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Mahoney v. Bank of America, National Association

United States District Court, S.D. California

May 27, 2014

RITA MAHONEY, et al., Plaintiffs,


THOMAS J. WHELAN, District Judge.

Pending before the Court is a motion to dismiss filed by Defendants Bank of America, National Association ("BANA") and Nationstar Mortgage LLC ("Nationstar"). Plaintiffs Rita Mahoney and Eric Johnston oppose.

The Court decides the matter on the papers submitted and without oral argument. See Civ. L.R. 7.1(d.1). For the following reasons, the Court DENIES Defendants' motion to dismiss [Doc. 10].


The parties are well aware of the facts based on this Court's previous order on Defendants' motion to dismiss the initial Complaint.

This lawsuit arises out of Plaintiff's purchase on or about April 2, 2004 of real property in San Diego, California. ( First Am. Compl. ("FAC") [Doc. 9] at ¶ 7, Ex. B [Doc. 9-1]; Defs.' RJN [Doc. 10-1] at Ex. A.) In order to purchase the property, Plaintiffs obtained a $960, 000 mortgage loan, which is secured by a deed of trust encumbering the property. ( Id. )

In October 2011, beneficial interest in the loan was assigned to BANA. ( Defs'. RJN at Ex. B.) Then in June 2012, BANA reassigned the beneficial interest to Deutche Bank National Trust Company, as Trustee for the Holders of the GSR Mortgage Loan Trust 2004-7. ( Id. at Ex. C.) BANA, however, continued to service the loan until July 1, 2013, when servicing was transferred to Nationstar. ( FAC at ¶ 24.)

According to the FAC, after purchasing the property, Plaintiffs made timely monthly mortgage payments. ( FAC at ¶ 9.) In 2011, their monthly mortgage payment increased from $3, 800 to $5, 900 because the loan changed from a fixed rate, interest only loan to an adjustable-rate mortgage. ( Id. at ¶ 10.) Plaintiffs struggled to make these increased payments, so in June 2011, Plaintiffs "met with [BANA] loan representatives at a mortgage modification workshop... to request that the Loan be restructured, and were told that they were excellent candidates for a loan modification." ( Id. ) However, Plaintiffs were subsequently told that their loan modification was rejected because they "were not yet in default and must be in imminent default to be considered for a modification." ( Id. ) Allegedly following BANA's instructions, Plaintiffs intentionally became delinquent on their loan in order to obtain a loan modification. ( Id. )

On June 12, 2012, a notice of default was recorded against Plaintiffs. ( FAC at ¶ 11; Defs.' RJN at Ex. D.) However, the notice of default was rescinded on August 16, 2013. ( Id. at Ex. E.)

Meanwhile, in July 2012, Plaintiffs filed a Chapter 13 bankruptcy petition, but contend that they began paying their monthly mortgage on time. ( FAC at ¶ 12; see also Defs.' RJN Ex. F.) In October 2012, the bankruptcy was converted to Chapter 7, and during that time, Plaintiffs allege that they "continued to pay their monthly mortgage payments on time, which [] were accepted by [BANA]." ( Id. at ¶ 12.)

In November 2012, Plaintiffs "decided to liquidate their retirement savings to pay the balance of their arrears on the mortgage by the end of 2012." ( FAC at ¶ 13.) Throughout November 2012 and into December 2012, Plaintiffs attempted to get a reinstatement quote from BANA, but were unable to obtain a response. ( Id. ¶¶ 13-15.) Accordingly, on December 28, 2012, Plaintiffs called BANA "to request that [BANA] accept a payment of $50, 000.00 over the phone so Plaintiffs could at least pay the majority of the delinquent balance[, ]" which they estimated to be approximately $50, 000-$60, 000. ( Id., ¶ 16.) According to Plaintiffs, the BANA representative agreed to the request, and "told Plaintiffs that the $50, 000 payment would be accepted and credited to their account in 2012." ( Id. ) Plaintiffs, therefore, made a $50, 000 payment over the phone on December 28, 2012 in order "to pay off the majority of their delinquent balance in the year 2012 so that they could obtain the tax write-off." ( Id. ) BANA failed to deposit and credit the payment until January 2013, and failed to provide Plaintiffs with a 1098 tax form reflecting the $50, 000 payment. ( Id., ¶ 17.)

In January 2013, Plaintiffs made another timely mortgage payment that BANA appeared to accept and apply to the loan. ( FAC at ¶ 18.) Though not alleged in the complaint, it appears the bankruptcy was discharged on approximately January 23, 2013.

In February 2013, Plaintiffs again submitted a timely mortgage payment, but this time BANA returned the payment with the explanation that the amount was "insufficient to reinstate the account." ( FAC, ¶ 18.) Plaintiffs contacted BANA to again request the 1098 tax form for 2012 and a quote for the amount of the remaining reinstatement balance, but BANA failed to provide both. ( Id., ¶ 19.) They allege that for the next four months, Plaintiffs continued calling BANA weekly requesting a reinstatement quote and payment history, but to no avail. ( Id., ¶ 20.) Additionally, while BANA was preventing Plaintiffs from reinstating their account, BANA was continuing to assess "late fees and penalties on the delinquent balance each month, and would not accept their monthly mortgage payments." ( Id. )

Finally, in May 2013, Plaintiffs received a response from BANA. The correspondence was a mortgage statement dated May 6, 2013 stating that Plaintiffs' delinquent amount was $48, 441.30 in "outstanding payments, late fees and penalties." ( FAC, ¶ 22.) Two days later, Plaintiffs received a second correspondence stating that BANA "intended to foreclose on their property, and showed a reinstatement amount of $39, 333.65 which included $963.88 in late fees, and stated that the last payment had been on October 1, 2012, which completely ignored the Plaintiffs' payment in December 2012 and regular monthly payment in January 2013." ( Id. ) On June 4, 2013, Plaintiffs sent a formal Qualified Written Request ("QWR") to BANA demanding (1) the payment history on their loan, (2) an accounting of their $50, 000 payment, and (3) an accounting of their penalties and fees. ( Id., ¶ 23.)

On July 1, 2013, BANA transferred the servicing of the loan to Nationstar. ( FAC, ¶ 24, Exs. K and L.) In the Servicing Transfer Notice, BANA acknowledged their duty to provide Plaintiffs with the payment history of their loan and an accounting through a QWR that Plaintiffs had submitted, and further acknowledged their duty to transfer all of the records of the loan to Nationstar. ( Id., ¶ 24, citing Ex. K.) Nationstar allegedly failed and refused to respond to Plaintiffs' June 4, 2013 QWR. ( Id., ¶ 25.) Nationstar further "failed and refused to respond to the Plaintiffs' phone calls in July and August 2013 in which they requested a payment history ...

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