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Jackson v. Specialized Loan Servicing, LLC

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

September 25, 2019

JABARI JACKSON and TAMARA JACKSON, Plaintiffs,
v.
SPECIALIZED LOAN SERVICING, LLC, Defendant.

          MEMORANDUM OPINION AND ORDER

          Rebecca R. Pallmeyer Judge

         In November 2006, Plaintiffs Jabari and Tamara Jackson took out a home loan mortgage from the Decision One Mortgage Company. Years later, Plaintiffs defaulted on their debt and the loan servicer, Defendant Specialized Loan Servicing, LLC (“SLS”), initiated foreclosure proceedings. The Jacksons sought refinancing and loss mitigation, without success. In this action, Plaintiffs allege that in its interactions with Plaintiffs, SLS violated the Fair Debt Collection Practices Act (“FDCPA”) and the Real Estate Settlement Procedures Act (“RESPA”). Their FDCPA claim (Count I) alleges that Defendant violated 15 U.S.C. § 1692c(a)(2) by communicating directly with them instead of their attorney regarding their outstanding debt. In their RESPA claim (Count II), Plaintiffs allege that Defendant violated § 1024.41(g) of Regulation X, which implements RESPA, by moving for a judgment of foreclosure while a loss mitigation application was pending.

         Defendant moves for summary judgment on both claims. Defendant contends that the FDCPA claim fails because Plaintiffs waived the protection of § 1692c(a)(2), because Defendant had no knowledge that Plaintiffs were represented by counsel, and because Plaintiffs’ counsel represented them only in the foreclosure proceedings, and not in connection with loss mitigation. Defendant seeks dismissal of Count II on the ground that no loss mitigation application was actually pending at the time that Defendant moved for a judgment of foreclosure. For the reasons stated here, the court grants summary judgment in favor of Defendant on the RESPA claim; summary judgment is denied with respect to the FDCPA.

         BACKGROUND

         For some years prior to this litigation, Plaintiffs Jabari and Tamara Jackson resided in the home they owned at 6113 Newbury Lane, Matteson, IL 60443. (Def.’s Rule 56.1 Statement of Material Facts, hereinafter “Def.’s SOF” [46], ¶ 1.) On November 27, 2006, Plaintiffs obtained a mortgage on this property and took out a home loan with Decision One Mortgage Company. (Def.’s SOF ¶ 5.) The loan was initially serviced by Wells Fargo Bank, N.A., doing business under the name of America’s Servicing Company. (Def.’s SOF ¶ 6.) On December 1, 2015, American Servicing Company transferred servicing of the loan to Defendant Specialized Loan Servicing, LLC (“SLS”). (Def.’s SOF ¶ 10.)

         By the time SLS took over servicing of their loan, Plaintiffs were in default (Def.’s SOF ¶ 7), and the lender (Deutsche Bank at this point) had filed a foreclosure action in the Circuit Court of Cook County in October 2015. (Def.’s SOF ¶ 8; Plaintiffs’ Response in Opposition to Defendant’s Rule 56.1 Statement of Material Facts, hereinafter “Pl.s’ Resp. to Def.’s SOF” [51], ¶ 8.) The law firm Manley Deas Kochalski, LLC (“Manley Deas”) represented Deutsche Bank in the foreclosure proceeding, and SLS retained Manley Deas as counsel after taking on the position as loan servicer. (Def.’s SOF ¶¶ 9–10.)

         On January 31, 2016, Plaintiffs submitted an application for mortgage assistance to SLS under the Making Home Affordable Program. (Def.’s SOF ¶ 11.) A month and a half later, SLS advised Plaintiffs that their application for the Home Affordable Modification Program (“HAMP”) Tier 1 (a program that would have resulted in modified mortgage payments) had been denied, but that they had been approved for HAMP Tier 2. (Def.’s SOF ¶ 12; Communication from SLS to Plaintiffs of 3/11/16, Ex. 6 to Jabari Jackson Dep., Ex. A to Def.’s SOF.) The Tier 2 program gave Plaintiffs the option to release the deed to their property in lieu of foreclosure, or to proceed with a “short sale” of the property as an alternative. (Pl.s’ Resp. to Def.’s SOF ¶ 12; Communication from SLS to Jacksons of 3/11/16.) This communication from SLS gave Plaintiffs instructions on how to proceed with these options, but Plaintiffs did not pursue either one, and the time period in which to do so expired a few weeks later. (Def.’s SOF ¶ 13; Communication from SLS to Jacksons of 3/11/16.)

         On April 9, 2016, Plaintiffs applied for a second independent review of their HAMP application. (Letter from Jacksons to SLS of 4/9/2016, Ex. 7 to Jabari Jackson Dep.) This time, SLS responded quickly, advising the Jacksons in writing that the second independent review had confirmed the denial of their application. (Def.’s SOF ¶ 14.) Despite these communications, Plaintiffs contend that a loss mitigation application remained pending at the time SLS moved for a judgment of foreclosure several months later. (Pl.s’ Resp. to Def.’s SOF ¶¶ 14–15.) Plaintiff Tamara Jackson explains that she believed the application was still pending because, she asserts, Plaintiffs continued to receive phone calls from SLS discussing loss mitigation and loan modification options. (Pl.s’ Resp. to Def.’s SOF ¶ 14.)

         Indeed, following the April 2016 application, the parties continued to communicate regularly in writing and by telephone for several months. (Def.’s SOF ¶ 16.) In May 2016, Plaintiffs wrote to SLS inquiring about the possibility of remaining in the home as renters after relinquishing the deed, with an option to re-purchase it. (Id.) Further 2016 communications from SLS encouraged Plaintiffs to inquire about loss mitigation options, assigned them a new “Relationship Manager” to handle their debt, and offered a trial period for mortgage payment modification. (See Ex. 13–18 to Jabari Jackson Dep.) In a December 2, 2016 letter, SLS offered Plaintiffs the option of settling their debt for a one-time payment of $215, 000. (Letter from SLS to Jacksons of 12/2/16, Ex. 19 to Def.’s SOF.) This letter explained that Plaintiffs could accept the offer by returning the letter and the payment amount in certified funds before January 31, 2017. (Id.)

         With this offer pending, SLS’s attorneys moved for a judgment of foreclosure on December 14, 2016. (SLS Amended Answer ¶ 30.) Proceedings followed over the next several months related to the foreclosure suit. In January 2017, Plaintiffs retained counsel, the Consumer Legal Group, P.C. (“CLG”), to represent them. (Jabari Jackson Dep. 27:5–9.) Plaintiffs state that they hired CLG to represent them for purposes of the foreclosure proceeding and “in connection with” the debt they owed. (Def.’s SOF ¶ 21, Pl.s’ Resp. to Def.’s SOF ¶ 21.) Tamara testified that she advised SLS in phone calls that Plaintiffs were represented by counsel. (Tamara Jackson Dep. 44:16–20, 80:23–24, 81:1, Ex. B to Def.’s SOF.) Jabari Jackson believes this to be the case as well. (Jabari Jackson Dep. 34:19–23.)

         On March 6, 2017, Plaintiffs again wrote to SLS, asking about the possibility of a deed in lieu of foreclosure as a loss mitigation option. (Def.’s SOF ¶ 17; Letter from Jacksons to SLS of 3/6/17, Ex. 20 to Jabari Jackson Dep.) The letter concludes, “Please contact me as soon as possible so that we may begin this process.” (Letter from Jacksons to SLS of 3/6/17.) SLS did not respond until June 6, 2017, when SLS sent a letter essentially identical to the one it had sent Plaintiffs six months earlier. (Letter from SLS to Jacksons of 6/6/2017, Ex. 23 to Jabari Jackson Dep.) This June 6 letter again offered to settle the Plaintiffs’ debt for a single payment of $211, 500, this time setting June 30, 2017 as the date on which the offer would expire. (Id.) SLS contends that this letter was in direct response to Plaintiffs’ March 6 letter. (Def.’s SOF ¶ 18.) Plaintiffs dispute that a letter sent three months later was in fact a response to their “contact me as soon as possible” letter of March 6, and emphasize that they retained counsel in the interim. (Pl.s’ Resp. to Def.’s SOF ¶ 18.) The June 6, 2017 letter from SLS and the December 14, 2016 motion for a judgment of foreclosure are central to this case. Plaintiffs contend SLS violated the FDCPA by communicating with them directly, rather than through counsel, and that SLS violated RSPA by proceeding with foreclosure while their loss mitigation application was pending.

         DISCUSSION

         Defendant moves for summary judgment on both the Plaintiffs’ claims under the FDCPA and RESPA Regulation X. Granting a motion for summary judgment is proper only when there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). In determining whether this standard is met, the court views the evidence in the light most favorable to the non-moving party and draws reasonable inferences in the non-moving party’s favor. Smith v. Simm Assocs., Inc., 926 F.3d 377, 380 (7th Cir. 2019). A dispute of material fact exists if the evidence would allow a reasonable jury to find in favor of the non-moving party. Minerva Dairy, Inc. v. Harsdorf, 905 F.3d 1047, 1053 (7th Cir. 2018.)

         A. ...


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