FEB 21, 2014

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Compliance Matters

Decision Sets Precedent for Dodd-Frank Servicing Litigation

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An action involving Cataldi v. New York Community Bank is one of the first decisions issued pursuant to the new mortgage servicing regulations under the “Dodd–Frank Wall Street Reform Act and Consumer Protection Act.”

Plaintiff sought injunctive relief for violation of the Act, including a claim that the defendant did not fairly offer and negotiate loss mitigation options and pursued “dual track” foreclosure. The facts established that the parties engaged in modification negotiations, that one or more modifications were offered, that plaintiff did not agree to the offered modifications, and that foreclosure notices were issued after the modification was denied. Plaintiff alleged that the offer was inadequate and in fact a “blatant fraudulent attempt” at “illegal extortion.”

The court noted that the claims appeared to be based on a new regulation enacted by the Consumer Financial Protection Bureau (“Regulation X,” 12 C.F.R. § 1024.41). The Court declared that the regulation can be privately enforced under Section 6(f) of the Real Estate Settlement Procedures Act, but that Section 6(f) of RESPA only allows suits for damages and costs, not injunctive relief. Therefore, the court held that the plaintiff could not assert a claim for injunctive relief.  In addition, the court held that “[n]othing in § 1024.41 imposes a duty on a servicer to provide any borrower with any specific loss mitigation option.” Finally, the court declared that plaintiff failed to allege any fraud with the particularity required by law, and failed to state any facts showing a likelihood of success with regard to the allegation that Defendant's offer of a modification violated any legal duty under Regulation X or otherwise.

Seth Muse, an attorney at Burr & Forman LLP, contributed to this blog.

Comments (1)
Dual tracking is being done by Ocwen Loan Servicing, except they don't know it because their servicing arm in Mumbai, India, does not know what is happening here with trustee sales. There is only one way communication because they do not allow e-mails or phone calls out of the center. There is no response to any request or e-mails in, and only drive by valuations which are inadequate when interior damage is present. Could it be that foreclosure is preferred because the servicer makes more money with a foreclosure than a modification or short sale?
Posted by Donna | Friday, February 21 2014 at 10:50PM ET
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