Summary
noting that "HAMP guidelines required [mortgage loan servicer] to use 'reasonable efforts' to obtain a waiver of any requirement that prevented it from performing the obligations imposed by HAMP"
Summary of this case from Smyth v. America's Servicing Co.Opinion
14-P-1488
11-13-2015
JOHN F. PACHECO, SR. v. PNC BANK, N.A.
NOTICE: Summary decisions issued by the Appeals Court pursuant to its rule 1:28, as amended by 73 Mass. App. Ct. 1001 (2009), are primarily directed to the parties and, therefore, may not fully address the facts of the case or the panel's decisional rationale. Moreover, such decisions are not circulated to the entire court and, therefore, represent only the views of the panel that decided the case. A summary decision pursuant to rule 1:28 issued after February 25, 2008, may be cited for its persuasive value but, because of the limitations noted above, not as binding precedent. See Chace v. Curran, 71 Mass. App. Ct. 258, 260 n.4 (2008).
MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
The plaintiff, John F. Pacheco, Sr., appeals from a Superior Court judgment, claiming error in the allowance of the defendant PNC Bank, N.A.'s (PNC), motion for summary judgment, the denial of Pacheco's cross motion for summary judgment, and the dismissal of his complaint. We affirm.
Background. The full recitation of facts is set forth in detail by the motion judge in his thorough and lucid memorandum of decision, and we refer to the findings as they pertain to our discussion of the issues raised on appeal. Pacheco's claims arise from the foreclosure of his residence by PNC, the servicer of his mortgage loan from Bank of America, following failed efforts to restructure the obligation. His claims are presented primarily in the context of alleged failures by PNC to follow regulations and guidelines established by the Department of the Treasury through the Home Affordable Modification Program (HAMP).
The exception is the first of Pacheco's four applications for loan modification, submitted prior to the issuance of HAMP guidelines by the Department of the Treasury. The financial information reported by Pacheco in that application indicated that his monthly expenses exceeded his monthly income. PNC declined the request on the basis of the reported deficit and, as stated, HAMP guidelines were not applicable.
Mortgage payment ratio. HAMP guidelines provide that a borrower "will only qualify for the HAMP if the verified income documentation confirms that the monthly mortgage payment ratio prior to the modification is greater than 31 percent." HAMP Supplemental Directive 09-01, at 6 (Apr. 6, 2009), https://www.hmpadmin.com/portal/programs/docs/hamp servicer/sd0901.pdf. The monthly mortgage payment ratio is "the ratio of the borrower's current monthly mortgage payment to the borrower's monthly gross income." Ibid. Pacheco submitted three separate applications to PNC while the HAMP guidelines were in effect; each of these applications presented varying figures for Pacheco's gross income and, in some cases, a different total monthly mortgage payment. Pacheco asserts that PNC's calculations of his payment ratios are improperly based on profit-and-loss statements for his wholly owned businesses, through which he is self-employed, rather than on his tax returns and bank statements.
Pacheco's financial statement, based on bank account deposits, produced a ratio of roughly thirty-seven percent and his 2009 tax return produced a ratio of roughly forty-one percent. By contrast, his wholly owned company's profit and loss statement for 2010 produced a ratio of fifteen percent. Additional profit-and-loss statements for a period in 2011 also produced a ratio of roughly fifteen percent.
As the judge pointed out in his opinion, HAMP guidelines expressly call for consideration of the documents used by PNC (and, here, containing information supplied by Pacheco himself) to establish income levels. See id. at 7 ("The HAMP documents instruct the borrower . . . to provide the . . . most recent quarterly or year-to-date profit and loss statement for each self-employed borrower"); HAMP Supplemental Directive 10-01, at 4-5 (Jan. 28, 2010) ("Servicers should request that the borrower provide the income verification documentation . . . [such as t]he most recent quarterly or year-to-date profit and loss statement for each self-employed borrower"), https://www.hmpadmin.com/portal/programs/docs/hamp servicer/sd1001.pdf. These directives also show that the HAMP ratio analysis, contrary to Pacheco's assertion, is intended to be based on a particular point in time rather than a more extended period.
Accordingly, Pacheco's claim that the profit-and-loss statements were improperly utilized is unavailing in the face of the HAMP guidelines themselves. The judge did not err in rejecting Pacheco's attempts to distinguish between personal and business income in the context of a wholly owned pass-through corporate entity, and we are unpersuaded by the renewal of that argument on appeal.
Debtor in active bankruptcy. Pacheco complains that PNC's denial of his second modification request during the pendency of Chapter 7 proceedings was improper because no law or regulation prohibits such consideration. Neither however, and more to the point, does any law or regulation require it. Borrowers in active bankruptcy are eligible for HAMP "at the servicer's discretion." HAMP Supplemental Directive 09-01, at 2. The judge did not err in finding that Pacheco had presented no evidence to support a claim of an abuse of discretion by PNC in this case.
Reaffirmation of loan in bankruptcy. PNC asserted that it denied Pacheco's third request for loan modification on the separate and independent ground that he refused to reaffirm the debt after his Chapter 7 discharge from bankruptcy. The judge concluded, and we agree, that under the circumstances described below this resulted in a violation of HAMP guidelines. See ibid. Specifically, the judge found that PNC was acting under the retention loss mitigation procedures promulgated by its principal, Bank of America, but noted - and again we agree - that regardless of its source, the requirement of reaffirmation violated HAMP. The finding of a violation was correct, if for no other reason, because HAMP guidelines required PNC to use "reasonable efforts" to obtain a waiver of any requirement that prevented it from performing the obligations imposed by HAMP. HAMP Supplemental Directive 09-01, at 1. PNC's HAMP participation agreement, at 3, par. 2.B. It is undisputed that PNC sought no such waiver from Bank of America.
However, in considering Pacheco's third application, PNC also considered profit-and-loss statements from three separate pass-through businesses and calculated that his monthly mortgage payment ratio was fifteen percent. Therefore, notwithstanding PNC's violation of HAMP guidelines, Pacheco was ineligible for a loan modification because, as stated, his monthly mortgage payment ratio was not greater than thirty-one percent.
Thereafter, in considering Pacheco's fourth and final application, PNC again utilized profit-and-loss statements submitted by Pacheco, and calculated a ratio of approximately sixteen percent. The judge found, with support in the record, that Pacheco's failure to meet the required mortgage payment ratio was a separate and independent basis for PNC's rejection of his applications. Consequently, we discern no error in the judge's determination that Pacheco was not damaged by PNC's failure to use reasonable efforts to have Bank of America waive its requirement of loan affirmation after his discharge from bankruptcy.
Fiduciary relationship. Notwithstanding the allegations of a breach of fiduciary duty set forth in the complaint, the general rule that a lender owes no fiduciary duty to a borrower is applicable here. Our cases recognize an exception to this rule where the borrower reposes trust and confidence in the lender and where the lender acquires "knowledge of the plaintiff's reliance upon him." Broomfield v. Kosow, 349 Mass. 749, 755 (1965). The lender's participation in HAMP creates no fiduciary duty per se, FAMM Steel, Inc. v. Sovereign Bank, 571 F.3d 93, 102 (1st Cir. 2009), and the judge found no facts supporting the assertion that the parties possessed anything other than a business relationship conducted at arm's length. Pacheco was represented by counsel and his counsel's correspondence with PNC neither claims a fiduciary relationship explicitly nor suggests anything other than an increasingly contentious relationship.
Good faith foreclosure. Pacheco first defaulted on the loan in 2008; six years later at the time of trial in 2014 he continued to reside at the mortgaged property and also remained in default. The judge found that Pacheco introduced no evidence supporting his assertions that PNC's failure to provide a loan modification or to obtain a waiver from Bank of America resulted in a bad faith foreclosure.
The judge found that PNC clearly informed Pacheco of its intention to institute foreclosure proceedings, and that there was no contractual basis to claim that modification was a condition precedent to the right to foreclose. Pacheco alleged neither that foreclosure was improperly instituted nor that PNC made any promises that it would not foreclose. And, as was the case with the failure to seek a waiver from Bank of America, Pacheco was unable to demonstrate damages even were the fact finder to infer that PNC had failed to exercise good faith in some respect.
To the extent the judge's determination is based on the loan documentation, we are in agreement. In reviewing a grant of summary judgment, we assess the documentary record de novo. Bulwer v. Mount Auburn Hosp., 86 Mass. App. Ct. 316, 318 (2014), citing Godfrey v. Globe Newspaper Co., 457 Mass. 113, 119 (2010).
General Laws c. 93A. Pacheco asserts that PNC committed unfair and deceptive practices in violation of G. L. c. 93A. He relies, first, on PNC's violation of HAMP guidelines by failing to request a waiver from Bank of America for its loan reaffirmation requirement, as discussed supra.
The HAMP violation itself is insufficient to support the G. L. c. 93A claim absent a showing that it was committed in an unfair or deceptive manner. Morris v. BAC Home Loans Servicing, L.P., 775 F. Supp. 2d 255, 259 (D. Mass. 2011) (Morris). Relevant here is the equitable principle, reflected by the statute, that the plaintiff must show that "errors were intentionally deceptive rather than merely negligent." Dragone vs. PNC Bank, Natl. Assn., U.S. Dist. Ct., No. 11-12194 (D. Mass. June 7, 2014). See Morris, supra at 263; Newell vs. America's Servicing Co., U.S. Dist. Ct. No. 13-11141 (D. Mass. Sept. 9, 2013).
Specifically, the proper inquiry is whether: (1) the servicer violated the HAMP directives, (2) the violations were unfair or deceptive, and (3) recovery under G. L. c. 93A is consistent with the HAMP objectives and enforcement mechanisms. See Morris, supra at 259. We agree with the judge that the first and third requirements are met, and that only the second is at issue here.
The judge also credited Pacheco's complaint that PNC failed to provide him with a copy of its investor guidelines after his counsel submitted a written request to that effect in July of 2011. He rejected PNC's assertion that a letter sent to Pacheco on September 6, 2011, qualified as a substantive response to that request because it referred to a legal directive conditioning eligibility for modification on a borrower's financial information that demonstrated "affordability."
Finally, the judge addressed Pacheco's assertion of a G. L. c. 93A violation derived from a failure to observe the strictures of G. L. c. 93, § 49(b). The judge found that Pacheco's attorney requested that all correspondence related to the mortgage loan be directed to his office on November 3, 2010, but that thereafter PNC contacted Pacheco directly on nine different occasions between November 11, 2010, and November 9, 2013. The record appendix, however, reveals only the following request made by Pacheco's counsel on April 14, 2010:
Chapter 93, § 49, as amended by St. 1975, c. 155, reads: "No one who is a creditor or an attorney for a creditor, or an assignee of a creditor, of a natural person present or residing in Massachusetts who has incurred a debt primarily for personal, family or household purposes shall collect or attempt to collect such debt in an unfair, deceptive or unreasonable manner. For the purposes of this section, such collection or attempt to collect shall be deemed unfair, deceptive or unreasonable if: . . . (b) The creditor communicates directly with the alleged debtor after notification from an attorney representing such debtor that all further communications relative to the debt should be addressed to him. . . . Failure to comply with the provisions of this section shall constitute an unfair or deceptive act or practice under the provisions of chapter ninety-three A." (Emphasis supplied.)
"Please consider this correspondence a written request that my client be considered for HAMP, and forward any applications or paperwork that you will require to my office."The judge found that G. L. c. 93, § 49(b), would not avail Pacheco because he was not a "debtor" within the meaning of the statute after he was discharged from bankruptcy. In addition to this legal defect in Pacheco's claim, we note that the request is a limited one ("applications or paperwork" related to a HAMP consideration) and also that it requires a strained interpretation to conclude that sending such documents directly to Pacheco constitutes an unfair, deceptive, or unreasonable practice rising to the level of a violation of G. L. c. 93A.
In sum, the judge found that notwithstanding the three omissions cited by Pacheco, he has shown no pattern of borrower misconduct and no evidence from which to infer "deliberately malign or immoral conduct on the part of PNC." The record shows that these omissions arose in the course of a seven-year effort to resolve a delinquent loan. There was no error in the dismissal of Pacheco's claim under G. L. c. 93A.
Judgment affirmed.
By the Court (Trainor, Grainger & Maldonado, JJ.),
The panelists are listed in order of seniority.
/s/
Clerk
Entered: November 13, 2015.