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HSBC Bank USA, National Association v. Davis

United States District Court, N.D. Illinois, Eastern Division

April 3, 2017

HSBC Bank USA, National Association, as Indenture Trustee for People's Choice Home Loan, Securities Trust Series 2005-3 Plaintiff/Counter-Defendant
v.
Ruth Helen Davis, Defendant/Counter-Plaintiff

          MEMORANDUM OPINION AND ORDER

          JOHN ROBERT BLAKEY UNITED STATES DISTRICT JUDGE.

         In this foreclosure action, pro se Defendant/Counter-Plaintiff Ruth Helen Davis (“Davis”) has raised various affirmative defenses and brought multiple counterclaims against Plaintiff/Counter-Defendant HSBC Bank USA, National Association, as Indenture Trustee for People's Choice Home Loan, Securities Trust Series 2005-3 (“HSBC”). [115] at 1-6 (incorporating counterclaims originally alleged in [77]).

         HSBC has moved for summary judgment on all of Davis' counterclaims and affirmative defenses. Davis, meanwhile, has moved to strike the affidavit relied upon by HSBC in its motion for summary judgment. For the reasons discussed below, HSBC's motion [119] is granted, and Davis' motion [128] is denied.

         I. Background[1]

         On March 24, 2005, People's Choice Home Loan, Inc. (“People's Choice”) lent Davis $161, 500.00, and Davis executed a note (the “Note”) reflecting that same amount in favor of People's Choice. [122] at 2. That same day, Davis executed a mortgage (the “Mortgage”) in favor of Mortgage Electronic Registration Systems, Inc. (“MERS”), as Nominee for People's Choice, to secure repayment of the loan and the Note. Id. The property encumbered by the Mortgage is located at 2202 East 70th Place #204, Chicago, Illinois 60649. Id. The Mortgage was recorded with the Cook County Recorder of Deeds on April 11, 2005. Id.

         Pursuant to the Mortgage and related documentation, Davis agreed to: (1) keep any “improvements now existing or hereafter erected on the property” insured against loss by fire and other hazards, [121] at 23; (2) pay into escrow amounts due for taxes and insurance premiums, id. at 22-23; and (3) furnish evidence of insurance upon request. Id. at 38. Davis also agreed that if she did not provide evidence of insurance upon request, the operative lender could independently acquire insurance and charge her account. [122] at 4; [121] at 38. HSBC acquired the Note from People's Choice on June 1, 2005. [122] at 4.

         A. The Escrow

         Litton Loan Servicing LP (“Litton”) originally serviced the loan for HSBC. Id. at 5. During that time, Litton maintained an escrow account, into which Davis paid amounts required for real estate taxes and from which real estate taxes were paid. Id. at 5.

         On April 18, 2011, Litton sent Davis an annual escrow statement, which explained that on June 1, 2011, her monthly escrow payment would increase to $318.84. Id. at 5. Accordingly, Davis' monthly payment (including the relevant principal, interest and escrow) would become $1, 365.26. Id. at 5-6.

         On October 10, 2011, Litton made real estate tax payments in the aggregate amount of $1, 270.37. Id. at 6. Following that payment, the balance on Davis' escrow account was negative $364.78. Id.

         On October 18, 2011, Litton advised Davis that the amount required to bring her loan account current was $2, 302.81. Id. This total reflected the amount held in a suspense account for Davis, two monthly payments (including escrow) of $1, 365.26, and three late charges of $52.32 each. Id. Davis paid this full amount on October 25, 2011. Id.

         On November 1, 2011, servicing of the loan transferred from Litton to Ocwen Loan Servicing, LLC (“OLS”). Id. at 5. Neither Litton nor OLS nor HSBC ever waived Davis' escrow obligations. Id. at 7.

         B. The Temporary Insurance

         On November 13, 2011, OLS sent a notice to Davis, requesting that she furnish evidence of insurance because her prior policy was expiring. Id. at 8. Davis did not respond. Id.

         On December 18, 2011, OLS mailed a second notice to Davis, advising her that: (1) it had “secured temporary coverage” over her property for the period from November 1, 2011 through December 31, 2011, [121] at 80; and (2) this temporary policy would be “cancelled at any time” at no cost to her upon receipt of proof of insurance. Id. at 81. Davis also failed to respond to this message. [122] at 8.

         On January 21, 2012, OLS mailed a third notice to Davis, informing her that she would be charged for the previously-mentioned temporary insurance within 30 days if she did not produce proof of insurance. [121] at 85. Davis did not respond to this letter either. [122] at 9.

         On April 5, 2012, OLS sent Davis an annual escrow statement, which reflected a payment of $1, 605 for lender-placed insurance. [121] at 94. This escrow statement also requested that Davis send a copy of the declaration page from her current insurance policy, if she thought the information contained in the escrow statement was incorrect. Id. at 94-95.

         On April 27, 2012, Davis finally responded to OLS and sent along her proof of insurance. [122] at 9. On May 4, 2012, OLS accordingly inactivated the temporary insurance policy. Id. At that point OLS had not collected any funds from Davis related to the temporary insurance policy, such that no refunds were due. Id. at 9-10.

         C. The Default

         Beginning in approximately February 2012, Davis began making payments that were lower than required under the Mortgage. Id. at 7. OLS held these lower payments in Davis' suspense account until the total in the suspense account equaled a regular payment, at which time OLS applied the funds to the loan. Id.

         On May 4, 2012, HSBC, though OLS, sent Davis a Notice of Default. Id. at 7. The Notice of Default advised Davis that she needed to pay the entire amount due ($2, 937.67) by June 4, 2012, or HSBC would accelerate payment under the Mortgage. Id. at 7-8.

         In response to the Notice of Default, Davis sent OLS a personal check in the amount of $1, 046.42. Id. at 8. On May 24, 2012, OLS returned this check to Davis, explaining that the check was returned because it did not satisfy the defaulted amount. Id. Davis sent in another check for less than the defaulted amount, and OLS returned this check on July 30, 2012, with the same explanation. Id. HSBC then initiated this foreclosure action in August of 2012. [1] at 1-5.

         II. Legal Standard

         Summary judgment is appropriate if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law. Spurling v. C & M Fine Pack, Inc., 739 F.3d 1055, 1060 (7th Cir. 2014). A genuine dispute as to any material fact exists if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The party seeking summary judgment has the burden of establishing that there is no genuine dispute as to any material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). In determining whether a genuine issue of material fact exists, this Court must construe all facts and reasonable inferences in the light most favorable to the nonmoving party. See CTL ex rel. Trebatoski v. Ashland School Dist., 743 F.3d 524, 528 (7th Cir. 2014).

         III. ...


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