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Khan v. One West Bank F.S.B

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

April 12, 2017

Shahnaaz A.R. Khan f/k/a Shahnaaz A. Azeem, Plaintiff,
v.
OneWest Bank, F.S.B., and Ocwen Loan Servicing, LLC, Defendants.

          MEMORANDUM OPINION AND ORDER

          Manish S. Shah United States District Judge.

         Shahnaaz Azeem sues OneWest Bank, F.S.B., and Ocwen Loan Servicing, LLC, for breach of contract and statutory violations arising out of her mortgage loan modification.[1] Defendants move to dismiss for failure to state a claim and for failure to join Azeem's ex-husband as an indispensable party. For the following reasons, defendants' motion to dismiss is denied.

         I. Background

         In 2006, plaintiff Shahnaaz Azeem executed a mortgage loan with Guaranty Bank to purchase a family home. [1] ¶ 9.[2] (Azeem's husband, Ahmed Azeem, co-signed the mortgage, but they divorced in April 2016. [21-1]; [32-1]. Ahmed is not a party to this suit.) Two years later, a foreclosure complaint was filed in state court. At some point afterwards, the loan was transferred to OneWest Bank, F.S.B., who was substituted into the foreclosure proceedings. [1] ¶¶ 10-11. Ocwen Loan Servicing, LLC, later became the loan servicer. [1] ¶ 12. The foreclosure case was still pending on March 18, 2015, when Azeem received a proposed loan modification agreement from Ocwen for modified monthly payments of $2, 453.89 for principal, interest, and escrow. [1] ¶¶ 13, 15-16. The cover letter to the loan modification agreement stated that Azeem had two weeks to either confirm her intent to accept the offer or submit her first monthly payment, and that if she did so, Ocwen would “suspend the next legal action in the foreclosure proceedings.” [1-1] at 2. The loan modification agreement listed several preconditions to the modification of Azeem's loan documents:

         1. Preconditions to Modification. I understand and agree that:

A. TIME IS OF THE ESSENCE under this Agreement:
B. The Loan Documents shall not be modified unless and until (i) I successfully complete the Trial Period (as defined below), (ii) the title insurance company insuring the lien of the Mortgage assures Servicer (or otherwise confirms to its satisfaction) that the Mortgage, as modified by this Agreement, continues to enjoy lien priority for the full amount of the Note and (iii) I receive from the Servicer a copy of this Agreement signed by the Servicer.
C. In order for the terms of this Agreement to become effective, I promise to make an initial payment of $2, 453.89 on or before 4/1/2015 and one (1) Trial Payment of principal and interest in the amount of $2, 453.89 to Servicer on or before 5/1/2015 (“Trial Period”).
D. If I successfully complete the Trial Period, the “Loan Documents” will be modified pursuant to the terms of this Agreement. However, I acknowledge and agree that if I fail to send any payment on or before the respective due date, the Servicer's modification offer will be null and void and this Agreement will not become effective, and I further understand and acknowledge that the Servicer may commence or resume foreclosure or other activities related to the delinquency of my Loan under its original terms. [. . .]

[1-1] at 6, ¶ 1. The agreement further stated that if these preconditions were met, then the loan documents would be automatically modified:

2. The Modification. If all preconditions to the modification set forth in Section 1 of this Agreement have been met, then the Loan Documents shall automatically become modified on 6/1/2015 (the “Modification Effective Date”). I understand that if I have failed to make any payments as a precondition to this modification, this modification will not take effect and this Agreement will not be effective. If this Agreement becomes effective, the Loan Documents will be modified to include the following new terms. . .

[1-1] at 6-7.

         Upon receiving the letter, Azeem called Ocwen to give notice of her intent to accept the loan modification, and, by March 30, 2015, she signed and returned the loan modification documents. [1] ¶¶ 14, 19. She made an initial trial payment of $2, 453.89 on March 31, 2015, and another on May 1, 2015. [1] ¶¶ 20-21. She also set up an automatic withdrawal from her bank account, and over the next three months, Ocwen deducted monthly payments for June, July, and August 2015. [1] ¶¶ 23-24. In August 2015, through her online account, Azeem received notices from Ocwen confirming the permanent loan modification. [1] ¶ 25. But when Ocwen did not withdraw her payment for September 2015, Azeem called to clarify. An Ocwen representative instructed her to send the payment by mail, so Azeem sent it by cashier's check through certified mail. [1] ¶¶ 26-28.

         A few weeks later, Ocwen rejected and returned Azeem's September payment. When she called to clarify, the representative advised her to again send her September and October payments by mail. [1] ¶¶ 29-30. Azeem mailed the checks, but the next day, she learned through her online account that Ocwen claimed that she owed monthly payments of $4, 502.96 and was in substantial default. [1] ¶¶ 31-32. The foreclosure action proceeded, and on October 15, 2015, Ocwen scheduled a judicial sale of the property. [1] ¶¶ 33-34. Ocwen also assessed Azeem default-related fees for property inspections and for the judicial sale. [1] ¶¶ 40-42. Azeem hired attorneys for the foreclosure action, who moved to enforce the loan modification and stay the judicial sale. [1] ¶ 35. Ocwen signed the loan modification on November 5, 2015, and the foreclosure case was dismissed a few days later. [1] ¶¶ 36-37.

         A few months later, in February 2016, Ocwen sent Azeem an escrow statement asserting that Azeem owed an escrow shortage of $8, 317.18, which would be collected over 60 months-increasing Azeem's monthly payments to $2, 703.40. [1] ¶¶ 43-46. Azeem paid the increased amount. [1] ¶ 47. Shortly thereafter, Azeem sent Ocwen a Notice of Error and Request for Information to dispute the default-related fees imposed after June 2015, to dispute the escrow shortage, and to request certain documents related to the fees and her account history. [1] ¶¶ 48-49. Ocwen received Azeem's letter on March 10, 2016, and responded on March 30, 2016. [1] ¶¶ 48, 50.

         In August 2016, Azeem sued OneWest Bank and Ocwen, alleging that they breached the loan modification agreement by charging her default-fees and pursuing foreclosure, that they violated the Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692e, 1692f (FDCPA), and the Illinois Consumer Fraud Act, 810 ILCS 505/1 et seq. (ICFA), by using deceptive and unfair means to collect a debt, and that Ocwen's response to her request for information violated Real Estate Settlement Procedures Act, 12 U.S.C. § 2605 (RESPA). Defendants move to dismiss all claims for failure to state a claim and for failure to join Azeem's ex-husband as an indispensable party.

         II. Legal Standards

         To survive a motion to dismiss for failure state a claim under Federal Rule of Civil Procedure 12(b)(6), a complaint must contain factual allegations that plausibly suggest a right to relief. Ashcroft v. Iqbal, 556 U.S. 662, 677-78 (2009). In ruling on a motion to dismiss under 12(b)(6), a court must construe all factual allegations as true and draw all reasonable inferences in the plaintiffs' favor, but the court need not accept legal conclusions or conclusory allegations. Id. at 680-82. Claims sounding in fraud are subject to the heightened pleading standard set forth in Federal Rule of Civil Procedure 9(b), which requires a plaintiff to describe the “who, what, when, where, and how of the fraud.” Cincinnati Life Ins. Co. v. Beyrer, 722 F.3d 939, 948 (7th Cir. 2013).

         When resolving a Rule 12(b)(6) motion, a court may only consider allegations in the complaint, documents attached to the complaint, and documents that are both referred to in the complaint and central to its claims. Levenstein v. Salafsky, 164 F.3d 345, 347 (7th Cir. 1998). However, when resolving a motion to dismiss for failure to join a necessary and indispensable party under Rule 12(b)(7), the court may look outside the pleadings, although the allegations of the complaint are accepted as true. Davis Cos. v. Emerald Casino, Inc., 268 F.3d 477, 479 n.2, 480 n.4 (7th Cir. 2001). Azeem has attached multiple documents to her complaint, including the loan modification agreement [1-1], the escrow shortage letter [1-2], her letter to Ocwen [1-3], and Ocwen's response, [1-4]. These exhibits are considered in resolving the motions to dismiss. Defendants included with their reply brief a copy of Azeem's May 2015 online account notice. [35-1]. This document is not referred to in Azeem's complaint, central to her claims, or relevant to the Rule 12(b)(7) motion, and ...


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