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Golbeck v. Johnson Blumberg & Associates, LLC

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

July 19, 2017




         Before the Court are Defendant JPMorgan Chase Bank, N.A.'s motion to dismiss [62] and Defendant Seterus, Inc.'s motion to dismiss [69]. For the reasons set forth below, Defendants' motions [62; 69] are granted. For those claims that are not dismissed with prejudice, Plaintiff is given until August 18, 2017, to file a second amended complaint.

         I. Background

         In April 2013, Plaintiff Robert Golbeck executed a mortgage and promissory note with Defendant JPMorgan Chase Bank, N.A. (“Chase”) secured by his property in West Dundee, Illinois. [60, ¶ 9.] The note was payable in monthly installments of $1, 332.48. Id. The mortgage required an escrow account for payment of property taxes and homeowner's insurance premiums (id. ¶ 10), but Chase initially waived that requirement (id. ¶ 11). In January 2014, Plaintiff defaulted on his monthly mortgage payment obligations. Id. ¶ 13.

         In July 2014, Chase offered Plaintiff a trial payment plan as a means to modify his mortgage. [60-4.] That plan offered three “steps to qualify for a permanent modification”: (1) make a first trial period payment of $1, 175.92 by August 1; (2) make second and third payments of this amount on September 1 and October 1; and (3) “[a]fter all trial period payments are made on time, sign and return the final modification agreement.” Id. at 1. The letter states “[o]nce the modification is final, we will reduce your monthly payment to a new lower amount for the remaining term of your loan, which may be slightly higher than the trial period payments because of your monthly escrow payment for taxes and insurance.” Id.

         This July letter also attaches several enclosures, including a frequently asked questions section and a legal notices section. One frequently asked question listed is “When will I know if my mortgage can be modified permanently and how will the modified loan balance be determined?” [60-4, at 6.] The answer states, “Once you make all of your trial period payments on time, we will send you a modification agreement detailing the terms of the modified loan. The modification agreement will become effective once you and we have signed it.” Id. Another question is “Will my interest rate and principal/interest payment be fixed after my loan is permanently modified?” Id. at 7. The answer provided is:

Once your loan is modified, your interest rate and monthly principal and interest payment will be fixed for the life of your mortgage. Your new monthly payment will also include an escrow for property taxes, hazard insurance and other escrowed expenses, but your servicer will separately notify you of the escrow amount to include with your monthly payment.


         The legal notice section also discusses escrow accounts. It reads: “If your monthly payment did not include escrows for taxes and insurance, you are now required to establish an escrow account for these items. You agree that any prior waiver that allowed you to pay directly for taxes and insurance is revoked. You agree to establish an escrow account and to pay required escrows into that account.” [60-4, at 8.] Similar information appears in the frequently asked question section:

If you did not have an escrow account before, you will be required to establish an escrow account for the payment of such escrow amounts. The timing of your tax and insurance bills may require that you make a payment to cover any such bills when they come due. This is known as an escrow shortage, which your loan currently has. This can either be paid in a lump sum when the loan is modified or over the next five years (60 months).

Id. at 6.

         Plaintiff timely made the three $1, 175.92 payments requested in the July letter. [60, ¶ 16.] On November 14, 2014, Chase advised Plaintiff that it would be transferring the servicing of his mortgage to Defendant Seterus, Inc. (“Seterus”), effective December 1, 2014. [60-5.] That letter directed Plaintiff to send any payments to Seterus after December 1, and stated that “Chase will no longer accept your payments.” Id. at 3. This letter also included a frequently asked question section. Two questions are relevant here:

I'm in the middle of a loan modification. Will my modification be completed first?
No, your new servicer will continue the modification process of your loan. For more information about your current modification status, please call your dedicated Customer Assistance Specialist.
When should I begin making payments to my new servicer?
As of the effective transfer date listed in this letter, Chase can no longer accept or process your loan payments. Any payments we receive after this date will be forwarded to your new servicer for up to 60 days. If you mail your payments or make your payments online, and:
Your payment due date falls before the effective date, please send the payment to us.
Your payment due date falls on or after the effective date, please send the payment to your new servicer.
Please refer to the payment and contact information section in this letter for payment addresses and additional payment information.

Id. at 5.

         On November 20, 2014, Chase sent Plaintiff another letter regarding his loan modification, this time attaching two copies of a permanent loan modification agreement (“LMA”) and a summary of its terms. [60-6.] The letter stated that “[u]pon full execution of the Modification Agreement, [Chase] will waive all previous late charges that remain unpaid.” Id. at 2. The letter directed that “[t]o accept this offer for a permanent mortgage modification, ” Plaintiff was to “[s]ign and send both copies of the Modification Agreement to us in the enclosed, prepaid envelope by DECEMBER 02, 2014.” Id.

         The LMA provides that Plaintiff's monthly principal and interest payments would be $1, 150.40, with the first payment due January 1, 2015. Id. at 5. Paragraph 7 of the agreement states that “Lender is notifying the borrower that any prior waiver by the Lender of the Borrower's obligation to pay to the Lender Funds for any or all Escrow Items is hereby revoked, and the Borrower has been advised of the amount needed to fully fund the Escrow Items.” Id. at 7. The next paragraph provides that “[t]he Lender may waive the Borrower's obligation to pay to the Lender Funds for any or all Escrow Items at any time, ” but “[a]ny such waiver may only be in writing.” Id. at 8. If such waiver occurred, Plaintiff remained responsible to pay directly the amounts due for any escrow items. Id. The last two pages of the LMA are signature pages, with one page for Plaintiff and another for Chase. Id. at 9-10. Only Plaintiff's signature appears on the LMA. Plaintiff does not allege that Chase or Seterus ever signed the LMA.

         The summary enclosed with the LMA and the November 20 letter includes the following additional details about Plaintiff's mortgage:

NEW/UNPAID PRINCIPAL BALANCE. Any past due amounts as of the end of the trial period, including unpaid interest, real estate taxes, insurance premiums, and certain assessments paid on your behalf to a third party, will be added to your mortgage loan balance. If you fulfill the terms of the trial period including, but not limited to, making any remaining trial period payments, we will waive ALL late charges that have accrued and remain unpaid at the end of the trial period.
* * *
ESCROW ACCOUNT. The terms of your Loan Modification Agreement require that you pay into an escrow account an amount sufficient to cover your property taxes, insurance premiums and other required fees. Any prior waiver of escrows by your lender is no longer in effect. We will draw on this account to pay your real estate taxes and insurance premiums as they come due. Please note that your escrow payment amount will adjust if your taxes, insurance premiums and/or assessment amounts change, so the amount of your monthly payment that we must place in escrow will also adjust as permitted by law. This means that your monthly payment may change. Your initial monthly escrow payment will be $591.42. This amount is not included in the loan payment noted in Section 2 of the enclosed Loan Modification Agreement; you must remit this amount separately.
ESCROW SHORTAGE. Due to the timing of your tax and insurance payments, we have determined that there is a shortage of funds in your escrow account in the amount of $31.30. This amount shall be repaid over a 5-year (60-month) period. This payment has been included in the monthly escrow payment stated above. If you wish to pay the total shortage now in a lump sum, please contact us. Paying this amount now in a lump sum will reduce your new monthly mortgage payment.

Id. at 4.

         On December 1, 2014, Plaintiff submitted a $1, 175.92 payment to Chase. [60-7.] Plaintiff alleges on “information and belief, Chase failed to promptly transfer [this] payment to Seterus” or return it to Plaintiff. [60, ¶ 24.] Instead, Chase allegedly kept the payment for itself. Plaintiff alleges that in December and January, Seterus sent him multiple letters and an account statement that “fail[ed] to acknowledge the Modification Agreement, ” indicated that Plaintiff remained in default, stated that he continued to owe monthly payments of $1, 332.48, and listed an escrow account balance of $0.00. Id. ¶¶ 25-27.

         On December 26, 2014, Plaintiff called Seterus about the LMA, but “Seterus informed [Plaintiff] that it had no record of the [LMA] and suggested that [Plaintiff] tender payment in the amount of $1, 332.48.” [60, ¶ 28.] Plaintiff instead tendered a payment of $1, 150.42 to Seterus on December 30, 2014. Id. ¶ 29. After receiving additional communications from Seterus that refused to recognize the LMA, Plaintiff contacted Chase on January 13, 2015 at 4:20 p.m. Id. ¶ 31. The next day, Chase called him back and told him that it had located the LMA, faxed it to Seterus, and “communicated with an Assistant Vice President at Seterus who ensured that the situation would be resolved.” Id. ¶ 32. Despite this alleged conversation, Seterus did not recognize the LMA as altering Plaintiff's mortgage. [60, ¶¶ 33, 41.] Seterus also apparently made at least four other offers to modify Plaintiff's ...

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