United States District Court, N.D. Illinois, Eastern Division
Alena W. Hammer Plaintiff,
Residential Credit Solutions, Inc., Defendant.
MEMORANDUM OPINION AND ORDER
THOMAS M. DURKIN, District Judge.
Alena Hammer ("Hammer") brought this lawsuit against Residential Credit Solutions ("RCS") on September 6, 2013, alleging that RCS caused her damages resulting from breach of contract and violations of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692; the Illinois Consumer Fraud Act ("ICFA"), 815 ILCS § 505/1; and the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. §§ 2605 & 2609. RCS moves to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). R. 30. For the reasons explained below, RCS's motion to dismiss is granted in part and denied in part.
Hammer obtained a 30-year home mortgage loan for $220, 000 in 2003. R. 1 ¶ 19. The loan required Hammer to pay her taxes and maintain hazard insurance separately from the mortgage loan. Id. ¶ 21. Hammer opted out of any escrow requirement for the loan, which was effective as long as she remained current on her taxes and insurance. Id. ¶ 22. As of August 2009, that loan was being serviced by AmTrust Bank ("FDIC/AmTrust"). Id . ¶¶ 23, 27. In February 2009, Plaintiff was laid off from her job and fell behind on her principal and interest payments on the loan. Id. ¶ 26. In August 2009, FDIC/AmTrust declared Hammer's loan in default. Id. ¶ 27. On September 9, 2009, FDIC/AmTrust filed a foreclosure against the subject property and against Hammer in DuPage County, Illinois in the case known as AmTrust Bank v. Hammer, 2009 CH 3951 ("Foreclosure Case # 1"). Id. ¶ 28.
In December 2009, the Federal Deposit Insurance Corporation ("FDIC") was appointed as receiver for FDIC/AmTrust. Id. ¶ 29. In January 2010, Hammer received a call from Theresa Holk of the FDIC/AmTrust about a potential loan modification. R. 1 ¶ 31. Holk explained that Hammer's modified loan amount would be the principal balance on the loan before the FDIC takeover of FDIC/AmTrust, and that all past-due amounts would be waived. Id. ¶ 32. Holk told Hammer she would receive correspondence in the mail with instructions on how to complete the modification. Id. ¶ 33. Hammer received a letter from FDIC/AmTrust providing her with a loan modification application and checklist of documents to be submitted no later than February 26, 2010. Id. ¶ 34. On February 2, 2010, Hammer submitted the application and documentation. Id. On June 21, 2010, Holk notified Hammer that her modification was officially approved with a total principal balance of $207, 176.99. Id. ¶ 35. Holk told Hammer that all future dealings should be through Hammer's new contact person, Chris Pelaci, and that all loan modification payments should be sent to Sandy Beauregard at FDIC/AmTrust. Id.
Hammer received the loan modification agreement-which was dated June 8, 2010-on June 28, 2010. Id. ¶ 36. The modification agreement noted that it should be returned no later than June 25, 2010, and instructed Hammer to send her new monthly payment of $749.88 to FDIC/AmTrust by July 1, 2010. Id. ¶ 37. It also included a miscellaneous fee of $2, 303.30, increasing the modified balance from $207, 176.99 to $209.471.59. Id. ¶ 38.
When Hammer received the agreement on June 28, she called Pelaci to request additional time to review and sign the modification agreement since she received it three days after the due date in the cover letter. Id. ¶ 39. Hammer also disputed the additional fees added to the modified balance. Id. Pelaci said she would look into the added fees and told Hammer that she still needed to send in the first $749.88 payment by July 1, 2010, but did not need to sign the document until Pelaci called her back regarding the unknown fees. Id. ¶ 40. Hammer sent her first payment in the amount of $749.88 to FDIC/AmTrust on June 28, 2010, which FDIC/AmTrust cashed on July 1, 2010. Id. ¶ 41, R. 1-2 at 2. When Hammer did not receive a response from Pelaci regarding the fees, she both called and wrote FDIC/AmTrust to dispute the fee and obtain an explanation and further instruction. R. 1 ¶ 42.
On July 23, 2010, Hammer received a RESPA Notice of Assignment stating that effective on August 1, 2010, FDIC/AmTrust would no longer accept payments for her loan and that she should make her payments to RCS beginning on that date. The letter advised Hammer of her right to send a RESPA Qualified Written Request ("QWR") dispute within 60 days. Id. ¶ 43. On July 28, 2010, Hammer made her second payment (due August 1, 2010) on the loan modification in the amount of $749.88 to FDIC/AmTrust which FDIC/AmTrust cashed on July 30, 2010. Id. ¶ 44, R. 1-3 at 2.
On August 2, 2010, RCS applied $1, 499.76-the two payments of $749.88-to Hammer's account. Id. ¶ 45. On or about August 14, 2010, Pelaci spoke with Hammer over the phone and told Hammer that the fees in her modification were assessed in error. Id. ¶ 46. Pelaci instructed Hammer to cross out the $2, 303.30 fee, write in the correct principal balance of $207, 176.99, initial and sign the contract in front of a notary, and return the executed copy to RCS, attention "Jim Bass." Id. Hammer wrote the amounts and then signed, notarized, and mailed the document to Bass as instructed. Id.
Upon receiving the document, Bass called Hammer and told her that the modification "did not exist at the time the loan was transferred to [RCS]" and therefore was not valid. Hammer alleges that Bass threatened to take her home and swore at her to the point where she became very distraught. Id. ¶ 47. On August 19, 2010, RCS sent Hammer a notice erroneously stating that her real estate taxes were delinquent and that RCS would set up an escrow account to pay the delinquent taxes. Id. ¶¶ 49-50.
On August 31, 2010, Hammer disputed the debt in writing, sending a QWR and a Fair Debt Dispute Letter addressed to Beauregard at FDIC/AmTrust. Id. ¶ 51. The letters stated that Hammer was sending the money to FDIC/AmTrust because RCS claimed it had no knowledge of the modification. Id. On September 1, 2010, Hammer sent her third loan modification payment to FDIC/AmTrust in the amount of $749.88, which FDIC/AmTrust forwarded to RCS. Id. ¶ 52.
On September 19, 2010, Hammer's hazard insurance policy automatically renewed for a twelve-month period. Id. ¶ 54. Hammer alleges that at all times since obtaining the underlying loan in 2003, she has paid her taxes in full and has maintained proper and adequate hazard insurance. Id. ¶ 14. Also on September 19, 2010, RCS force-placed insurance on Hammer's property. Id. ¶ 54. Beginning in September 2010, RCS billed Hammer's account certain unexplained fees on multiple occasions including in October 2010, and February, April, and May through August of 2011. Id. ¶¶ 53, 57, 69, 74, 76, 79, 81-83, 88, 91.
On September 30, 2010, Hammer sent FDIC/AmTrust another Fair Debt Dispute Letter along with her fourth modification payment in the amount of $749.88. Id. ¶ 55. The letter stated that Hammer had a loan modification contract with FDIC/AmTrust. Id. On October 15, 2010, Hammer received a letter from FDIC/AmTrust telling her that her loan had been transferred to RCS more than 60 days earlier and returning her most recent payment "which needs to be paid directly to [RCS]." Id. ¶ 56. The letter included Hammer's October 2010 payment check but not her September 2010 payment check. Id. On October 29, 2010, Hammer sent a check to RCS in the amount of $749.88 for her November 2010 payment, also including a third Fair Debt Dispute Letter with her check which stated, "Also, the November payment enclosed as per contract w/FDIC/AmTrust bank prior to transfer to RCS." Id. ¶ 58. RCS received the payment on November 1, 2010 and returned the payment on November 5, 2010, without cashing it. Id. ¶ 59.
On November 5, 2010, RCS force-placed insurance on Hammer's account for a second time in the amount of $2, 615 which RCS "deducted" from Hammer's escrow account, creating a negative escrow balance. Id. ¶ 60. On December 1, 2010, Hammer sent a check to RCS in the amount of $749.88 which RCS did not cash but insurance on the home by arranging for its own policy at the borrower's expense." Decambaliza v. QBE Holdings, Inc., No. 13-CV-286-BBC, 2013 WL 5777294, at *1 (W.D. Wis. Oct. 25, 2013). instead returned to Hammer. Id. ¶ 62. After December 1, 2010, Hammer continued to send her monthly payments to RCS via certified mail each month through the filing of her complaint. Id. RCS cashed two of Hammer's payments-for August 2011 and September 2012. Id. However, RCS returned all the other checks after holding them for time periods of several weeks to several months. Id.
On or about December 3, 2010, Hammer received a letter from RCS that it had not received proof of her insurance policy on the subject property. Id. ¶ 63. As a result, they secured force-placed insurance for the third time on her behalf through American Modern Home. Id. ¶ 63. The letter also stated that the cost of the policy would be paid out of her loan escrow account, which would be set up if it did not already exist and would result in an increase in her mortgage payment and "future insurance policies." Id. In response, Hammer sent RCS proof of her insurance again. Id. ¶ 64. RCS assessed a third "escrow disbursement" of $2, 516 for force-placed insurance from Hammer's account on January 4, 2011. Id. ¶ 65.
On January 5, 2011, Hammer filed a motion to dismiss Foreclosure Case # 1, alleging that there was a valid and enforceable loan modification agreement with an effective date of July 1, 2010, and that all payments had been timely tendered. Id. ¶ 66. On January 11, 2011, Hammer sent RCS her fourth Fair Debt Dispute Letter requesting information as to why RCS was not cashing her checks and disputing the credit reporting on her account. Id. ¶ 67. Hammer enclosed copies of her credit report for reference and proof of hazard insurance. Id. RCS never responded to her dispute letter or corrected the credit reporting. Id.
On March 18, 2011, DuPage County, Illinois, Circuit Judge Gibson heard arguments on Hammer's motion to dismiss Foreclosure Case # 1 and granted the motion to dismiss the lawsuit. Id. ¶ 70. Following the dismissal of Foreclosure Case # 1, Hammer requested reinstatement figures from RCS pursuant to her modification and continued to make monthly payments to RCS each month in the amount of $749.88. Id. ¶ 73. RCS continued to return her payments and bill her for unexplained fees. Id. On May 12, 2011, in response to Hammer's request for reinstatement figures, RCS sent Hammer figures reflecting principal and interest payments, late charges, escrow payments, attorney fees, and miscellaneous fees. Id. ¶ 76. Subsequently, Hammer called RCS and Codilis, RCS's collection attorneys, to obtain accurate reinstatement figures. Id. ¶ 80. Hammer left numerous messages but did not receive any return calls. Id.
On July 25, 2011, Hammer spoke with Codilis' attorney, Courtney Nogar, who had represented RCS in Foreclosure Case # 1. Id. ¶ 84. Nogar asked Hammer "if she ever intended to pay back the loan." Id. Hammer replied that she had been paying every month, that no one would call her back, and that each of her payments was being returned to her. Id. Hammer asked Nogar for the amount necessary to bring the loan current, but Nogar did not provide that amount. Id. ¶ 85. On July 26, 2011, Hammer sent her August 2011 loan modification payment to RCS in the amount of $749.88. Id. ¶ 86. RCS cashed that payment on July 28, 2011. Id. On July 29, 2011, Hammer received an escrow analysis from RCS showing an escrow shortage of $3, 319.80 even though she did not have an escrow account opened pursuant to her mortgage contract or loan modification. Id. ¶ 87. The analysis reflected two prior assessments for hazard insurance and indicated that $2, 516 would be added to the loan amount in September 2011. Id.
On August 1, 2011, approximately four months after the dismissal of Foreclosure Case # 1, Hammer received an acceleration notice from Codilis on behalf of RCS that stated: "As of 7/29/2011 the amount of the debt we are seeking to collect is $32, 050.60, which includes the sum of payments that have come due on and after the date of default 10/01/2010." Id. ¶ 89. On August 8, 2011, RCS sent Hammer a notice that it was renewing her force-placed insurance and deducting the amount from her escrow account. Id. ¶ 91. Hammer again sent RCS proof of her insurance. Id.
On August 15, 2011, Hammer received a second "acceleration notice" from RCS stating, "As of 8/11/2011 the amount of the debt we are seeking to collect is $10, 507.95, which includes the sum of payments that have come due on and after the date of default 10/01/2010." Id. ¶ 93. That amount was $21, 542.65 less than the amount listed in the first acceleration notice. Id. On August 17, 2011, in an attempt to resolve the discrepancy, Hammer called the number listed on the acceleration notice and spoke with someone named "Randy" from RCS's loss mitigation department. Id. ¶ 94. That person never called her back. Id. On or about September 16, 2011, Hammer received a letter from RCS stating that her account had been referred to foreclosure for a second time for a failure to cure the default. Id. ¶ 95. On September 20, 2011, RCS deducted $2, 516 from Hammer's escrow account to pay for force-placed insurance. Id. ¶ 96.
On September 21, 2011, RCS filed a second foreclosure against the subject property and against Hammer in DuPage County, Illinois, in the case known as RCS v. Hammer, 2011 CH 004503 ("Foreclosure Case # 2"). Id. ¶ 97. The foreclosure complaint alleged a default under the original note and mortgage. Id. The complaint did not reference or attach the loan modification. Id. On September 30, 2011, Hammer received a "Notice Pursuant to the Fair Debt Collection Practices Act" from Codilis on behalf of RCS notifying her of her right to dispute the debt within 30 days. Id. ¶ 98. Hammer also received another notice of force-placed insurance and a deduction of $2, 516 from her escrow account. Id. ¶ 99.
On October 28, 2011, Hammer sent another Fair Debt Dispute Letter requesting verification of the debt in writing and RCS to cease all phone calls to her. Id. ¶ 100. Hammer also sent RCS a QWR asking for a payment history, the amount alleged to be owed, an accounting, a record and proof of each payment that Hammer made, an "[e]xplanation on the alleged lapse in Hazard Insurance that was force placed on the account when proof of insurance had been previously provided, " and "the identity of the holder of [the] mortgage pursuant to U.S.C. § 1641(f)(2), " as well as a complete breakdown of the fees, payments, and amounts alleged as owing on the loan and how each was calculated. Id. ¶ 101. On October 31, 2011, RCS acknowledged receipt of Hammer's QWR and FDCPA dispute letter. Id. ¶ 102.
On November 4, 2011, Hammer filed a motion to dismiss Foreclosure Case # 2. Id. ¶ 103. On February 29, 2012, Judge Gibson granted the motion to dismiss the first amended complaint without prejudice. Id. On November 7, 2011, RCS partly responded to both Hammer's QWR and her FDCPA dispute letter in a single response. Id. ¶ 104. The response letter provided a breakdown of fees and amounts to reinstate the loan. Id. It did not provide an explanation of fees or the force-placed insurance, nor did it provide verification of the debt. Id. The response letter stated that Hammer's loan modification "had been finalized" on August 9, 2011, the date that RCS cashed Hammer's August 2011 payment. Id. ¶ 105.
By January 2012, after Hammer tendered 19 consecutive payments pursuant to the loan modification, RCS developed a pattern and practice of accepting Hammer's checks, keeping them for several weeks to several months, then returning them to Hammer. Id. ¶ 106. Over this period of time, Hammer's health and well-being "drastically deteriorated." Id. ¶ 107. She developed severe nerve and internal organ problems that her physician could not attach to anything other than stress. Id. Hammer's medical records show a steady decline in her health from the time that RCS took over the loan through the filing of Hammer's September 6, 2013, complaint. Id.
On February 3, 2012, Codilis sent Hammer another reinstatement letter with figures that did not recognize her loan modification. Id. ¶ 108. On March 28, 2012, RCS filed a second amended complaint in Foreclosure Case # 2, R. 32-4, alleging that the terms of the loan modification as presented by Hammer were unenforceable because there was no "meeting of the minds." R. 1 ¶ 109. Hammer continued to send in her loan modification payments every month, but RCS rejected all of Hammer's subsequent payments until September 2012, when RCS cashed her payment. Id. ¶¶ 110-11. On September 19 and October 5, 2012, RCS sent Hammer letters stating that it had reviewed her insurance policy and that she was ...