written

request[s] for information from a borrower that includes the name of the borrower,

information that enables the servicers to identify the borrower’s mortgage loan

account, and states the information the borrower is requesting with respect to the

borrower’s mortgage loan.

12 C.F.R. § 1024.36(a). The servicer must respond to an information request by “either . . .

providing the borrower with the requested information and contact information . . . or . . .

[c]onducting a reasonable search for the requested information and providing the borrower with

a written notification” of their attempted search for the information. 12 C.F.R. § 1024.36(d)(1).

For requests of information beyond basic facts like the identity of the assignee of a mortgage, a

servicer must comply within 30 business days (excluding holidays and weekends).

§ 1024.36(d)(2)(i)(B).

As relevant to Count II, § 1024.35 requires that servicers investigate and respond to

notices of error in certain ways. That regulation states in part:

[A] servicer must respond to a notice of error by either:

(A) Correcting the error or errors identified by the borrower and providing the

borrower with a written notification of the correction, the effective date of the

correction, and contact information, including a telephone number, for further

assistance; or

(B) Conducting a reasonable investigation and providing the borrower with a

written notification that includes a statement that the servicer has determined that

no error occurred, a statement of the reason or reasons for this determination, a

statement of the borrower's right to request documents relied upon by the servicer

in reaching its determination, information regarding how the borrower can request

such documents, and contact information, including a telephone number, for further

assistance.

12 C.F.R. § 1024.35(e)(1)(i). For all types of errors, the servicer must respond at most “not later

than 30 days (excluding legal public holidays, Saturdays, and Sundays) after the servicer

receives the applicable notice of error.” § 1024.35(e)(3)(i)(C).

As relevant to Count III, § 1024.41 provides loss mitigation procedures to avoid

foreclosure. It states in relevant part:

[I[f a complete loss mitigation application is received 90 days or more before a

foreclosure sale, a servicer may require that a borrower accept or reject an offer of

a loss mitigation option no earlier than 14 days after the servicer provides the offer

of a loss mitigation option to the borrower. […]

* * *

A borrower who does not satisfy the servicer’s requirements for accepting a trial

loan modification plan, but submits the payments that would be owed pursuant to

any such plan within the deadline established pursuant to paragraph (e)(1) of this

section, shall be provided a reasonable period of time to fulfill any remaining

requirements of the servicer for acceptance of the trial loan modification plan

beyond the deadline established pursuant to paragraph (e)(1) of this section.

12 C.F.R. § 1024.41(e)(1) and (2)(ii). A borrower is entitled to “enforce the provisions of this

section pursuant to section 6(f) of RESPA” (referring to 12 U.S.C. §2605(f) creating a private right

of action for damages), but nothing in the regulation imposes a duty on a servicer to provide a

specific loss mitigation option. 12 C.F.R. § 1024.41(a).

Loper Bright

For 40 years, the Chevron doctrine instructed federal courts to defer to an agency’s

reasonable interpretation of its governing statutes. Chevron, U.S.A., Inc. v. Nat. Res. Def.

Council, Inc., 467 U.S. 837 (1984). In 2024, the Supreme Court overturned Chevron in Loper

Bright, holding that the Administrative Procedure Act (APA) prescribes no deferential standard

for agency actions or interpretations and courts must exercise their own independent judgment in

each case. 603 U.S. at 412.

Loper Bright did not affect an agency’s ability to exercise rulemaking authority clearly

conferred by statute. Legislative delegation of authority within reasonable bounds is permitted

and is sometimes the best reading of statutory language. Loper Bright, 603 U.S. at 395. The

Supreme Court recognized that a “statute’s meaning may well be that the agency is authorized to

exercise a degree of discretion.” Id. at 394. Congress has often enacted statutes that “empower an

agency to prescribe rules to ‘fill up the details’ of a statutory scheme.” Id. at 394-95. “When the

best reading of a statute is that it delegates discretionary authority to an agency, the role of the

reviewing court under the APA is, as always, to independently interpret the statute and effectuate

the will of Congress.” Id. at 395. “The Court fulfills that role by recognizing constitutional

delegations” and “ensuring [that] the agency has engaged in reasoned decision-making” within

the boundaries of constitutionally permissible delegation. Id.

DISCUSSION

Relying on Loper Bright, PHH contends that Counts I-III fail to state a claim because

agency regulations cannot give rise to a cause of action. Although PHH is correct that a

regulation cannot create a right that Congress has not, Alexander v. Sandoval, 532 U.S. 275, 291,

(2001), that general principle does not prescribe dismissal here because Stageman’s claims are

firmly rooted in the statute. With respect to Counts I and II, RESPA itself imposes a loan

servicer’s duty to respond to borrower inquiries (§ 2605(e) and (k)) and explicitly creates a

private right of action for violations (§ 2605(f)). The regulations Stageman invokes in Counts I

and II (§ 1024.36 and § 1024.35, respectively) plainly track the information-sharing

requirements of the statute.

While the loss mitigation regulation invoked in Count III (§ 1024.41) does not find such

closely parallel language in RESPA, courts have readily acknowledged a cognizable action

without the need for Chevron interpretation. “RESPA prohibits a mortgage servicer from moving

for a foreclosure judgment or from conducting a foreclosure sale until after a borrower’s loss-

mitigation process has been completed.” Cilien v. U.S. Bank Nat’l Ass’n, 687 F. App’x 789, 791

(11th Cir. 2017). “RESPA’s plain language confers a cause of action on borrowers to protect

against RESPA loss mitigation violations.” McHugh v. Bank of New York Mellon as Tr. for

Certificate Holders of CWABS, Inc. Asset-Backed Certificates, Series 2007-8, No. CV 21-2174

(JRT/JFD), 2022 WL 4226208, at *3 (D. Minn. Sept. 13, 2022). See also Lage v. Ocwen Loan

Servicing LLC, 839 F.3d 1003, 1009 (11th Cir. 2016) (finding § 1024.41 unambiguous as to the

deadlines for loss mitigation applications); Landau v. RoundPoint Mortg. Servicing Corp., 925

F.3d 1365, 1372 (11th Cir. 2019) (finding provisions of § 1024.41 unambiguous); Hurst v.

Caliber Home Loans, Inc., 44 F.4th 418, 424 (6th Cir. 2022) (recognizing a cause of action in

§ 1024.41); Lloyd v. New Jersey Hous. & Mortg. Fin. Agency, 845 F. App’x 139, 144 (3d Cir.

2021) (same); Muathe v. Wells Fargo Bank, NA, 807 F. App’x 855, 859 (10th Cir. 2020) (same);

Todaro v. Ditech Fin. LLC, No. 4:18-CV-00261-BCW, 2018 WL 11510960, at *2 (W.D. Mo. Oct.

26, 2018) (same); Young v. Select Portfolio Servicing, Inc., No. 20-11236, 2021 WL 5968662, at

*2 (5th Cir. Dec. 15, 2021); (same); and Vance v. Wells Fargo Bank, N.A., 291 F. Supp. 3d 769,

773 (W.D. Va. 2018) (same).

As the foregoing cases recognize, RESPA authorizes the CFPB to “fill up the details”? by

adopting measures to advance its intended statutory purpose to protect consumers from abusive

practices (§ 1511) such as avoidable loan foreclosure (§ 2605(k)(1)(C) and (E)). Language in a

regulation may invoke a private right of action that Congress created through statute. Alexander,

532 USS. at 291. Section 1024.41(a) does precisely that.

CONCLUSION

Loper Bright does not nullify existing regulations based in clear statutory authority

creating a private cause of action. The regulations giving rise to Stageman’s Counts I-III find

clear statutory authority in RESPA. “Tf the intent of Congress can be clearly discerned from the

statute’s language, the judicial inquiry must end.” Union Pac. R.R. v. Surface Transp. Board, 113

F.4th 823, 833 (8th Cir. 2024).

Accordingly,

IT IS HEREBY ORDERED that Defendant’s motion to dismiss is DENIED. (Doc. 23).

IT IS FURTHER ORDERED that Defendant shall file an answer to the complaint

within fourteen (14) days of this Order.

Dated this 12th day of February, 2025.

A ou

UNITED STATES DISTRICT JUDGE

3 Loper Bright, 603 U.S. at 395.

10