Urquizo v. Community Loan Servicing LLC

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

SOFIA URQUIZO,

Plaintiff,

– against – MEMORANDUM & ORDER

24-cv-00909 (NCM) (JAM)

COMMUNITY LOAN SERVICING LLC,

formerly known as Bayview Loan

Servicing LLC; FCI LENDER SERVICES,

INC.; NATIONSTAR MORTGAGE LLC,

doing business as Mr. Cooper; NEWREZ

LLC, doing business as Shellpoint

Mortgage Servicing,

Defendants.

NATASHA C. MERLE, United States District Judge:

Before the Court are defendants’ motions to dismiss plaintiff’s complaint pursuant

to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6).1 Plaintiff Sofia Urquizo brings

this action against defendants2 Community Loan Servicing LLC (“CLS”), FCI Lender

Services, Inc. (“FCI”), and Nationstar Mortgage LLC (“Nationstar”) for violations of the

Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2601 et seq., and breach of

1 The Court hereinafter refers to the Memorandum of Law in Support of CLS’s

Motion to Dismiss, ECF No. 47-1, as the “CLS Motion”; the Memorandum of Law in

Support of FCI’s Motion to Dismiss, ECF No. 44-1, as the “FCI Motion”; the Memorandum

of Law in Support of Nationstar’s Motion to Dismiss, ECF No. 41-1, as the “Nationstar

Motion”; plaintiff’s Memorandum of Law in Opposition to Defendants’ Motions to

Dismiss, ECF No. 42, as the “Opposition”; the Reply Memorandum of Law in Support of

CLS’s Motion to Dismiss, ECF No. 49, as the “CLS Reply”; the Reply Memorandum of Law

in Support of FCI’s Motion to Dismiss, ECF No. 46, as the “FCI Reply”; and the Reply

Memorandum of Law in Support of Nationstar’s Motion to Dismiss, ECF No. 43, as the

“Nationstar Reply.”

2 Pursuant to a stipulation of dismissal entered into by plaintiff and defendant

Newrez LLC, all claims in this action against defendant Newrez LLC, doing business as

Shellpoint Mortgage Servicing (“Shellpoint”), have been dismissed without prejudice.

ECF No. 28.

contract arising out of defendants’ alleged failure to honor a loan assumption and

modification agreement between plaintiff and CLS. For the reasons stated below,

defendants’ motions are DENIED except insofar as plaintiff’s RESPA claim against FCI

is DISMISSED.

BACKGROUND

In 2004, plaintiff’s husband, Miguel Mena, purchased a two-family home located

in Far Rockaway, New York, for $439,000.00. First Amended Complaint (“FAC”) ¶¶ 20–

22, ECF No. 19. To do so, he entered into two mortgage agreements with First United

Mortgage Banking Corporation, which represented 95% of the financing for the purchase.

FAC ¶ 22. One of the two mortgages, for $333,700.00, is referred to as the primary

mortgage and is the subject of this action. FAC ¶ 23. Initially, the house was only in Mena’s

name; six months after the purchase, plaintiff’s name was added to the title. FAC ¶ 24.

The couple had been married since 2000. FAC ¶ 21.

By 2006, the primary mortgage was assigned to JPMorgan Chase Bank, N.A.

(“Chase”). FAC ¶ 25. Mena entered into a Consolidation, Extension and Modification

Agreement (“CEMA”) with Chase in June 2006. FAC ¶ 25. As part of the CEMA, plaintiff

was added as a borrower under the primary mortgage because her name was now on the

title to the house. FAC ¶ 25. Plaintiff is a signatory on the CEMA. FAC ¶ 25. In May 2013,

the parties modified the primary mortgage agreement through a loan modification with

Chase, on which plaintiff was again listed as a borrower and signatory. FAC ¶ 26.

Mena died in July 2014. FAC ¶ 27. Faced with financial difficulty after her

husband’s passing, plaintiff attempted to explore loss mitigation options with Chase.

FAC ¶¶ 28–29. Plaintiff attempted to work with Chase to address the loan payments, but

Chase refused to speak with her and claimed she was not a borrower on the loan. FAC ¶

31. The servicing of the loan was then transferred from Chase to Bayview Loan Servicing,

and later to CLS in 2016. FAC ¶ 32. For years, plaintiff continued to attempt to “establish

her status as a borrower or a successor-in-interest” and manage her loan payments,

without success. FAC ¶¶ 32–33.

Plaintiff alleges that on May 6, 2022, CLS finally approved a loan modification

application and offered an agreement under which she would simultaneously assume and

modify the primary mortgage (“Agreement”). FAC ¶ 34. Pursuant to the Agreement, the

loan balance increased to $462,954.39 and was re-amortized over 40 years with a fixed

interest rate of 2.875%. FAC ¶ 35. Under the Agreement, the estimated monthly payment

was $2,298.00. FAC ¶ 35. As part of the Agreement, CLS sent plaintiff the following

documents: Loan Estimate; Equal Credit Opportunity Act Notice; New York Fair Credit

Reporting Act Disclosure; Borrower’s Certification and Authorization; Mortgage Fraud Is

Investigated by the FBI Warning; Errors and Omissions/Compliance Agreement;

Acknowledgment of Receipt of Loan Estimate; and Acknowledgment of Intent to Proceed.

FAC ¶ 36. Plaintiff signed and faxed the executed documents to CLS on May 13, 2022.

FAC ¶ 39.

In June 2022, CLS transferred service of the loan to Nationstar. FAC ¶ 40. In

December 2022, Nationstar transferred service of the loan to Shellpoint. FAC ¶ 52. In

January 2023, Shellpoint transferred service of the loan to FCI. FAC ¶ 54. Between June

2022 and June 2023, plaintiff sent several notices of error to each successive loan

servicer, alleging that they had failed to transfer over and comply with the Agreement.

FAC ¶¶ 42–80.

Specifically, plaintiff sent a letter to CLS and Nationstar on June 8, 2022, in which

she demanded that Nationstar honor the Agreement (“First Letter”). FAC ¶ 42. CLS did

not respond to the First Letter. FAC ¶ 45. Nationstar responded the next month, stating

that CLS had informed it that the “modification was denied April 22, 2022” because “the

assumption documents were never returned.” FAC ¶ 46. Nationstar directed plaintiff to

submit a new application for a loan modification and assumption with Nationstar.

FAC ¶ 46. Plaintiff then sent a second letter to Nationstar and explained that while an

April 2022 application had been denied, she later entered into the Agreement, which CLS

offered a month later in May 2022 (“Second Letter”). FAC ¶¶ 47–48. Nationstar stated

that it would respond to the Second Letter by September 2, 2022, but never did so.

FAC ¶¶ 49–50.

Eventually, plaintiff received a new loan modification offer in February 2023 from

the administrator of the then owner of the primary mortgage, RCO Trust. FAC ¶¶ 51, 58–

60. The terms of the offer included a higher principal balance, interest rate, and monthly

payment than the terms of the Agreement. FAC ¶ 60. RCO Trust then offered another

modification in March 2023 under which the principal balance, interest rate, and monthly

payment would be even higher than the February 2023 offer. FAC ¶¶ 61–62. Plaintiff

responded by informing RCO Trust’s administrator of the Agreement and its terms.

FAC ¶ 63. FCI then represented in an email that FCI had no “evidence that CLS received

the faxed, signed pre-closing documents on May 13, 2022.” FAC ¶ 65. Plaintiff again

demanded that FCI honor the terms of the Agreement pursuant to its RESPA obligations

as a loan servicer. FAC ¶ 66. FCI then offered another loan modification with further

unfavorable terms, including capitalized interest and higher principal balance, interest

rate, and monthly payment. FAC ¶ 67.

Plaintiff sent a third letter to CLS, Nationstar, and Shellpoint on April 20, 2023,

requesting all documents relating to the Agreement (“Third Letter”). FAC ¶ 68. CLS did

not respond; Nationstar stated that it would respond at a later date. FAC ¶¶ 70–71.

Shellpoint responded the next month by referring plaintiff to Nationstar’s prior responses

in June and August 2022. FAC ¶ 73. Plaintiff then sent a fourth letter to FCI on June 20,

2023 (“Fourth Letter”). FAC ¶ 74. FCI responded the next month by stating that it had no

evidence that CLS received plaintiff’s executed documents in May 2022 and there was no

loss mitigation agreement it need honor. FAC ¶ 77. RCO Trust then offered another loan

modification, even more unfavorable to plaintiff than the last, which plaintiff declined.

FAC ¶¶ 78–80.

Plaintiff alleges that defendants’ failures to correct the alleged servicing errors have

caused her injuries, including money damages and “extreme stress and anxiety

occasioned by the risk of the loss of her family’s home to a foreclosure.” FAC ¶¶ 100, 112,

124, 136. Plaintiff further alleges that defendant “FCI caused a foreclosure action to be

filed” against her “in the name of the trust for whom [FCI] acts as agent.” FAC ¶ 83. The

state foreclosure action was filed in March 2024, as Wilmington Savings Fund Society,

FSB, as Owner Trustee of the Residential Credit Opportunities Trust VIII-A v. Sofia

Urquizo, Individually and as Executor of the Estate of Miguel A. Mena a/k/a Miguel

Mena, et al., in the Supreme Court of New York, County of Queens (Index Number

706385/2024) (“Foreclosure Action”). FAC ¶ 83. The relief sought in the Foreclosure

Action includes payment of the “remaining balance of the loan” on plaintiff’s house.

FAC ¶ 84.

LEGAL STANDARD

A court must dismiss a case for lack of subject matter jurisdiction under Rule

12(b)(1) when it “lacks the statutory or constitutional power to adjudicate it.” Huntress v.

United States, 810 F. App’x 74, 75–76 (2d Cir. 2020) (quoting Makarova v. United States,

201 F.3d 110, 113 (2d Cir. 2000)).3 In making this determination, the Court “must accept

as true all material factual allegations in the complaint.” Berger v. L.L. Bean, Inc., 351 F.

Supp. 3d 256, 260 (E.D.N.Y. 2018) (quoting J.S. ex rel. N.S. v. Attica Cent. Schs., 386

F.3d 107, 110 (2d Cir. 2004)). A court may also “refer to evidence outside the pleadings”

in its assessment. Makarova, 201 F.3d at 113.

When deciding a motion to dismiss based on Rule 12(b)(6), a court must again

“accept[] all factual claims in the complaint as true, and draw[] all reasonable inferences

in the plaintiff’s favor.” Lotes Co. v. Hon Hai Precision Indus. Co., 753 F.3d 395, 403 (2d

Cir. 2014). Factual disputes are typically not the subject of the Court’s analysis, as Rule 12

motions “probe the legal, not the factual, sufficiency of a complaint.” Plastic Surgery

Grp., P.C. v. United Healthcare Ins. Co. of N.Y., Inc., 64 F. Supp. 3d 459, 468–69

(E.D.N.Y. 2014). That is, “the issue” on a motion to dismiss “is not whether a plaintiff will

ultimately prevail,” but instead whether a plaintiff is “entitled to offer evidence to support

the claims.” Sikhs for Just. v. Nath, 893 F. Supp. 2d 598, 615 (S.D.N.Y. 2012).

Accordingly, “[d]ismissal is inappropriate unless it appears beyond doubt that the

plaintiff can prove no set of facts which would entitle him or her to relief.” Fat Brands

Inc. v. Ramjeet, 75 F.4th 118, 125 (2d Cir. 2023).

In order to survive a motion to dismiss pursuant to Rule 12(b)(6), a plaintiff must

state “a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678

(2009); see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A claim is

plausible ‘when the plaintiff pleads factual content that allows the court to draw the

reasonable inference that the defendant is liable for the misconduct alleged.’” Matson v.

3 Throughout this Opinion, the Court omits all internal quotation marks, footnotes,

and citations, and adopts all alterations, unless otherwise indicated.

Bd. of Educ. of City Sch. Dist. of N.Y., 631 F.3d 57, 63 (2d Cir. 2011) (quoting Iqbal, 556

U.S. at 678). Although the Court takes all factual allegations contained in the complaint

as true, it does not do so for legal conclusions or “[t]hreadbare recitals of the elements of

a cause of action, supported by mere conclusory statements” in a complaint. Iqbal, 556

U.S. at 678.

When a court is faced with a motion to dismiss pursuant to both Rules 12(b)(1) and

12(b)(6) of the Federal Rules of Civil Procedure, the Court “must decide the jurisdictional

question first because a disposition of a Rule 12(b)(6) motion is a decision on the merits

and, therefore, an exercise of jurisdiction.” Pressley v. City of New York, No. 11-cv-03234,

2013 WL 145747, at *5 (E.D.N.Y. Jan. 14, 2013); see also United States ex rel. Kreindler

& Kreindler v. United Techs. Corp., 985 F.2d 1148, 1155–56 (2d Cir. 1993).

DISCUSSION

I. Colorado River Abstention

Defendants urge the Court to abstain from exercising jurisdiction over this action

pursuant to the Colorado River doctrine. Federal courts have “a virtually unflagging

obligation to exercise” their subject matter jurisdiction. Mochary v. Bergstein, 42 F.4th

80, 84 (2d Cir. 2022). Accordingly, “[a]bstaining from exercising federal jurisdiction is

the exception, not the rule.” Id. Only in “a few extraordinary and narrow exceptions” may

a federal court find reason to decline its “duty to exercise its jurisdiction”—and even then,

“the balance is heavily weighted in favor of the exercise of jurisdiction.” Id. at 84–85. One

such exception lies in the Colorado River doctrine. Under this doctrine, “a federal court

may abstain from exercising jurisdiction where an existing parallel state-court litigation

would accomplish a comprehensive disposition of litigation.” Id. at 85 (citing Colorado

River Water Conservation Dist. v. United States, 424 U.S. 800 (1976)). Unless specific

abstention requirements are met, the Court has “little to no discretion” and may not

abstain from exercising its jurisdiction. Mochary, 42 F.4th at 85.

A court assessing whether abstention under Colorado River is appropriate

proceeds in two steps. First, the Court must “make a threshold determination that the

concurrent proceedings are parallel,” meaning that “substantially the same parties are

contemporaneously litigating substantially the same issue in another forum.” Mochary,

42 F.4th at 85. “[T]he mere potential for conflict in the results of adjudications, does not,

without more, warrant staying exercise of federal jurisdiction.” Colorado River,

424 U.S. at 816. Second, if the proceedings are parallel, the Court must “careful[ly]

balance” six factors, including the convenience and adequacy of the state and federal fora:

(1) whether the controversy involves a res over which one of

the courts has assumed jurisdiction; (2) whether the federal

forum is less inconvenient than the other for the parties; (3)

whether staying or dismissing the federal action will avoid

piecemeal litigation; (4) the order in which the actions were

filed, and whether proceedings have advanced more in one

forum than in the other; (5) whether federal law provides the

rule of decision; and (6) whether the state procedures are

adequate to protect the plaintiff’s federal rights.

Mochary, 42 F.4th at 85. No one factor is dispositive, and “[o]nly the clearest of

justifications will warrant dismissal.” Id. at 86. Where a factor is neutral, it provides a

“basis for retaining jurisdiction, not for yielding it.” Woodford v. Cmty. Action Agency of

Greene Cnty., Inc., 239 F.3d 517, 522 (2d Cir. 2001).

Defendants argue that the doctrine applies because the same loan at issue in this

action is the subject of the state Foreclosure Action. CLS Mot. 12–13; FCI Mot. 8–11;

Nationstar Mot. 7–10.4 Plaintiff counters that Colorado River abstention is not applicable

4 Throughout this Order, page numbers for docket filings refer to the page numbers

assigned in ECF filing headers.

here because the Foreclosure Action presents a different legal issue between different

parties, was filed after this action, and does not provide a proper forum for RESPA claims.

Opp’n 21–32. The Court finds that this action is not parallel to the state foreclosure action

and, regardless, the factors weigh against abstention.

First, the parties are not the same: the plaintiff in the foreclosure action—the

holder of plaintiff’s mortgage—is not a party to this action, and the defendants in this

action—the servicers of plaintiff’s mortgage—are not parties to the foreclosure action.

Specifically, the plaintiff in the foreclosure action is Wilmington Savings Fund Society,

FSB (“Wilmington”), the owner of RCO Trust.5 Bliss Decl. ¶ 4, ECF No. 47-2. Wilmington

is not a party to this action.6

Although CLS and FCI are correct that Wilmington may share a “congruent

interest” with defendants in enforcing the pre-Agreement terms of the loan (presumably,

the CEMA), those overlapping interests do not necessarily render these parties

substantially the same for purposes of abstention. See FCI Mot. 9; CLS Reply 6; see also

CLS Mot. 13 (arguing that defendants appear in this action “in their capacity as

[Wilmington’s] agents”). Nor is the caselaw defendants rely on persuasive. For example,

in Potente v. Capital One, the court found the original mortgagee shared “congruent”

interests with the current mortgagee due to a corporate acquisition of one by the other.

Potente v. Cap. One, N.A., No. 16-cv-03570, 2018 WL 1882848, at *4, *2 n.1 (E.D.N.Y.

5 Although plaintiff alleges that “FCI filed the action in the name of the trust for

whom it acts as agent,” FAC ¶ 83, the Court discerns no evidence from the face of the

complaint in the Foreclosure Action that FCI is the plaintiff in that action.

6 As evidenced supra, note 5, the pleadings introduce some ambiguity as to whether

Wilmington or FCI filed the Foreclosure Action. See FAC ¶ 88 (noting that plaintiff has

suffered injury in part because “FCI . . . filed a foreclosure action). However, even if FCI

did file the Foreclosure Action, one overlapping party would not require abstention

pursuant to Colorado River.

Apr. 19, 2018). Here, rather than one mortgagee stepping into the shoes of another as was

the case in Potente, defendants are servicers of the mortgagee’s loan. That is, defendants

occupy a distinct role from Wilmington—indeed, they work on behalf of the creditor in

the discrete function of servicing plaintiff’s loan. For example, as servicers, defendants

are subject to different regulatory schemes, including RESPA, and their ultimate interest

lies in properly administering the service of loans owned by another, here, Wilmington,

rather than collecting a debt owed directly to them.

Second, the issues and relief sought in this action are not substantially the same as

those in the Foreclosure Action. In the latter, Wilmington seeks to enforce the pre-

Agreement loan and not the terms of the loan as plaintiff in this action alleges were later

modified in the Agreement. See Foreclosure Action Compl., Opp’n Ex. O, ECF No. 45-16.

In her answer to that complaint, Ms. Urquizo states several affirmative defenses and

cross-claims for violations of state property laws. Foreclosure Action Answer, ECF No.

13.7 She does not rely on RESPA or the merits of the Agreement and only mentions the

Agreement in alleging that counsel for Wilmington failed to comply with state procedural

law requiring the inclusion of all loan documents in the pleading. Foreclosure Action

Answer ¶¶ 41–43.

Accordingly, the Court is not persuaded that the foreclosure action necessarily

requires the state court to determine whether the Agreement was enforceable in order to

determine whether Ms. Urquizo has defaulted on the pre-Agreement loan. Cf. Mochary,

7 While the parties did not attach Ms. Urquizo’s state court answer to their motion

papers, the Court takes judicial notice of the filing. Where courts take judicial notice of

filings outside of the pleadings, they may do so only insofar as “what statements [the

filings] contained” but “not for the truth of the matters asserted” therein. Roth v.

Jennings, 489 F.3d 499, 509 (2d Cir. 2007). Accordingly, the Court only considers the

fact that plaintiff stated these defenses and claims, not the truth of those statements.

42 F.4th at 86 (“Mere commonality in subject matter does not render actions parallel.”);

Renois v. WVMF Funding, LLC, No. 20-cv-09281, 2024 WL 1313492, at *6 (S.D.N.Y. Mar.

27, 2024) (declining to abstain pursuant to Colorado River in part because “though the

two actions clearly overlap in that they both relate to the Loan, there is no indication or

allegation that the State Foreclosure Action considered any of the issues raised here—

namely, whether . . . sub-servicing the loan violated various provisions of state and federal

law”). Furthermore, as plaintiff points out, the RESPA claims do not arise out the original

loan and therefore do not fall into the scope of the Foreclosure Action. See Opp’n 28 (“A

favorable ruling in the Foreclosure Action might restore [plaintiff’s] property rights but

would not address the RESPA and Regulation X violations related to Defendants’ failure

to honor the Agreement.”).

Even if the proceedings were parallel, the Colorado River factors collectively

counsel for exercise of this Court’s jurisdiction. Several factors weigh against abstention:

contrary to FCI’s contention, the Foreclosure Action was filed after the initial complaint

in this action, compare Opp’n Ex. O (state court complaint filed March 25, 2024) with

ECF No. 1 (complaint filed February 6, 20248); the Foreclosure Action has not proceeded

beyond the filing of the complaint and an answer, see generally Foreclosure Action Dkt.;

and plaintiff’s RESPA claims are based on federal law. Some factors counsel for

abstention: plaintiff also brings breach of contract claims in this action that arise out of

state law; there is no contention that the New York state courts do not provide an adequate

forum; and a stay or dismissal of this action might allow the state court to adjudicate most

8 Although plaintiff filed an amended complaint, which added claims for breach of

contract and specific performance arising out of the same factual conduct as the RESPA

violations, the amendments relate back to the filing of the original complaint. See Fed. R.

Civ. P. 15(c)(1)(B).

or all of plaintiffs’ claims in one action thereby avoiding piecemeal litigation. Yet, as noted

supra, that possibility is only that—there is no indication that plaintiff’s RESPA claims

will have the opportunity to be heard in the state court, or that continuing with this action

would necessarily lead to piecemeal litigation where the actions differ between the

enforcement and servicing of the loan. And while the Foreclosure Action involves a res—

plaintiff’s house—the instant action arises out of contractual and statutory rights not tied

to the specific property itself. The final factor is neutral and therefore weighs in favor of

exercising jurisdiction: there is no indication that this Court provides a less convenient

forum for the parties than does the state court. On balance, these factors do not support

abstention. In sum, whereas the Foreclosure Action concerns a mortgage default dispute

between Wilmington and Ms. Urquizo, this action states specific claims under federal law,

was filed prior to the state foreclosure action, and does not currently risk inconsistent

judgments.

Accordingly, the Court declines to abstain from exercising its federal question

jurisdiction pursuant to Colorado River.

II. RESPA Claims

RESPA “provides a framework for borrowers to remedy errors relating to the

servicing of their mortgage loans.” Naimoli v. Ocwen Loan Servicing, LLC, 22 F.4th 376,

379 (2d Cir. 2022). It is a “consumer protection statute” subject to implementing

regulations issued by the Consumer Financial Protection Bureau. Id. at 381. In particular,

Regulation X specifies that borrowers may provide written notice to “mortgage servicers

of possible account errors,” to which the servicers must respond if the errors are

“covered.” Id. at 381–82 (citing 12 C.F.R. § 1024.35). Regulation X “enumerates ten

specific covered errors” along with “an eleventh catch-all provision, which encompasses

‘any other error relating to the servicing of a borrower’s mortgage loan.’” Id. at 382 (citing

12 C.F.R. § 1024.35(b)(11)).

“To state a claim under RESPA, a plaintiff must allege that the defendant failed to

comply with specific RESPA provisions and identify damages that she sustained as a

result of the defendant’s alleged RESPA violations.” Bocci v. Nationstar Mortg. LLC, No.

23-cv-01780, 2024 WL 3813756, at *8 (S.D.N.Y. June 28, 2024), report and

recommendation adopted, No. 23-cv-01780, 2024 WL 4326932 (Sept. 27, 2024).

Defendants primarily challenge plaintiff’s claims on the ground that RESPA only applies

to loan servicing and not loan modification. FCI Mot. 12–13; CLS Mot. 14–15; Nationstar

Mot. 12–13. For the reasons stated below, the Court finds that RESPA applies to plaintiff’s

claims, and plaintiff has sufficiently pleaded RESPA violations.

A. The Agreement

As a threshold matter, plaintiff does not allege that defendants erred in making a

determination on plaintiff’s loss mitigation application. Such a claim would likely fail

pursuant to RESPA. See Naimoli, 22 F.4th at 384 (“All parties agree that a loan servicer’s

failure to properly evaluate a borrower for a loss mitigation option is not a covered error

under § 1024.35(b).”). To the contrary, plaintiff alleges that her loss mitigation

application was approved and resulted in a loan modification agreement between CLS

and plaintiff. FAC ¶ 34; see also Opp’n Ex. C, ECF No. 45-4. However, CLS and FCI

contend that plaintiff never accepted the Agreement such that no contract was formed

that would provide the basis for plaintiff’s RESPA claims. FCI Mot. 17; CLS Mot. 18.

Accordingly, the Court must first assess whether plaintiff has sufficiently alleged that the

parties entered into the Agreement.

To assess whether a contract exists pursuant to New York law, “the first step is to

determine whether there is a sufficiently definite offer such that” a party’s “unequivocal

acceptance” is sufficient to bind the parties. Kolchins v. Evolution Markets, Inc., 31

N.Y.3d 100, 106 (2018). Sufficient definiteness as to material terms is required in order

to “assure[] that courts will not impose contractual obligations when the parties did not

intend” to enter into a binding agreement. Id. Where the parties’ “course of conduct and

communications” form the basis of the disagreement as to intent to enter a contract, id.,

the court must consider “the objective manifestations of the intent of the parties as

gathered by their expressed words and deeds,” CoraMed USA, LLC v. Alexion Pharms.,

Inc., 695 F. Supp. 3d 251, 260 (E.D.N.Y. 2023). This requires a “totality” inquiry,

including assessment of “the attendant circumstances, the situation of the parties, and

the objectives they were striving to attain.” CoraMed USA, LLC, 695 F. Supp. 3d at 260.

Here, plaintiff has sufficiently alleged that she and CLS intended to enter into a

loan modification agreement based on the express material terms offered by CLS in May

2022. See FAC ¶ 34. Specifically, plaintiff alleges that she submitted an application to CLS

to assume and modify the loan, which CLS approved. FAC ¶¶ 33–34. Plaintiff alleges that

CLS then provided the following documents: Loan Estimate; Equal Credit Opportunity

Act Notice; New York Fair Credit Reporting Act Disclosure; Borrower’s Certification and

Authorization; Mortgage Fraud Is Investigated by the FBI Warning; Errors and

Omissions/Compliance Agreement; Acknowledgment of Receipt of Loan Estimate; and

Acknowledgment of Intent to Proceed. FAC ¶ 36. Plaintiff also alleges that CLS provided

specific “underlying terms” of the Agreement at this time: “new unpaid principal balance

of $462,954.39, re-amortized the loan over 40 years with a fixed interest rate of 2.875%,

and provided an estimated monthly payment of $2,298.00.” FAC ¶ 35. Plaintiff further

alleges that she accepted the loan modification agreement by signing and returning the

executed documents via fax to CLS.9 FAC ¶ 39. These actions by CLS and plaintiff

constitute express and “objective manifestations of the intent” to enter into the

Agreement, which was offered in sufficiently definite terms such that plaintiff’s

“unequivocal acceptance” was sufficient to bind the parties. See Kolchins, 31 N.Y.3d at

106.

CLS contends that the Agreement could not have been accepted as plaintiff alleges

because the applicable Fannie Mae guidelines “precluded the simultaneous assumption

and modification of the loan” and instead required a two-step process by which an

assumption agreement must be executed prior to any modification agreement.

CLS Mot. 18. Plaintiff counters that the applicable guidelines exempt certain transfers

based on death, divorce, or inheritance from the two-step requirement and allow

simultaneous assumption and modification in these circumstances. Opp’n 49–50. FCI’s

response that “just because something could happen does not mean that it did” is

nonsensical in the context of a Rule 12 motion. See FCI Reply 8. Instead, there may be a

question as to whether the Agreement is an enforceable contract or merely a “letter of

intent” to pursue a later agreement, as CLS contends. See CLS Reply 13. However,

plaintiff’s allegations that she submitted a joint application for assumption and

modification, which CLS responded to by sending specific material terms of a modified

loan principal, interest rate, and monthly payment support a plausible inference that CLS

and plaintiff intended to and did enter into a binding agreement for loss assumption and

loan modification. See FAC ¶¶ 33, 35; see also Mendez v. Bank of Am. Home Loans

9 FCI’s contention that plaintiff sent the documents to an incorrect fax number is a

factual dispute not ripe for resolution on a Rule 12 motion. See FCI Mot. 17.

Servicing, LP, 840 F. Supp. 2d 639, 650 (E.D.N.Y. 2012) (finding loan servicer’s “sole

discretion” to determine whether it was satisfied and would proceed with modification

agreement “would not render the agreement invalid”).

FCI also argues that it is not bound by the Agreement because servicers are

generally not parties to loan modification agreements. FCI Mot. 18; FCI Reply 8

(contending that “there still is no contract between FCI and Plaintiff, as required, because

a mortgage servicer [] is not a party to the underlying Mortgage or Loan or a modification

to the Loan”). To the contrary, the out-of-circuit caselaw FCI cites to support this

argument merely states that where a servicer is not a party to a loan modification contract,

a breach of contract claim cannot be alleged against that servicer. See, e.g., DiGiacomo v.

Statebridge Co., LLC, No. 14-cv-06694, 2015 WL 3904594, at *8 (D.N.J. June 25, 2015)

(“Only a party to a contract can be found liable for breach of contract[.]”). In other words,

a contract may only be enforced between parties to the contract. This is a basic principle

of contract law and does not stand for the proposition that servicers cannot be bound by

loan modification contracts as a matter of law. In fact, courts in this district have

recognized claims for breach of contract arising out of a loan modification agreement

between a servicer and mortgagor. See, e.g., Graham v. Select Portfolio Servicing, Inc.,

156 F. Supp. 3d 491, 514 (S.D.N.Y. 2016) (finding allegations that servicer breached loan

modification sufficient to state breach of contract claim under New York law). Here,

plaintiff has alleged that “CLS approved the application and offered the Agreement,

FAC ¶ 34, which comports with the text of the Agreement on CLS letterhead in which CLS

is listed as the “lender,” Opp’n Ex. C 4, 6. Accepting these allegations as true, which the

Court must on a Rule 12 motion, FCI’s argument that CLS, as servicer, was not a party to

the Agreement is unavailing.

Furthermore, Nationstar’s contention that as a successive servicer it is not bound

by the alleged Agreement between plaintiff and CLS is unavailing. See Nationstar Mot. 15

(contending plaintiff “inadequately pleaded that she was ever in contract with

Nationstar”). Successor loan servicers may inherit the contractual obligations of prior

services. See Mendez, 840 F.Supp.2d at 651 (finding plaintiff’s claim for breach of loan

modification agreement entered into with prior loan servicer sufficiently pled as to

successor loan servicer); see also Block v. Seneca Mortg. Servicing, 221 F. Supp. 3d 559,

578 (D.N.J. 2016) (“The factual question of what the relationships were between

Defendants, and what obligations they incurred, must therefore be resolved on summary

judgment or at trial.”). Defendants have provided no indication why that would not be the

case here. To the extent the Agreement allegedly changed the principal balance, re-

amortized the loan and set the fixed interest rate, it is unclear why a loan servicer would

not be bound by those terms.

Accordingly, plaintiff has sufficiently alleged that CLS entered into the Agreement

and FCI and Nationstar as successor loan servicers are bound by that agreement.

B. Loan Servicing

RESPA’s catch-all provision, subsection 11, applies to an error that “relates to or is

connected with either (a) the loan servicer’s receipt of payments from borrowers or (b)

the loan servicer’s making of payments to the loan’s owners or third parties.” Naimoli,

22 F.4th at 384. This unambiguous and broad language includes “any error that has some

connection with or pertains to loan servicing.” Id. at 383–84. Nonetheless, a “narrow

exception to the catch-all provision” has been recognized, “which excludes challenges to

the merits of a servicer’s loss mitigation determination,” but not errors made “while in

pursuit of a loss mitigation option.” Id. at 384 (emphasis added). See also Mohamed v.

Nationstar Mortg., LLC, No. 20-cv-00216, 2024 WL 4132351, at *3–4 (E.D.N.Y. Sept. 10,

2024) (finding that RESPA confers a private right of action for violations of 12 C.F.R. §

1024.35).

Defendants’ contention that plaintiff fails to state a RESPA claim because errors

regarding the terms of a modification agreement are not covered misses the mark.

Plaintiff’s RESPA claims are premised on defendants’ alleged failure to service the loan

modification by “refus[ing] to honor the terms of the Agreement.” FAC ¶ 50. This supports

a reasonable inference that plaintiff’s RESPA claims concern defendants’ “receipt of

payments” from plaintiff—for example, whether defendant accepted payments pursuant

to the Agreement—and are therefore related to errors with “some connection” to loan

servicing. See Naimoli, 22 F.4th at 383–84. Indeed, similar allegations have been found

sufficient to constitute covered errors. In Mohamed, the court found that the “alleged

errors all stem[med] from the same fundamental contention: that [plaintiff] reached a

binding agreement with Nationstar to modify the loan, and Nationstar failed to honor that

agreement.” Mohamed, 2024 WL 4132351, at *5. Because the plaintiff had otherwise

sufficiently pled the existence of a valid modification agreement, the court found that the

alleged errors were covered, including pursuant to subsection 11. Id. Accordingly, plaintiff

has sufficiently alleged that defendants engaged in covered errors pursuant to RESPA and

Regulation X.10

10 Nationstar also contends, on reply, that plaintiff’s RESPA claims fail because

Section 1024.38 does not confer a private right of action. Reply 6–7. However, plaintiff’s

RESPA claims arise out of Section 1024.35, which confers a private right of action.

Mohamed, 2024 WL 4132351, at *3–4. To the extent plaintiff attempts to argue in her

opposition that she has alleged separate violations of Sections 1024.38 and 1024.41, see

Opp’n 47, that argument is without support in the amended complaint or the caselaw. See

Mohamed, 2024 WL 4132351, at *6 (no private cause of action for Section 1024.38).

C. Notices of Error

Pursuant to Section 2605 of RESPA, borrowers may submit requests for

information to loan servicers. 12 U.S.C. § 2605(e)(1); Kapsis v. Am. Home Mortg.

Servicing Inc., 923 F. Supp. 2d 430, 444 (E.D.N.Y. 2013). These requests are referred to

as qualified written requests (“QWR”) and must include the borrower’s name and account

information and “a statement of the reasons for the belief of the borrower, to the extent

applicable, that the account is in error or provides sufficient detail to the servicer

regarding other information sought by the borrower.” 12 U.S.C. § 2605(e)(1)(B). Within

30 days of receiving a QWR, a loan servicer must “make appropriate corrections” to the

borrower’s account and “after conducting an investigation, provide the borrower with a

written explanation or clarification” as to the purported error and provide the information

requested or explain why the servicer does not have that information. 12 U.S.C. §

2605(e)(2). Additionally, Regulation X provides for parallel resolution procedures when

a borrower submits a notice of error (“NOE”) for a covered error, which, as discussed

supra, includes loan servicing. 12 C.F.R. § 1024.35(a)–(e); see also id. § 1024.35

(e)(3)(i)(C) (providing servicers 30 days to respond to notices of errors regarding the

catch-all covered error). QWRs and NOEs are generally synonymous.

Here, plaintiff has sufficiently alleged that she sent four QWRs, which also

constitute NOEs, to defendants regarding the Agreement. In each of the First, Second,

Third, and Fourth Letters (together, the “QWR/NOEs”), plaintiff alleges that she provided

CLS, Nationstar, and/or FCI with a statement that her account was in error for failure to

abide by the Agreement and requested documents relating to the Agreement. FAC ¶¶ 42,

47, 68, 74. This is sufficient to allege that plaintiff’s letters to defendants constituted

QWRs under Section 2605 and NOEs under Regulation X. See Kapsis, 923 F. Supp. 2d at

446 (finding plaintiff sufficiently alleged that he sent QWRs to servicer). Furthermore,

plaintiff alleges that CLS and Nationstar each completely failed to respond to at least one

of plaintiff’s QWR/NOEs: CLS did not respond to the First or Second Letters, FAC ¶¶ 45,

68; and Nationstar did not respond to the Second Letter, FAC ¶¶ 49–50. Those alleged

failures to respond to the QWR/NOEs constitute violations of both Section 2605 and

Regulation X.

Additionally, plaintiff alleges that Nationstar’s response to the First Letter was

inadequate, as was FCI’s response to the Fourth Letter. Opp’n 40–42. Regarding the First

Letter, plaintiff alleges that Nationstar responded to her QWR/NOE regarding the

Agreement by erroneously referring to an earlier modification that was denied prior to

the Agreement. FAC ¶ 46. The Court is unpersuaded that this response would constitute

a violation of RESPA’s requirement that Nationstar conduct an “investigation” and

explain why the information requested regarding the Agreement was not available. See 12

U.S.C. § 2605(e)(2)(C)(i). However, Nationstar’s erroneous response may violate the

requirement in Regulation X that servicers conduct a “reasonable investigation.”

12 C.F.R. § 1024.35(e)(1)(i)(B). That is, plaintiff’s allegations support the reasonable

inference that Nationstar did not reasonably investigate the existence of the Agreement

in responding to the First Letter. Cf. Izmirligil v. Select Portfolio Servicing, Inc., No. 18-

cv-07043, 2020 WL 1941319, at *6 (E.D.N.Y. Apr. 22, 2020) (finding plaintiff had

adequately alleged a RESPA violation for a servicer’s insufficient response to a QWR).

However, regarding the Fourth Letter, plaintiff alleges that FCI responded by

stating that it has completed an “extensive search” of plaintiff’s file and “failed to locate

any evidence that CLS received the faxed” and executed Agreement. FAC ¶ 77. While

plaintiff may disagree with FCI’s response—and indeed, as discussed supra, FCI’s

response may have been legally inaccurate as to its obligation to honor the Agreement—

plaintiff’s allegations do not support a reasonable inference that FCI failed to reasonably

investigate the existence of the Agreement. Accordingly, plaintiff has failed to state an

alleged RESPA or Regulation X violation against FCI.

D. Damages

In order to sufficiently plead a RESPA claim, plaintiff must allege actual damages

proximately caused by a violation of the statute. Lau v. Specialized Loan Servicing, LLC,

No. 23-cv-01385, 2023 WL 6135553, at *10 (S.D.N.Y. Sept. 20, 2023), report and

recommendation adopted as modified, No. 23-cv-01385, 2024 WL 3219810 (June 28,

2024) (“RESPA does not support a claim for statutory damages or fees in the absence of

actual damages.”). To adequately allege actual damages, plaintiff “must allege injury and

resulting damages that are proximately caused by the loan servicer’s failure to adhere to

its obligations under § 2605.” Manzolillo v. Nationstar Mortg., LLC, No. 22-cv-03570,

2025 WL 411754, at *6 (E.D.N.Y. Feb. 6, 2025). Plaintiffs may also recover statutory

damages of no more than $2,000 “in the case of a pattern or practice of noncompliance”

of Section 2605. Dolan v. Select Portfolio Servicing, No. 03-cv-03285, 2016 WL 4099109,

at *5 (E.D.N.Y. Aug. 2, 2016); see also 12 U.S.C. § 2605(f)(1)(B). “Courts commonly

dismiss RESPA complaints at the pleading stage for failing to” adequately allege

proximate cause for damages. Bocci, 2024 WL 3813756, at *8.

Here, plaintiff contends that defendants’ alleged failure to correct the errors in

response to her QWR/NOEs informing them of the Agreement caused her actual damages

in the form of emotional distress, postal costs for repeated QWR/NOE letters, and

increased fees and costs associated with the Foreclosure Action. Defendants counter that

these damages were not proximately caused by the alleged RESPA violations and instead

were the product of plaintiff’s own failure to make her monthly payments. CLS Reply 11–

12; Nationstar Reply 8.

Plaintiff’s allegation that she “has been under enormous stress, directly as a result

of Defendants’ failure to honor the Agreement, and their subsequent failures to correct

this error,” FAC ¶ 81, is sufficient to plead actual damages flowing from the alleged RESPA

violation arising out of the “the form and timing of [defendants’] response to plaintiff’s

letters.” Roth v. CitiMortgage Inc., No. 12-cv-02446, 2013 WL 5205775, at *8 (E.D.N.Y.

Sept. 11, 2013), aff’d, 756 F.3d 178 (2d Cir. 2014). Contrary to defendants’ contention that

plaintiff’s emotional harm is a result of her failure to pay her mortgage, plaintiff has

expressly alleged that defendants’ alleged RESPA violations have caused that harm. While

plaintiff will need to clear a higher bar to establish causation at a later stage in this action,

her allegations are sufficient at the pleading stage. See Tanasi v. CitiMortgage, Inc., 257

F. Supp. 3d 232, 270 (D. Conn. 2017) (finding “plausible theory of causation” at pleading

stage where plaintiffs alleged servicer “failed to respond to their inquiries about the

servicing of their loan, leading to frustration and unnecessary stress during the

foreclosure process”).11

Likewise, plaintiff has sufficiently alleged that defendants’ failure to correct the

errors by honoring the Agreement has led to a specific harm in the Foreclosure Action:

she alleges that Wilmington now seeks the entire balance of the loan in the Foreclosure

11 Defendants do not argue that emotional distress cannot constitute actual damages

under RESPA. While there may be some uncertainty as to this issue, courts in this Circuit

have found that it can. Rosendale v. Mr. Cooper Grp. Inc., No. 19-cv-09263, 2021 WL

4066821, at *12 (S.D.N.Y. Sept. 7, 2021) (assuming so without deciding and citing In re

Residential Capital, LLC, 513 B.R. 446, 465 (Bankr. S.D.N.Y. 2014) as “collecting cases

and concluding that emotional distress damages can constitute actual damages under

RESPA”).

Action, “thereby increasing even more the amount of money that it claims is presently due

and owing under the loan.” FAC ¶ 84. Plaintiff’s allegations that CLS and Nationstar’s

non-existent or otherwise inadequate responses to her QWR/NOEs requesting that they

honor the Agreement caused an increase in the current amount due on her loan is also

sufficient to plead actual damages for her RESPA claims. See Mohamed, 2024 WL

4132351, at *6–7 (finding that “expenses [plaintiff] incurred in defending the foreclosure

action were proximately caused by Nationstar’s mishandling of his loan modification”

that “had already [been] entered into” with plaintiff); cf. Manzolillo, 2025 WL 411754, at

*7 (finding no proximate cause where plaintiff failed to show that she entered into a loan

modification).

As to statutory damages, plaintiff has not sufficiently alleged that any defendant

has engaged in a “pattern or practice” of RESPA violations. Izmirligil, 2020 WL 1941319,

at *8. As discussed supra, plaintiff sufficiently alleged one to two violations of RESPA as

to defendants CLS and Nationstar. These alleged violations do not constitute a pattern or

practice to support statutory damages under RESPA, especially where “many of

[plaintiff’s] QWRs asked for the same or similar information” from defendants. Id.

(finding defendant servicer’s four failures to respond to QWRs insufficient for statutory

damages under RESPA).

* * *

Accordingly, defendants’ motions are denied with respect to the RESPA claims

against CLS and Nationstar but granted with respect to the RESPA claim against FCI.

III. Contract Claims

A claim for breach of contract pursuant to New York law requires allegations of:

“(i) the formation of a contract between the parties; (ii) performance by the plaintiff; (iii)

failure of defendant to perform; and (iv) damages.” Orlander v. Staples, Inc., 802 F.3d

289, 294 (2d Cir. 2015). To recover a remedy in the form of specific performance, a

plaintiff “must establish its willingness and ability to perform its remaining obligations,

that Defendant was able to perform its obligations, and that there is no adequate remedy

at law to address Defendant’s nonperformance.” Sandstone Springs, LLC v. Virag

Distribution, LLC, 617 F. Supp. 3d 159, 176 (W.D.N.Y. 2022). Specific performance is

available only where “the subject matter of a particular contract is unique and has no

established market value.” Lanesborough 2000, LLC v. Nextres, LLC, No. 23-cv-07584,

2025 WL 785071, at *5 (S.D.N.Y. Mar. 12, 2025). In New York, plaintiffs may recover both

damages and specific performance for breach of contract claims. Versatile Housewares

& Gardening Sys., Inc. v. Thill Logistics, Inc., 819 F. Supp. 2d 230, 239 (S.D.N.Y. 2011)

(“New York courts will award, in addition to specific performance of the contract, such

items of damage as naturally flow from the breach[.]”).

The primary dispute between the parties is whether plaintiff entered into a (i) loss

assumption or (ii) loan modification contract with CLS in 2022. As discussed supra, they

disagree over whether Fannie Mae procedures would have allowed for a simultaneous loss

assumption and loan modification or if those procedures necessarily required a two-step

process, which plaintiff does not allege occurred. CLS also argues that the documents sent

to plaintiff on May 6, 2022, were not sufficiently definite to constitute a binding contract.

However, as discussed supra, plaintiff has alleged facts sufficient to support the plausible

inference that the 2022 agreement between herself and CLS constituted a binding

contract for loss assumption and loan modification. Furthermore, plaintiff’s allegations

that CLS and its successor loan servicers—Nationstar and FCI, for purposes of this

action—did not honor the loan modification is sufficient to plead breach of contract. As

to specific performance, plaintiff contends that monetary damages are insufficient to

remedy the “risk[ of] losing her home to foreclosure.” Opp’n 53. At a later stage in this

action, plaintiff may be required to establish that foreclosure of her house cannot be

remedied through money damages and therefore she is entitled to specific performance

of the Agreement. However, plaintiff has sufficiently alleged a claim for specific

performance at the pleading stage.

CONCLUSION

For the reasons stated above, the Motions are DENIED in part and GRANTED

in part. CLS and Nationstar’s motions to dismiss are DENIED in their entirety. FCI’s

motion to dismiss is GRANTED as to plaintiff’s RESPA claim but DENIED as to

plaintiff’s claims for breach of contract and specific performance.

SO ORDERED.

/s/ Natasha C. Merle

NATASHA C. MERLE

United States District Judge

Dated: April 11, 2025

Brooklyn, New York