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Wilson Richard sued his mortgage lender, Finance of America Mortgage LLC (FOA), which later became his mortgage servicer and allegedly let Richard's homeowner's insurance lapse, substituting "a lender force-placed insurance policy on this [Richard's] property."
Specifically, Richard alleged that he "was harmed by a course of conduct that resulted in the cancellation of his original homeowner's insurance and the substitution of a lender force-placed insurance policy in 2016, which provided him with less coverage at the time that he experienced property damage losses in 2016 and 2017." Richard v. Fin. of Am. Mort., LLC, No. 3:18-CV-559, 2020 WL 6274822, at *1 (M.D. Pa. Oct. 26, 2020) (Carlson, USMJ).
Richard sued globally so to speak, joining as defendants "his mortgagee; a mortgage servicing company; two insurance companies; and an insurance agency, seeking damages he claims he is owed for water damage to his home[.]" Richard, 2020 WL 6274822, at *1.
As against FOA, Richard alleged two claims: first, that "FOA violated the Real Estate Settlement and Procedure Act (RESPA), 12 U.S.C. § 2601, et seq., and second, a claim for breach of contract." The Court in this case joined with "the majority view" that "RESPA provides a private right of action for persons injured both by violations of the statute and its implementing regulations." Richard, 2020 WL 6274822, at *5 (emphasis added).
Applying the majority view of the applicable law to the undisputed facts in the record of this case, the Court rejected FOA's assertion that in giving notice in accordance with RESPA, it was insulated from "any liability under RESPA." The Court denied FOA's motion for summary judgment accordingly, holding:
Under RESPA, we do not deem the duty of a loan servicer to entail simply providing notice to a borrower prior obtaining force-placed insurance. The statute and its implementing regulations impose a far more fundamental duty on loan servicers like FOA— a duty to timely pay hazard insurance premiums in order to avoid a lapse in coverage and the necessity of securing inferior force-placed insurance.
It is this fundamental duty that FOA is alleged to have violated, and it is this alleged failure to protect Richard's interests by timely paying the hazard insurance premium out of the existing escrow account balance, that forms the gravamen of Richard's RESPA claim. Viewed in this light, FOA cannot avoid liability for this greater failure on its part to make timely hazard insurance payments by simply pointing to the fact that, after it is alleged to have harmed Richard when its inaction led to the loss of hazard insurance on this property, it subsequently complied with RESPA's force-placed insurance notice requirements. Because FOA's claimed defense does not relate to, or excuse, its prior alleged RESPA violations, FOA's motion for partial summary judgment fails and will be denied.
Richard, 2020 WL 6274822, at *8.
Lender force-placed insurance in 2016. Duties allegedly unfulfilled under the RESPA statute and its attendant regulations. Denial of a mortgage servicer's immunity defense based on notices that complied with RESPA. "As we have noted," the Court said in the first sentence of its opinion, "this case presents a homeowner's nightmare scenario."
What the Court did not emphasize was so obvious that it did not need to be emphasized: Lender force-placed insurance practices continue today. The gist of the Court's holding, on the other hand, was emphatic: A mortgage servicer's claim to compliance with "the letter of the law" does not confer immunity from RESPA claims. Providing the statutorily required notice under RESPA does not "relate to, or excuse, its prior alleged RESPA violations" of its "fundamental duty," namely, "a duty to timely pay hazard insurance premiums in order to avoid a lapse in coverage and the necessity of securing inferior force-placed insurance." Richard, 2020 WL 6274822, at *8.
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