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Ali v. Ocwen Loan Servicing Inc.

United States District Court, E.D. Pennsylvania

March 29, 2017

AZFAR ALI, Plaintiff
v.
OCWEN LOAN SERVICING, INC., and WELLS FARGO BANK, N.A., as Trustee for the MORGAN STANLEY ABS CAPITAL I INC. TRUST 2006-HE8, Defendants

          MEMORANDUM

          STENGEL, J.

         Azfar Ali brings this action against Ocwen Loan Services, Inc., and Wells Fargo Bank, N.A., alleging violations of the Real Estate Settlement Procedures Act, 15 U.S.C. § 2605, and Regulation X, 12 C.F.R. § 1024.35 in Count I; Pennsylvania's Unfair Trade and Consumer Protection Law, 73 P.S. § 201-3.1, and Pennsylvania's Fair Credit Extension Uniformity Act, 73 P.S. § 2270.4 in Count II; and the Fair Credit Reporting Act, 15 U.S.C. § 1681s-2(b) in Count III. The defendants have filed a motion to dismiss Count II of the amended complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. The plaintiff has responded. For the following reasons, I will deny the motion in its entirety.

         I. BACKGROUND[1]

         Mr. Ali owns and resides in a home in Macungie, Pennsylvania, which he purchased in 2006. The residence is encumbered by a mortgage, originally in the amount of $273, 472. Sometime before February 10, 2009, Mr. Ali's mortgage was assigned to the Morgan Stanley ABS Capital I Trust 2006-HE8, but the assignment was not recorded. Around that same time, Mr. Ali entered into a Loan Modification Agreement with Saxon Mortgage Services. The modification was also not recorded. At some point before January 10, 2011, Defendant Ocwen began servicing the mortgage on behalf of the Trust. Mr. Ali's contractual monthly mortgage payments were $1, 533.47.

         On October 24, 2011, Mr. Ali received an invitation from Ocwen to apply for a modification for his loan. Mr. Ali contacted Ocwen to inquire about refinancing options. Ocwen responded that as a servicer, it could not refinance loans directly and thus did not participate in a refinancing program.

         On March 20, 2013, Mr. Ali submitted an application for a mortgage loan modification to Ocwen, complete with all requested documents. In a letter dated April 10, 2013, Ocwen offered Mr. Ali a HAMP[2] Trial Period Plan (“TPP”) with three trial payments of $1, 941.98 to be made on or before May 1, 2013, June 1, 2013, and July 1, 2013. The offer specifies: “To accept this offer, you must make your first monthly trial period payment.” It further clarifies: “If each payment is not received by Ocwen Loan Servicing in the month in which it is due, this offer will end and your loan will not be modified under the Making Home Affordable Program.”

         Upon receiving Ocwen's HAMP TPP offer and before May 1, 2013, Mr. Ali called Ocwen to discuss the offer. He rejected it on the telephone with Mr. Yash, an Ocwen representative. Mr. Ali confirmed that he wanted to continue paying his property taxes and homeowner's insurance premiums directly, and requested that Ocwen not escrow his account as required by HAMP. Ocwen also allegedly and falsely represented to Mr. Ali's that his rejection of the HAMP loan modification had been confirmed.

         Based upon Ocwen's false representations that a trial payment must be made to accept the HAMP program and that Mr. Ali's rejection of the loan modification had been confirmed, Mr. Ali did not make the trial period payment and instead continued making his contractual mortgage payments of $1, 533.47 from May 2013 through the present.

         The amended complaint further alleges that immediately after Mr. Ali's rejection of the mortgage modification, and Ocwen's purported acknowledgment of the rejection, Ocwen began mishandling Mr. Ali's contractual mortgage payments. In fact, Ocwen admits that it treated the mortgage loan as if it had been modified through HAMP, allocating portions of Mr. Ali's contractual monthly payment to an escrow account for property taxes and homeowner's insurance.

         Defendant Ocwen allegedly allocated Mr. Ali's mortgage payments to a suspense account, and not towards the principle and interest of the mortgage in May 2013 and June 2013. Ocwen applied late charges to Mr. Ali's May 2013 mortgage payment, even though the payment was not late. Ocwen's misallocation of these payments also included the application of $614.34 towards an escrow account, an account which should never have existed because Mr. Ali's payment allocated to the escrow account was not applied to interest or principle of the mortgage.

         Although Ocwen had allegedly represented to Mr. Ali that his mortgage loan would not be included in the HAMP modification, Ocwen improperly treated his contractual mortgage payments as “Forbearance Payments, ” which were deposited into suspense accounts and used to establish escrow accounts. Ocwen also misapplied Mr. Ali's contractual mortgage payments to a homeowner's insurance policy. Mr. Ali had always paid his property taxes and homeowner's insurance directly. Mr. Ali renewed his current homeowner's policy and paid the premiums directly to the insurance company on June 20, 2013. Unbeknownst to Mr. Ali, Ocwen opened and paid a homeowner's insurance policy on Mr. Ali's behalf with the contractual mortgage payments Mr. Ali made, instead of applying them to the principle and interest. In fact, less than a week after Ocwen paid the homeowner's policy on Mr. Ali's behalf, Ocwen sent Mr. Ali a letter indicating that Mr. Ali's application for a loan modification had been denied. The reason given for the denial was, “The application was withdrawn at your request.”

         A year later in June 2014, the same situation was repeated. Mr. Ali paid his homeowner's insurance directly, and Ocwen paid Mr. Ali's homeowner's insurance with Mr. Ali's contractual mortgage payments.

         Ocwen also allegedly misapplied Mr. Ali's contractual mortgage payments to his annual property taxes. Mr. Ali had always paid his property taxes directly. Based on Ocwen's representations that his mortgage had not been modified through HAMP, Mr. Ali paid his property taxes directly to his town's tax assessor on August 10, 2013. Defendant Ocwen paid the annual property taxes to Mr. Ali's town's tax assessor on August 14, 2013, with money from Mr. Ali's contractual mortgage payment. In October 2013, Ocwen was refunded for the double payment of the annual property taxes and Ocwen applied the refund to the impermissibly opened and operated escrow account. Mr. Ali has never received any refund from Ocwen stemming from the double payment of the $4, 132 in property taxes.

         Mr. Ali disputed the late charges Ocwen applied to his May 2013 payment and confirmed his rejection of the HAMP loan modification. He also disputed the treatment of his mortgage as if it had been modified by HAMP in June 2013, in July 2013, twice in November 2013, twice in January 2014, in April ...


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