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Tomlinson v. Ocwen Loan Servicing, LLC

United States District Court, D. Kansas

September 5, 2017




         Plaintiff Lata Tomlinson filed suit against Defendant Ocwen Loan Servicing, LLC (“Ocwen”), in the District Court of Sedgwick County, Kansas. She originally alleged four violations of the Kansas Consumer Protection Act (“KCPA”), [1] and sought a declaratory judgment regarding insurance proceeds. Ocwen timely removed the case to this Court and filed a motion to dismiss all five claims. The Court granted the motion in part, dismissing all but two of Tomlinson's KCPA claims-Count II (deceptive act) and Count IV (unconscionable act). Ocwen now moves for summary judgment on the two remaining claims. For the following reasons, the Court denies Ocwen's Motion for Summary Judgment (Doc. 58).

         I. Factual and Procedural Background

         In 2006, Tomlinson purchased residential property in Wichita, Kansas. To finance her purchase of the property, Tomlinson executed a promissory note in favor of Ownit Mortgage Solutions, Inc. and a mortgage in favor of Mortgage Electronic Registration Systems, Inc., as the nominee of Ownit Mortgage and its successors and assigns.[2]

         Several years after she took out the loan, Tomlinson negotiated a loan modification with the then-servicer of the loan, Litton Loan Servicing, LP. Ocwen became the servicer of Tomlinson's loan effective November 1, 2011. On June 27, 2012, U.S. Bank, N.A.[3] filed a mortgage foreclosure suit against Tomlinson in the Sedgwick County District Court. U.S. Bank took a default judgment against Tomlinson on August 6, 2012.

         Shortly before the mortgage foreclosure suit was initiated, on June 16, 2012, Ocwen sent Tomlinson an offer to apply for a loan modification through the Home Affordable Modification Program (“HAMP”). The parties dispute whether Tomlinson completed the HAMP application. On July 6, shortly after the mortgage foreclosure suit was initiated, Ocwen sent Tomlinson another offer to apply for a loan modification through HAMP. Two weeks later, on July 20, Ocwen sent Tomlinson numerous letters stating that it had received her loan modification applications, but further documentation was required to complete the application process. The parties dispute whether Tomlinson actually submitted the requested documentation. Ocwen then sent Tomlinson two letters stating that she was not eligible for a HAMP modification on August 24, 2012 and June 3, 2013.

         But on June 7, 2013, Ocwen sent Tomlinson a Shared Appreciation Modification Offer (“the SAM Offer”). Per the terms of the SAM Offer, Tomlinson had to complete and return the SAM Offer to Ocwen, and pay $782.45 as an initial payment on or before July 1, 2013, and a trial payment of $782.45 on or before August 1, 2013. Section one of the Loan Modification Agreement (“the Agreement”) attached to the Offer expressly states that the Loan Documents shall not be modified unless and until: (1) Tomlinson successfully completes the Trial Period, and (2) Tomlinson receives from Ocwen a copy of this agreement signed by Ocwen.

         The parties dispute whether the Offer would be “null and void” if Tomlinson failed to send the initial and trial payments on time. The Offer states: “If the payments are made after their due dates or in amounts different from the amount required, your loan may not be modified (emphasis added).” However, as Ocwen points out, the Agreement provides: “I acknowledge and agree that if I fail to send any payment on or before the respective due date, the Servicer's modification offer will be null and void and this Agreement will not become effective . . . .”

         In her deposition testimony, Tomlinson testified that she “understood” that Ocwen could commence or resume foreclosure proceedings if she failed to comply with the terms of the Agreement. But, as Tomlinson points out, U.S. Bank had already foreclosed on the Property by the time the Offer was made on June 7, 2013. U.S. Bank initiated foreclosure proceedings on June 27, 2012 and took a default judgment against Tomlinson on August 6, 2012.

         Tomlinson testified that she signed and executed the Agreement and sent it to Ocwen before the July 1, 2013 deadline. Ocwen maintains it never received a copy. But there is a notation in Ocwen's Comments Log made on July 5, 2013, that states: “Foreclosure sale postponed for forbearance, ” because: “[f]ile is on hold for active forbearance plan, as borrower has been approved for SAM modification plan.”

         The parties dispute whether Tonlinson made the required payments and Ocwen received them. Ocwen cites to an August 19, 2013 entry in its Comments Log for Tomlinson's loan, which states: “[Tomlinson] did not make the first trial payment or down payment required for their SAM modification.” But Tomlinson cites to three account statements she received from Ocwen. Tomlinson's June 17 statement indicated that her “current forbearance payment due by 08/01/13” was $782.45. This statement did not indicate a past due forbearance payment. Her July 17 statement indicated the same- her “current forbearance payment due by 08/01/13” was $782.45. And her August 19 statement stated that her current forbearance payment due by 09/01/2013 was $782.45, and that the past due forbearance payment was also $782.45.

         The parties agree that Tomlinson never received a signed copy of the SAM Offer from Ocwen, and that Ocwen denied Tomlinson a loan modification under the SAM Offer. Ocwen sent Tomlinson a letter dated August 27, 2013, which indicated that a sheriff's sale of the Property had been scheduled. The Property was sold to U.S. Bank at a sheriff's sale on September 25, 2013 pursuant to the judgment the district court had entered in 2012. Ocwen did not notify Tomlinson that the Offer had been denied until November 2013, over a month after U.S. Bank purchased the property at the sheriff's sale. Ocwen asserts that this delay was due to “coding issues” in Ocwen's system.

         II. Legal Standard

         Summary judgment is appropriate if the moving party demonstrates that there is no genuine issue as to any material fact, and the movant is entitled to judgment as a matter of law.[4]A fact is “material” when it is essential to the claim, and issues of fact are “genuine” if the proffered evidence permits a reasonable jury to decide the issue in either party's favor.[5] The movant bears the initial burden of proof and must show the lack of a genuine issue of material fact and entitlement to judgment as a matter of law.[6] If the movant carries this initial burden, the nonmovant that bears the burden of persuasion at trial may not simply rest on its pleading but must instead “set forth specific facts” that would be admissible in evidence in the event of trial from which a rational trier of fact could find for the nonmovant.[7] These facts must be clearly identified through affidavits, deposition transcripts, or incorporated exhibits-conclusory allegations alone cannot survive a motion for summary judgment.[8] The Court views all evidence and reasonable inferences in the light most favorable to the party opposing summary judgment.[9]

         III. Discussion

         The KCPA prohibits both deceptive and unconscionable acts and practices by a supplier in connection with a consumer transaction.[10] Of Tomlinson's two remaining claims, Count II alleges that Ocwen committed a deceptive act, and Count IV alleges that Ocwen committed an unconscionable act. Ocwen now seeks summary judgment on these two claims.

         A. Deceptive Act Claim

         Count II alleges a violation of K.S.A. § 50-626(b)(8). Tomlinson claims that Ocwen committed a deceptive act by falsely stating in the SAM Offer that her loan would be modified if she completed the attached agreement and made timely payments. Under this provision, it is per se deceptive to falsely state, “knowingly or with reason to know, that a consumer transaction involves consumer rights, remedies or obligations.”[11] And the solicitation of a loan modification is a consumer transaction under the KCPA.[12] Whether or not a ...

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