Pay Your Mortgage and Keep Insurance or Lose

Many people have – especially in the last ten years – had difficulty paying their mortgage and keeping the property insured as required by the mortgage documents. When the lender exercises its rights under the mortgage document, places “forced-placed insurance” to protect their security, they are often sued by the defaulting mortgagor.

In Tonya Hill v. DLJ Mortgage..., United States Court of Appeals, Second Circuit — Fed.Appx. —-, 2017 WL 1732114 (May 3, 2017) Tonya Hill appealed an order dismissing her claims against DLJ Mortgage Capital, Inc. (“DLJ”), Selene Finance LP (“Selene”), and Doonan, Graves and Longoria, LLC (“Doonan”).

Hill alleged violations of the Fair Debt Collection Practices Act (“FDCPA”), the Real Estate Settlement Procedures Act (“RESPA”) and a state statute. Hill’s claims arise from her promissory note (the “Note”) in the amount of $379,200, and the mortgage on real property that she and her husband executed and delivered as security for the Note. Hill alleged that the defendants improperly sought to collect on her defaulted Note.

The District Court dismissed Hill’s FDCPA and RESPA claims with prejudice and declined to exercise jurisdiction over Hill’s state statutory claim. We assume the parties’ familiarity with the underlying facts, the procedural history of this case, and the issues on appeal.

ANALYSIS

To state a claim, the complaint must plead enough facts to state a claim to relief that is plausible on its face. Although all allegations contained in the complaint are assumed to be true, legal conclusions are not presumed to be accurate.

A claim will have 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.

FDCPA Claims

Hill’s FDCPA claims are premised on monthly statements sent to her by Selene regarding the total amount owing under her Note. As the District Court explained, Selene sent these statements in compliance with the Truth in Lending Act federal regulations, which requires mortgage loan servicers to transmit monthly statements to consumers. With this in mind, the monthly statements here do not reflect attempts to collect on the debt evidenced by the Note.

RESPA Claim

Hill alleged that the defendants, when purchasing force-placed insurance on her property, did not provide her with any of the information or requests required by RESPA’s Regulation X and charged her account for the insurance in violation of a different regulation.

“Force-placed insurance,” as defined by RESPA, is “hazard insurance coverage obtained by a servicer of a federally related mortgage when the borrower has failed to maintain or renew hazard insurance on such property as required of the borrower under the terms of the mortgage.” 12 U.S.C. § 2605(k)(2). The allegations of Hill’s complaint, all conclusory in nature, failed to state a plausible claim for relief under RESPA. Among other things, the RESPA allegations do not specify that Hill’s mortgage was “federally related.”

Hill also asserts that the District Court should have granted her leave to amend her complaint to assert a specified damages amount for her RESPA claim. Hill, however, never sought leave to replead her Amended Complaint from the District Court. The contention that the District Court abused its discretion in not permitting an amendment that was never requested is frivolous.

State-Law Claim

Hill did not address her GBL claim on appeal, and accordingly has waived that claim. In fact, arguments not made in an appellant’s opening brief are waived. Even so, because the District Court correctly dismissed all of Hill’s federal claims, it was entitled to decline to exercise supplemental jurisdiction over her state-law claims.

ZALMA OPINION

Not only was the appellate request to amend the complaint frivolous, it appears that the entire action was frivolous, and an attempt to avoid paying a mortgage and insure the property that was security for the debt. Although the Second Circuit affirmed the district court, one can only wonder why there was no sanction for the frivolous nature of the suit and appeal.

Appropriate to Effect “Forced-Placed Insurance”