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McKendall v. Ditech Financial LLC

United States District Court, E.D. Louisiana

July 30, 2018

LARRY MCKENDALL
v.
DITECH FINANCIAL LLC

         SECTION I

          ORDER & REASONS

          LANCE M. AFRICK UNITED STTATES DISTRICT JUDGE

         Before the Court is defendant Ditech Financial LLC's (“Ditech”) motion[1] for summary judgment. For the following reasons, the motion is granted.

         I.

         This case concerns a mortgage loan on plaintiff Larry McKendall's (“McKendall”) property.[2] The loan is serviced by Ditech.[3] McKendall alleges that, in 2015, Ditech purchased a force-placed insurance policy on the property.[4] McKendall argues that Ditech wrongfully obtained the alleged force-placed insurance policy because his property was “properly insured for homeowners insurance in compliance with the mortgage contract.”[5] Moreover, McKendall contends that, as a result of the force-placed insurance policy allegedly purchased, his escrow payments increased, “ostensibly to cover the . . . costs of the . . . coverage.”[6] The increase in his monthly payments forms the heart of this lawsuit.

         Ditech does not dispute the increase in McKendall's monthly payments, but it offers an alternative explanation. Ditech contends that it advanced $6, 004 to Hanover Insurance Company (“Hanover”) to renew a policy that McKendall had previously selected.[7] Ditech asserts that McKendall did not request that it cancel the policy until June 9, 2015 and that-after the policy was canceled-Hanover sent McKendall a reimbursement check for $6, 004.[8] McKendall retained the proceeds instead of sending the check to Ditech to be credited to his escrow account.[9] Ditech asserts that only then did it increase McKendall's monthly escrow payments-“for the purposes of satisfying the $6, 004 insurance premium, the refund for which [McKendall] retained in his own bank account.”[10]

         II.

         Summary judgment is proper when, after reviewing the pleadings, the discovery and disclosure materials on file, and any affidavits, the Court determines that there is no genuine dispute of material fact. See Fed. R. Civ. P. 56. “[A] party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The party seeking summary judgment need not produce evidence negating the existence of a material fact; it need only point out the absence of evidence supporting the other party's case. Id.; see also Fontenot v. Upjohn Co., 780 F.2d 1190, 1195 (5th Cir. 1986).

         Once the party seeking summary judgment carries its burden, the nonmoving party must come forward with specific facts showing that there is a genuine dispute of material fact for trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). The showing of a genuine issue is not satisfied by creating “‘some metaphysical doubt as to the material facts,' by ‘conclusory allegations,' by ‘unsubstantiated assertions,' or by only a ‘scintilla' of evidence.” Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (citations omitted).

         Instead, a genuine issue of material fact exists when the “evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). “Although the substance or content of the evidence submitted to support or dispute a fact on summary judgment must be admissible . . ., the material may be presented in a form that would not, in itself, be admissible at trial.” Lee v. Offshore Logistical and Transp., LLC, 859 F.3d 353, 355 (5th Cir. 2017) (citations omitted).

         The party responding to the motion for summary judgment may not rest upon the pleadings but must identify specific facts that establish a genuine issue. Anderson, 477 U.S. at 248. The nonmoving party's evidence, however, “is to be believed, and all justifiable inferences are to be drawn in [the nonmoving party's] favor.” Id. at 255; see also Hunt v. Cromartie, 526 U.S. 541, 552 (1999).

         III.

         McKendall alleges several violations of the Real Estate Settlement Procedures Act (“RESPA”). According to Mckendall, Ditech increased his monthly escrow payments to cover the costs of an alleged force-placed insurance policy.[11] He claims that, in doing so, Ditech violated Section 2605(m) of RESPA, [12] which requires that all charges imposed on a borrower “related to force-placed insurance” be “bona fide and reasonable.” 12 U.S.C. § 2605(m). McKendall characterizes the increase in his monthly payments as a charge “related to force-placed insurance” and argues that it was neither bona fide nor reasonable.[13]

         Summary judgment is appropriate with respect to McKendall's Section 2605(m) claim because there is no evidence in the record that suggests Ditech purchased force-placed insurance on McKendall's property. Instead, the evidence shows that, in March 2014, McKendall selected a hazard insurance policy through Hanover.[14] Then, in March 2015, Ditech advanced $6, 004 to Hanover to renew that policy.[15] McKendall alleges that this 2015 renewal was force-placed; however, he selected the policy one year earlier.[16]

         The evidence also demonstrates that McKendall had a new policy with another insurance company, Lighthouse Property (“Lighthouse”).[17] Consequently, McKendall requested that Ditech cancel the Hanover policy.[18] In a letter to McKendall detailing this course of events, Ditech noted that it immediately sought to cancel the Hanover policy upon his request.[19] The letter also pointed out that the $6, 004 refund was sent directly to McKendall, who concedes that he deposited the check.[20] According to a Ditech corporate litigation representative, “McKendall refused to forward the refund proceeds” to the company.[21]

         After McKendall chose not to endorse the check to Ditech to be credited to his escrow account, “an escrow analysis was performed to determine whether the monthly escrow payments needed to be adjusted.”[22] In July 2015, McKendall's escrow balance reflected a deficiency “as a direct result of the $6, 004 disbursement to Hanover Insurance and the fact that the refund in that amount was sent directly to [him].”[23] That “deficiency amount was spread over 36 months”-hence the increase in McKendall's monthly payments.[24]

         McKendall has not offered any evidence disputing this explanation of the increase in his escrow payments. In fact, his evidence establishes the following timeline of events:

• On February 9, 2015, McKendall's 2014 Hanover insurance policy was renewed for 2015-2016.[25]
• On March 1, 2015, Hanover sent McKendall a statement with respect to that policy showing an outstanding balance of $6, 004.[26]
• On March 10, 2015, McKendall's insurance agent faxed Ditech the declaration for his new insurance policy with Lighthouse.[27]The policy went into effect on March 26, 2015.[28]
• Sometime in March, Ditech made disbursements to both Hanover and Lighthouse out of McKendall's escrow account.[29]
• On March 11, 2015, the Hanover policy was canceled, effective March 26, 2015.[30]
• On April 14, 2015, Hanover sent McKendall a check refunding him the $6, 004 premium, which he deposited on April 27, 2015.[31]
• On April 29, 2015, Ditech sent McKendall a letter notifying him that it “ha[d] recently received evidence of insurance” under the Lighthouse Policy. The letter explained:
Ditech's “records show that the . . . policy is a policy purchased in addition to your existing insurance policy. Premiums for both policies may have been paid from your escrow account. If you do not intend to have two policies, you are responsible to: (1) Cancel the incorrect policy (2) Request a refund of the unearned premium and send that refund to [Ditech] to be applied to your escrow account [and] (3) Provide evidence of the policy cancellation.

         The Court concludes that there is no genuine issue of material fact regarding whether Ditech imposed any charges on McKendall related to force-placed insurance. Regardless of when and who canceled the Hanover policy, the evidence submitted makes clear that the policy was not purchased as force-placed insurance and that Hanover refunded the $6, 004 premium directly to McKendall, who then deposited the check. Summary judgment is therefore appropriate with respect to the Section 2506(m) claim.

         McKendall also alleges that Ditech violated Section 2506(e)(3) of RESPA by “furnish[ing] information regarding the disputed payments to credit bureaus.”[32] Section 2605(e) sets forth a loan servicer's responsibilities when responding to inquiries from a borrower:

During the 60-day period beginning on the date of [a loan] servicer's receipt from any borrower of a qualified written request relating to a dispute regarding the borrower's payments, a servicer may not provide information regarding any overdue payment, owed by such borrower and relating to such period or qualified written request, to any consumer reporting agency. . . .

12 U.S.C. § 2605(e)(3). In his complaint, McKendall contends that he submitted “a written notice of error” (to use the language from the statute, a “qualified written request”) to Ditech disputing the amount it claimed was past due on his account.[33]

         He alleges that Ditech nonetheless continued furnishing information to consumer reporting agencies during the 60 days following receipt of his ...


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