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Clark v. Green Tree Servicing LLC

United States District Court, D. Colorado

September 24, 2014

SHANNON CLARK, individually and on behalf of all others similarly situated, Plaintiff,
GREEN TREE SERVICING LLC, a Delaware limited liability company, Defendant

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[Copyrighted Material Omitted]

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For Shannon Clark, individually and on behalf of all others similarly situated, Plaintiff: Megan Lynn Lindsey, Steven Lezell Woodrow, Edelson, P.C.-Denver, Denver, CO.

For Green Tree Servicing LLC, a Delaware limited liability company, Defendant: Martin Christopher Bryce, Jr., Ballard Spahr, LLP-Philadelphia, Philadelphia, PA; Sarah Block Wallace, Ballard Spahr, LLP-Denver, Denver, CO.

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PHILIP A. BRIMMER, United States District Judge.

This matter is before the Court on Defendant Green Tree's Motion to Dismiss Class Action Complaint [Docket No. 9]. This case arises out of plaintiff Shannon Clark's efforts to modify her mortgage loan through her servicer, defendant Green Tree Servicing LLC (" Green Tree" ). The Court's jurisdiction is based on 28 U.S.C. § 1332(d)(2).


A. Allegations in the Complaint

The following allegations are set forth in the complaint and will be taken as true for the purposes of ruling on defendant's motion to dismiss. Alvarado v. KOB-TV, LLC, 493 F.3d 1210, 1215 (10th Cir. 2007).

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Green Tree services residential mortgage loans. Docket No. 1 at 1, ¶ 2. Over the past several years, Green Tree has purchased billions of dollars of servicing rights to loans owned by Bank of America, N.A. (" BAC" ). Id. at 2, ¶ 3. In its role as a servicer, Green Tree signed a contract in April 2009 with the United States Department of the Treasury to participate in the Home Affordable Modification Program (" HAMP" ), a federal program intended to help homeowners remain in their homes despite financial difficulties. Id. at 2, ¶ 4. Green Tree has failed to satisfy its obligations under HAMP, as well as under federal and state law, by (1) providing borrowers with deficient validation notices; (2) claiming to have lost or never received financial documentation submitted by borrowers; and (3) refusing to abide by the terms of permanent modification agreements. Id. at 2-3, ¶ ¶ 5-6. Green Tree engages in these practices in order to maximize its own profits. Id. at 3, ¶ 7.

On February 18, 2009, acting on their authority under the Emergency Economic Stabilization Act of 2008 and the American Recovery and Reinvestment Act of 2009, the Secretary of the Treasury and the Director of the Federal Housing Finance Agency introduced HAMP, designed to encourage loan servicers to modify loans. Docket No. 1 at 6-8, ¶ ¶ 18-20. Under HAMP, servicers receive $1,000 for each loan they modify. Id. at 7-8, ¶ 20.

A HAMP modification proceeds in two stages: first, a servicer gathers a borrower's financial information to determine whether the borrower qualifies and, if so, offers the borrower a trial period plan (" TPP" ). Docket No. 1 at 9, ¶ 25. If the borrower makes all the payments under the TPP and otherwise satisfies the eligibility requirements, the servicer offers the borrower a permanent modification agreement (" PMA" ). Id. Once the PMA is signed by both parties and notarized, the loan is permanently modified. Id. at 10, ¶ 27. Green Tree systematically refuses to honor TPPs that borrowers obtained from BAC before the right to service their loans was transferred to Green Tree. Id. at 9, ¶ 26. Green Tree systematically fails to honor PMAs that have been signed and recorded by unilaterally revoking agreements, reverting to borrowers' original loan terms, and coercing borrowers into signing new and less favorable PMAs by threatening them with foreclosure. Id. at 10, ¶ 27. Green Tree refuses to correct known errors in this process, fails to adequately hire and train its staff, routinely loses borrowers' documents, routinely ignores documents submitted by borrowers, and routinely disregards HAMP guidelines and directives. Id. at 10, ¶ 28.

Because banks such as BAC have decreasing incentives to retain the servicing rights to underperforming loans--which are classified as " riskier" assets that require them to hold more equity and which must be written down as default rates rise and interest rates drop--they often sell the rights to entities like Green Tree that lack the resources, ability, and incentive to service loans in compliance with applicable law. Docket No. 1 at 4-6, ¶ ¶ 12-17.

Plaintiff Shannon Clark is a Colorado homeowner. Docket No. 1 at 10, ¶ 29. In early 2012, she began having difficulty making her mortgage payments. She applied for a loan modification through HAMP on July 31, 2012. Id. On August 28, 2012, BAC sent a letter to plaintiff indicating that her loan would be serviced by Green Tree as of September 16, 2012. Id. at 11, ¶ 30. The notice stated that BAC would transfer documentation related to any loan modifications to Green Tree. Id. at 11, ¶ 32.

On September 14, 2012, BAC sent Ms. Clark a TPP (the " first TPP" ) pursuant to

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HAMP. Docket No. 1 at 12, ¶ 34. Under the first TPP, Ms. Clark was required to make three monthly payments of $1,173.05. Id. at 14, ¶ 44. On September 27, 2012, Green Tree notified Ms. Clark of her designated account representative. Id. at 12, ¶ 37. On October 1, 2012, Green Tree sent her a notice reporting the total amount due on her loan. Id. at 12-13, ¶ 38.

On October 15, 2012, Ms. Clark called Green Tree and spoke with a customer service representative who stated that Green Tree had no record of Ms. Clark's first TPP or her attempts to modify her loan. Docket No. 1 at 13, ¶ 39. Ms. Clark promptly faxed a copy of her first TPP and supporting documentation to Green Tree; when she called later to confirm receipt, Green Tree denied ever receiving the documents. Id. at 13, ¶ 40. Ms. Clark then spoke with a Green Tree representative who said that a new phone application was necessary to determine whether Ms. Clark was eligible to apply for a HAMP modification. Id. at 13, ¶ 41.

On November 6, 2012, Ms. Clark received a HAMP application package from Green Tree, which stated that the application was due the same day. Docket No. 1 at 13, ¶ 42. Ms. Clark completed the application and sent it back, along with the first trial payment due under the first TPP, which Green Tree deposited in December 2012. Id. On December 10, 2012, Green Tree informed Ms. Clark that she had been approved for a HAMP trial plan and sent her a new TPP (the " second TPP" ). Id. at 14, ¶ 43. Although Ms. Clark's financial circumstances had not changed since she received the first TPP, the second TPP required her to make three monthly payments of $1,381.76. Id. at 14, ¶ 44. Ms. Clark made the three trial payments due under the second TPP on January 1, February 1, and March 1, 2013. Id. at 13, ¶ 45. During that time, Ms. Clark continued to receive letters from Green Tree regarding foreclosure and the sale date of her home. Id.

On March 20, 2013, Green Tree sent Ms. Clark a PMA (the " first PMA" ). Docket No. 1 at 14, ¶ 46. An attached letter instructed Ms. Clark that, " [t]o accept this offer, you must sign and return both copies of the Modification Agreement to us in the enclosed, pre-paid envelope by 04/19/2013." Id. (emphasis in original). On April 10, 2013, Ms. Clark signed two copies of the first PMA before a notary public and sent the copies to Green Tree. Id. at 14, ¶ 47. On April 22, 2013, Jeff D. Koenig, Green Tree's Director of Default Services, signed the first PMA before a notary public. Id. On May 6, 2013, the first PMA was recorded in Jefferson County, Colorado. Id.

On July 19, 2013, Green Tree sent Ms. Clark a second PMA (the " second PMA" ), which differed from the first. Docket No. 1 at 15, ¶ 50. Specifically, the second PMA had a higher principal balance, a longer term, a higher interest rate, and slightly lower monthly payments. Id. at 15, ¶ 51. The second PMA did not forgive any of Ms. Clark's principal and it provided for finance charges that were three and one-half times as high over the life of the loan. Id. at 16, ¶ 51.

Ignoring both PMAs, Green Tree sent Ms. Clark notices of default, foreclosure, loss mitigation alternatives, and her right to cure on May 28, June 5, June 17, June 19, and July 17 of 2013. Id. at 16, ¶ 52.

On July 26, 2013, Ms. Clark spoke with a Green Tree representative who told her that she did not qualify for the terms set forth in the first PMA and that the documents were sent to her in error. Id. at 16-17, ¶ 53. Based on the HAMP rules and plaintiff's financial documentation, Green Tree's representation that she did not qualify for the terms set forth in the

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first PMA was incorrect. Id. at 17-19, ¶ ¶ 55-57. On July 31, 2013, Ms. Clark spoke with another Green Tree representative about her eligibility for HAMP and the representative told her he would " personally cancel" her application and place her house in foreclosure if she did not sign the second PMA. Id. at 17, ¶ 55.

In July 2013, Ms. Clark obtained a personal credit report, which indicated that Green Tree had reported her loan as past due prior to April 2013. Docket No. 1 at 20, ¶ 62. Green Tree reported her loan as being current in April 2013 and as being over $13,000 past due in May, June, July, and August, 2013; by September 2013, Green Tree was reporting Ms. Clark as being $17,722.87 past due. Id. 20-21, ¶ ¶ 62-63. Green Tree's May 6, 2013 monthly billing statement listed a monthly payment of $1,102.90. Id. at 20, ¶ 63. Statements for June, July, August, and September 2013 listed a monthly payment of $1,265.87-Ms. Clark's original loan payment. Id. at 20-21, ¶ 63.

On August 7, 2013, Green Tree sent Ms. Clark an additional copy of the second PMA. Docket No. 1 at 19, ¶ 58. During the course of several conversations with Green Tree representatives regarding the second PMA, Ms. Clark was told that " Green Tree had made 'mistakes' on its end by sending out the wrong PMAs and that it had happened to 'lots' of other people." Id. at 19, ¶ 59.

On September 20, 2013, Green Tree responded to a Qualified Written Request sent by Ms. Clark with a letter stating:

As you are aware, an error was detected on the modification agreement sent on March 20, 2013. A revised modification agreement was provided to you on July 19, 2013 to correct the terms and conditions of the plan. The previous agreement executed by Borrower and Lender are [sic] void and of no legal effect. If you elect not to sign the corrected agreement, the terms of your original loan documents shall continue and you will not be eligible for a modification under the HAMP.

Docket No. 1 at 19-20, ¶ 60. Green Tree was incorrect in stating that the first PMA was subject to error and thus had no basis for refusing to honor it. Id. at 20, ¶ 61.

B. Procedural Background

Ms. Clark brought this case on September 27, 2013, alleging (1) violations of the Fair Debt Collection Practices Act (" FDCPA" ), 15 U.S.C. § 1692 et seq.; (2) fraudulent misrepresentation; (3) breach of the first TPP; (4) unjust enrichment; (5) breach of the first PMA; (6) breach of the implied covenant of good faith and fair dealing; (7) promissory estoppel; (8) violation of the Equal Credit Opportunity Act (" ECOA" ), 15 U.S.C. § 1691; (9) violation of the Fair Credit Reporting Act (" FCRA" ), 15 U.S.C. § 1681s-3; and (10) violations of the Colorado Consumer Protection Act (" CCPA" ), Colo. Rev. Stat. § 6-1-101. Docket No. 1. Ms. Clark is seeking to represent a class of all others similarly situated. Id. at 1. On November 13, 2013, Green Tree moved to dismiss the complaint. Docket No. 9. Ms. Clark opposes dismissal. Docket No. 12.


The Rule 12(b)(6) standard tests " the sufficiency of the allegations within the four corners of the complaint after taking those allegations as true." Mobley v. McCormick, 40 F.3d 337, 340 (10th Cir. 1994). To survive a Rule 12(b)(6) motion, " [t]he complaint must plead sufficient facts, taken as true, to provide 'plausible grounds' that discovery will reveal evidence to support the plaintiff's allegations." Shero v. City of Grove, Okla., 510 F.3d 1196, 1200 (10th Cir. 2007) (citing Bell

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A. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). " [P]lausibility refers to the scope of the allegations in a complaint: if they are so general that they encompass a wide swath of conduct, much of it innocent, then the plaintiff[ ] [has] not nudged [her] claims across the line from conceivable to plausible." Khalik v. United Air Lines, 671 F.3d 1188, 1191 (10th Cir. 2012) (internal quotations and citations omitted).

" A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). However, " [a] pleading that offers 'labels and conclusions' or a 'formulaic recitation of the elements of a cause of action will not do.' Nor does the complaint suffice if it tenders 'naked assertion[s]' devoid of 'further factual enhancement.'" Id. (citation omitted). That said, " [s]pecific facts are not necessary[. Instead,] the statement need only give the defendant[s] fair notice of what the . . . claim is and the grounds upon which it rests[, and is not required to] include all facts necessary to carry the plaintiff's burden." Khalik, 671 F.3d at 1192 (internal citation and quotation omitted).


A. Federal Claims

1. Equal Credit Opportunity Act

Plaintiff alleges that defendant violated ECOA by failing to provide a written statement of reasons in advance of placing her loan in default, reporting her as past due to credit bureaus, revoking the first PMA, and threatening her with foreclosure. Docket No. 1 at 55, ¶ ¶ 191-93. Defendant argues that plaintiff fails to state a claim under ECOA because plaintiff was in default at the time defendant took adverse action against her and because defendant is not a " creditor" within the meaning of the statute. Docket No. 9 at 3-4.

Under ECOA, " [e]ach applicant against whom adverse action is taken shall be entitled to a statement of reasons for such action from the creditor." 15 U.S.C. § 1691(d)(2). " Adverse action" means a " denial or revocation of credit, a change in the terms of an existing credit arrangement, or a refusal to grant credit in substantially the amount or on substantially the terms requested." Id. at § 1691(d)(6). It does not include a " refusal to extend additional credit under an existing credit arrangement where the applicant is delinquent or otherwise in default, or where such additional credit would exceed a previously established credit limit." Id. Whether an applicant is " in default" is determined with respect to the time the purportedly adverse action was taken. See Lewis v. ACB Business Servs., Inc., 135 F.3d 389, 406-07 (6th Cir. 1998); see also Davis v. CitiMortgage, Inc., 2011 WL 891209, at *2 (E.D. Mich. Mar. 11, 2011).

" Credit" is the " right granted by a creditor to an applicant to defer payment of a debt, incur debt and defer its payment, or purchase property or services and defer payment therefor." 12 C.F.R. § 202.2(j). A " creditor" is " any person who regularly arranges for the extension, renewal, or continuation of credit." 15 U.S.C. § 1691a(e); see also 12 C.F.R. § 202.2(l) (" Creditor means a person who, in the ordinary course of business, regularly participates in a credit decision, including setting the terms of the credit." ). A creditor " revokes credit when it annuls, repeals, rescinds or cancels a right to defer payment of a debt." Schlegel v. Wells Fargo Bank, NA, 720 F.3d 1204, 1211 (9th Cir. 2013). Sending default notices and accelerating a loan despite a homeowner's

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compliance with an approved loan modification may constitute adverse action. Id. at 1210-11.

With respect to Green Tree's status as a creditor, plaintiff alleges that, in its capacity as a HAMP servicer, Green Tree must " evaluate all loans that are delinquent sixty (60) days or greater for HAMP modifications" and, if contacted by a borrower requesting a modification, must " collect income and hardship information to determine if the HAMP is appropriate for the borrower." Docket No. 1 at 8-9, ¶ 24 (emphasis in original). She further alleges that Green Tree determined her eligibility for a TPP and a PMA, that it unilaterally revoked the first PMA, and that it set the terms of the second PMA. Id. at 13-17, ¶ ¶ 39-55.

Plaintiff sufficiently alleges that Green Tree " regularly participates in a credit decision, including setting the terms of the credit," see 12 C.F.R. § 202.2(l), insofar as it regularly evaluates borrowers for loan modifications and sets the terms of the modifications it offers.[1]

With respect to whether plaintiff was in default at the time of the alleged ECOA violation, plaintiff alleges that she was in compliance with the terms of the first PMA--which had been signed by both parties and recorded--at the time defendant took adverse action against her by revoking the first PMA, instructing her to sign a second PMA with less favorable ...

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