Opinion
23-03476 WHA
11-04-2024
SARAN NUTH and KEVIN O'NEILL, Plaintiffs, v. NEWREZ LLC, dba SHELLPOINT MORTGAGE SERVICING, TRANSUNION, LLC, EQUIFAX INFORMATION SERVICES LLC, and EXPERIAN INFORMATION SOLUTIONS, INC. Defendants.
ORDER REGARDING PLAINTIFFS' PARTIAL MOTION FOR SUMMARY JUDGMENT AND DEFENDANT'S MOTION FOR SUMMARY JUDGMENT
WILLIAM ALSUP UNITED STATES DISTRICT JUDGE
INTRODUCTION
In this FCRA and CCRAA action, both sides have filed cross motions for summary judgment. To the extent stated herein, plaintiffs' partial motion for summary judgment is GRANTED and defendant Shellpoint's motion for summary judgment is GRANTED IN PART AND DENIED IN PART.
STATEMENT
This case arises out of plaintiffs' former home in Santa Rosa in Sonoma County, California. In April 2011, plaintiffs obtained a mortgage loan for their home in Santa Rosa, which was serviced by defendant NewRez LLC (“Shellpoint”). In March 2020, plaintiffs suffered financial hardships and contacted Shellpoint for a payment accommodation. Shellpoint agreed and sent plaintiffs a letter to confirm that three monthly payments from April to June 2020 were deferred. In May 2020, however, plaintiffs received a letter from Shellpoint stating that they were late on their mortgage payments and that “failure to bring your loan current may result in fees and foreclosure-the loss of your home” (Compl. ¶ 18).
That same month, Shellpoint provided a forbearance on the loan for eighteen months, from April 2020 through September 2021 (UMF 1). Shellpoint mailed plaintiffs a letter to confirm that the temporary forbearance of eighteen months, which meant that they “would not be penalized with a late charge or with negative credit reporting if you miss a mortgage payment” (Dkt. No. 82-1 at 39). That same letter also stated:
Both sides have filed a jointly submitted list of stipulated, undisputed material facts (“UMF”). The full list can be found on Dkt. No. 79-2.
If you can afford to make payments or even partial payments, you are strongly urged to do so. Your payment continues to come due on a monthly basis and these payments will be due at the end of the temporary forbearance period. If you are unable to bring your mortgage loan current at the end of the forbearance period, we do have options available that can help.(ibid.). The letter also provided:
The terms of your mortgage remain unchanged. As a result of not making any payments during the term of the Forbearance Plan, if you do not resume making timely monthly payments or make other arrangements with us you will become delinquent on your mortgage and your credit score may be impacted.(ibid.) (emphasis added).
Both sides agree that the loan was current prior to entering the forbearance period, and plaintiffs did not make any payments during the forbearance agreement (UMF 2, 4). Moreover, the loan was reported as current to credit reporting agencies during the forbearance period (UMF 3).
On August 31, 2021, Shellpoint mailed plaintiffs another letter in which they offered a trial period plan (“TPP”), for which plaintiffs would need to make payments for October, November, and December 2021 (UMF 5). Plaintiffs made all three timely payments (UMF 6).
Shellpoint reported the loan as thirty-days past due in October 2021 and sixty-days past due in November 2021 (UMF 7). Shellpoint reported the loan as current in December 2021, and all subsequent months until the loan was paid off in July 2022 (UMF 9). Plaintiffs disputed the credit reporting of October 2021 and November 2021 with Shellpoint and three other defendants: Equifax, Experian, and Trans Union (UMF 8). Plaintiffs allege that Shellpoint refused to correct its reporting (Dkt. No. 79 at 8).
Plaintiffs filed suit in July 2023, against Shellpoint, Equifax Information Services, LLC, Experian Information Solutions, Inc., and Trans Union, LLC, alleging violations of the CARES Act, CCRAA, FCRA, and the Rosenthal Act. Plaintiffs have now filed a motion for partial summary judgment. Likewise, Shellpoint has filed a cross motion for summary judgment. Since the two instant motions were filed, Equifax, Experian, and Trans Union were dismissed from this action (Dkt. Nos. 72, 86, 88).
This order follows full briefing and oral argument.
ANALYSIS
Summary judgment is proper when “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” FRCP 56(a). A dispute is “genuine” only if there is sufficient evidence for a reasonable fact finder to find for the nonmoving party, and “material” only if the fact may affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-249 (1986). Unsupported conjecture or conclusory statements, however, cannot defeat summary judgment. Surrell v. Cal. Water Serv. Co., 518 F.3d 1097, 1103 (9th Cir. 2008).
During the COVID-19 pandemic, Congress passed the Coronavirus Aid, Relief, and Economic Security (“CARES Act”) to address the economic hardships faced by many Americans. The CARES Act is integrated into FCRA and requires furnishers to report borrowers who receive accommodation as “current” if their loan was not delinquent before the accommodation began. 15 U.S.C. § 1681s-2(a)(1)(F). In doing so, the CARES Act aims to protect consumer's credit. See CARES Act Legislative History, 166 Cong. Rec. E339-01 (March 27, 2020) (“It also prohibits forced collections such as garnishment of wages, tax refunds, and Social Security benefits, and negative credit reporting during this time period.”) (emphasis added).
Shortly thereafter, the Consumer Financial Protection Bureau (“CFPB”) published directives to aid furnishers and credit reporting agencies in complying with the CARES Act. Consumer Reporting FAQs Related to the CARES Act and COVID-19 Pandemic, CONSUMERFINANCE.GOV, https://files.consumerfinance.gov/f/documents/cfpbfcraconsumer-reporting-faqs-covid-192020-06.pdf (last visited November 4, 2024).
This action involves a furnisher, Shellpoint, assisting plaintiffs on their loan by first providing a forbearance for eighteen months (for which monthly payments were not required) and subsequently offering them a trial period plan (“TPP”) for which plaintiffs were required to make a reduced payment each month. The essence of this order is to clarify how a furnisher must report the status of an account when a borrower follows the terms of one accommodation and then makes payments according to the terms of a second, subsequent accommodation. To be clear, this order is issued in the absence of any binding authority from our court of appeals, and very little discussion on the subject in this district.
Although both sides stipulate to several facts, both sides essentially differ as to (1) whether plaintiffs were delinquent on the loan when they entered the TPP and (2) whether Shellpoint should have reported plaintiffs' loan as past due in October 2021 and November 2021. Plaintiffs seek a partial summary judgment finding that Shellpoint's reporting plaintiffs' loan as past due in October 2021 and November 2021 is “inaccurate as a matter of law,” under the CARES Act (Dkt. No. 79 at 8). On the other hand, Shellpoint argues that while the loan was current before the forbearance, plaintiffs were delinquent at the end of the eighteen-month forbearance and were thus delinquent going into the TPP (Dkt. No. 81 at 8-9). Moreover, Shellpoint moves for summary judgment on all claims.
The CARES Act states that if a furnisher makes an accommodation with respect to one or more payments on a credit obligation, and the consumer “is not required to make [one] or more payments pursuant to the accommodation, the furnisher shall report the credit obligation or account as current,” unless the loan was delinquent before the accommodation. 15 U.S.C. § 1681s-2(a)(1)(F)(ii). What forms the crux of the instant action, however, is what the CARES
Act requires in terms of reporting, when a furnisher, such as Shellpoint, grants a borrower two consecutive accommodations.
This order disagrees with Shellpoint that plaintiffs were delinquent on the loan during October 2021 and November 2021. Further, this order disagrees with Shellpoint's construction of the CARES Act, which would essentially penalize plaintiffs for complying with the terms of an accommodation offered by Shellpoint.
This order will provide a brief overview of Shellpoint's argument that plaintiffs were delinquent on their loan prior to entering the TPP and why the CARES Act permitted them to report plaintiffs as past due. First, Shellpoint argues that plaintiffs' loan had accrued delinquency during the eighteen-month forbearance because payments became due each month, and plaintiffs did not make any monthly payments during those forborne months. Second, that at the end of the forbearance period, plaintiffs' loan was “delinquent” on the balance of the forborne payments and were therefore delinquent entering the TPP. Third, the TPP did not modify the terms of plaintiffs' loan. Fourth, because plaintiffs' TPP payments were less than the monthly amount contractually required under the loan, plaintiffs were delinquent in the months of October 2021 and November 2021. Fifth, because plaintiffs did not make their contractual mortgage payments in October and November 2021, Shellpoint was permitted under CARES Act to report them as past due. To support its interpretation, Shellpoint cites to the following provision of the CARES Act: “if the credit obligation or account was delinquent before the accommodation” the furnisher must “maintain the delinquent status during the period in which the accommodation is in effect” or “if the consumer brings the credit accommodation or account current during the period described in item (aa), report the credit obligation or account as current.” 15 U.S.C. § 1681s-2(a)(1)(F)(ii)(II).
This order is not convinced by Shellpoint's construction of the CARES Act which would essentially penalize plaintiffs for following the terms of two consecutive accommodations offered by Shellpoint. It is inconceivable that Congress intended for hardworking Americans to be punished by following the instructions of a mortgage-servicer. Rather, a more reasonable interpretation depends on the definition of “delinquent status.”
In interpreting the definition of “delinquent status” this order “first looks to the language of the statute, giving effect to the word's plain meaning; ‘[i]f the language is unambiguous, the plain meaning controls.'” Gonzalez v. CarMax Auto Superstores, LLC, 840 F.3d 644, 650 (9th Cir. 2016) (quoting Voices of the Wetlands v. State Water Res. Control Bd., 52 Cal.4th 499, 519 (2011)). “If the language is clear, courts must generally follow its plain meaning unless a literal interpretation would result in absurd consequences the Legislature did not intend. If the statutory language permits more than one reasonable interpretation, courts may consider other aids, such as the statute's purpose, legislative history, and public policy.” Coalition of Concerned Communities, Inc., v. City of Los Angeles, 34 Cal.4th 733 737 (2004). As stated above, Congress enacted the CARES Act in order to protect Americans from negative credit reporting.
Therefore, a more reasonable interpretation of “delinquent status” is the reporting status of an account. This would mean that a furnisher must maintain the reporting status of account going into the accommodation. 15. U.S.C. § 1681s-2(a)(1)(F)(ii)(II)(aa). So, if the account was reported as current prior to an accommodation, then the furnisher must continue to report the account as current during the accommodation. Here, since plaintiffs' account was reported as current prior to the second accommodation (i.e. the TPP), Shellpoint should have maintained the reporting status as current, as plaintiffs went into the TPP.
Even if this order were to accept Shellpoint's interpretation of the CARES Act, Shellpoint is still incorrect as a matter of law that that plaintiffs were delinquent on the loan in October and November 2021, because plaintiffs selected an accommodation provided by Shellpoint according to the terms of its forbearance letter. Although payments became due each month during the forbearance period, Shellpoint stated that they would only become delinquent if they “do not resume making timely monthly payments or make other arrangements with us” (Dkt. 82-1 at 39) (emphasis added). Plaintiffs argue that by agreeing to and complying with the terms of the TPP, they had agreed to another “arrangement” in order to deal with the forborne balance (Dkt. No. 79). Therefore, according to plaintiffs, Shellpoint's own terms determined that they could not be delinquent. This order agrees.
This order finds that plaintiffs addressed the balance left after the forbearance period by making timely payments pursuant to the TPP-all in accordance with Shellpoint's own terms. On August 31, 2021, plaintiffs received a letter entitled “Streamlined Modification Solicitation Letter” which contained vexing language such as “your time to act is running out,” and “time is of the essence.” The same letter stated that in order to comply with the TPP, plaintiffs had to make a payment of $2,191.12 on the first days of October, November, and December 2021. Both sides agree that plaintiffs made each payment pursuant to the TPP.
In fact, Shellpoint acknowledged that plaintiffs had successfully completed the TPP because Shellpoint permanently modified the terms of plaintiffs' loan at the end of December 2021. By 2022, plaintiffs paid off the rest of their mortgage. Shellpoint now argues that it was justified in reporting plaintiffs as past due in October 2021 and November 2021 because plaintiffs' payments pursuant to the TPP were less than what was contractually due under the terms of their loan. This order finds Shellpoint's argument unpersuasive and further finds its own terms confusing at best.
The only reasonable way to construe the forbearance letter and the TPP letter, is to find that the TPP is one of the “arrangements” offered by Shellpoint at the end of the forbearance period. By making timely payments pursuant to the TPP, plaintiffs had complied with the terms of an “arrangement.” Therefore, according to Shellpoint's own terms, this order finds that plaintiffs could not have been delinquent because they had “made an arrangement” and complied with the terms of the TPP.
Further, at no point in the TPP letter did Shellpoint state that by making payments pursuant to the TPP, they would receive negative credit reporting. The only language which comes close to a warning is “[w]e will continue to report the delinquency status of your loan to credit reporting agencies as well as your entry into the Trial Period Plan in accordance with the requirements of the Federal Credit Reporting Act.” This language, however, does not convey to the reader that, despite following Shellpoint's accommodation, payments pursuant to the TPP will result in reporting the loan as past due. Even more troubling, the TPP letter contained the following confusing language: “your current loan documents remain in effect; however, you may make the trial period payment instead of the payment required under your loan documents.” This order is concerned by the deceptive language of Shellpoint's letters, which appears to aid plaintiffs but vaguely threatens to punish them as well.
In effect, Shellpoint attempts to argue that plaintiffs should have simply made the contractually owed, monthly payment in order to escape negative reporting. At no stage, however, did Shellpoint transparently convey this to plaintiffs. Most of all, the difference between the contractually required payments and the TPP payments was about $120. Plaintiffs' misfortune could have been prevented if they had simply paid roughly an additional $240-and they probably would have done so, were it not for Shellpoint's lack of clarity.
Credit is wrecked by misinformation propagated by credit reporting agencies. Upon inquiring and investigating a borrower's account, the credit reporting agencies almost invariably point fingers at furnishers who supply information on a massive and automated basis, the result of which ends up ruining the credit of good, hardworking Americans. To be clear, plaintiffs Kevin O'Neill and Saran Nuth timely made every installment payment when asked by Shellpoint and yet were still reported as “delinquent” by the loan services to three national credit reporting agencies. It is true that they would still need to be liable for future installment, as they fell due, but the irrefutable fact is that they timely made every installment payment as due. In reporting them as delinquent, Shellpoint violated the CARES Act and their own agreement. For these reasons, this order finds that Shellpoint's reporting was inaccurate as a matter of law and plaintiffs' partial motion for summary judgment is GRANTED.
This order will now briefly address Shellpoint's motion for summary judgment regarding plaintiffs' Rosenthal, FCRA and CCRAA claims. Plaintiffs allege that Shellpoint violated the Rosenthal Act by making misleading representations to collect payments on the loan that plaintiffs did not owe. Shellpoint argues that this claim is barred by a one-year statute of limitations. This order agrees. Given that the loan was reported as past due only in October and November 2021, and this action was filed in July 2023, plaintiffs' Rosenthal claim is time- barred. Therefore, Shellpoint's motion for summary judgment is GRANTED. However, this order finds that Shellpoint has not demonstrated that summary judgment should be granted in its favor for plaintiffs' FCRA or CCRAA claims. Given that both claims turn on the reasonableness of a credit reporting investigation, these two claims should be left to a jury. Gross v. CitiMortgage, Inc., 33 F.4th 1246, 1252-1253 (9th Cir. 2022). As such, Shellpoint's motion for summary judgment as to plaintiffs' FCRA and CCRAA claim is DENIED.
CONCLUSION
For the aforementioned reasons, plaintiffs' partial motion for summary judgment is GRANTED and Shellpoint's motion for summary judgment is GRANTED IN PART AND DENIED IN PART.
IT IS SO ORDERED.