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Vassalotti v. Wells Fargo Bank

August 9, 2010


The opinion of the court was delivered by: Anita B. Brody, J.


Plaintiff Marie Vassalotti ("Vassalotti") brings this action against Wells Fargo Bank, N.A. d/b/a America's Servicing Company ("Wells Fargo" or "ASC"), alleging that Wells Fargo failed to service her mortgage loan in accordance with the terms of the original note and mortgage, two loan modification agreements, federal law, and state law.

In the Third Amended Complaint, Plaintiff brings four claims: violation of the Real Estate Settlement Procedures Act ("RESPA") (Count I), breach of contract (Count II), violation of the Fair Credit Reporting Act ("FCRA") (Count IV), and violation of the Unfair Trade Practices and Consumer Protection Law ("UTPCPL") (Count V).*fn1 Defendant moves to dismiss Counts I, IV, and V.


In August 2007, Wells Fargo, as servicer of Vassalotti's mortgage loan, filed a foreclosure action against Vassalotti because she failed to make the required payments under her mortgage agreement. On November 14, 2007, Wells Fargo sent Vassalotti a letter describing its loan modification program. Loan modification programs generally assist delinquent borrowers by extending their overdue payment obligations over the remaining term of the loan. Wells Fargo described its own program as follows:

This program adds the delinquent interest, taxes, and/or insurance payments to your unpaid balance if applicable. If you qualify, we may be able to extend the repayment of the past due amounts over the remaining term of your loan. (3AC Ex. F.) Typically, the borrower's deficit is added to the original loan's remaining balance, to create an increased overall balance. The borrower then agrees to make payments toward the modified balance and has no further obligations with respect to the original shortfall.

On January 18, 2008, after Vassalotti executed a loan modification agreement, Wells Fargo withdrew the foreclosure action. On May 22, 2008, Vassalotti executed a second loan modification agreement with Wells Fargo.

In addition to other delinquencies under the original mortgage agreement, Vassalotti failed to make sufficient payments into her escrow account. An escrow account is an "account that a servicer establishes or controls on behalf of a borrower to pay taxes, insurance premiums (including flood insurance), or other charges with respect to a federally related mortgage loan."

24 C.F.R. 3500.17. This action arises, in part, out of a dispute over whether the May 22, 2008 loan modification agreement cured the deficit in Vassalotti's escrow account.

In the May 22, 2008 loan modification, Wells Fargo capitalized a $33,238.25 deficit into a modified loan balance. Thus, Vassalotti's loan balance increased from $277,688.51 to $310,926.76. The full modification data is as follows:

Pre-Modification Modified

Unpaid Principal Balance $277,688.51 $310,926.76 Note Rate 9.65000% 9.650% Monthly P&I Payment 2,385.10 2,691.86 DDLPI (I) Eff. Interest Change Date (II) 01-08 06/01/2008 Maturity Date 12-35 12/01/2035 First Modified Payment Due Date 07/01/2008 New Term (months) 330 Breakdown of Amounts Due:

Interest (Plus Del Prin if Structured Finance mod) $35,428.44 Escrow .00 Corp Recov/Title/Mod Fees/Atty/FC/BPO/Appraisal 7,800.72 Borrower's Payment Toward Arrearages $9,990.91 Mortgage Insurer Contribution .00 Total Capitalized Amount $33,238.25

(2AC Ex. N.) The Breakdown of Amounts Due explains how Wells Fargo arrived at the $33,238.25 figure: it added Vassalotti's interest deficit ($35,428.44) and "Corp Recov/Title/Mod Fees/Atty/FC/BPO/Appraisal" fees ($7,800.72), and then subtracted Vassalotti's payment towards her arrearage ($9,990.91). Vassalotti argues that the entry of ".00" with respect to the escrow balance demonstrates that the loan modification brought her escrow account deficit to zero. In contrast, Wells Fargo contends that the Breakdown of Amounts Due lists only the amounts that were capitalized into the modified balance. It argues that the ".00" entry for the escrow line item reflects that Vassalotti's escrow obligations were not capitalized into the modified balance.

In July 2008, Wells Fargo informed Vassalotti that her escrow account maintained a deficit of $10,220.35. (2AC Ex. O.) To cover this shortfall, Wells Fargo increased Vassalotti's required monthly escrow payments from $327.45, the amount stated in the May 22, 2008 agreement, to $1,214. (2AC Ex. P.) On August 10, 2008, Wells Fargo wrote Vassalotti informing her that she was delinquent on the required payments under the mortgage agreement. (2AC Ex. S.)

On August 19, 2008 and September 23, 2008, Vassalotti wrote Wells Fargo disputing her mortgage loan's accounting. (2AC Exs. T & U.) These letters expressed Vassalotti's belief that Wells Fargo erred by carrying over a negative escrow balance from her original mortgage agreement and increasing her required escrow payments from $327.45 per month to $1,214 per month. Wells Fargo responded to these letters on September 5, 2008 and November 12, 2008, explaining that the loan modification agreements failed to cure Vassalotti's escrow deficit. (2AC Ex. W; Def.'s Mot. to Dismiss, Ex. 1.) In Count I, Vassalotti claims that Wells Fargo's responses were insufficient under RESPA.

In Count IV, Vassalotti complains that Wells Fargo violated the FCRA by furnishing inaccurate information to credit reporting agencies. In particular, Vassalotti alleges that Experian, Equifax, and Trans Union (together, the "Credit Reporting Agencies" or "CRAs") reported that Vassalotti's mortgage was discharged in bankruptcy. Vassalotti further alleges that the CRAs contacted Wells Fargo, and that Wells Fargo verified the inaccurate information.

Vassalotti contends that the information is inaccurate because her mortgage was never discharged in bankruptcy.

Finally, in Count V, Vassalotti alleges that Wells Fargo violated the UTPCPL by engaging in "deceptive acts that caused confusion and misunderstanding of the terms of the loan modifications." (3AC ΒΆ 10.) Although this pro se plaintiff fails to explain her exact legal theory, the essence of her allegations is that Wells Fargo misled her by stating that it would capitalize her escrow shortage into the modified loan ...

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