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Foreclosure company fails to dismiss FDCPA claim

Where a homeowner alleged a company that instituted foreclosure proceedings failed to provide proper notice under Virginia law, and thus lacked a “present right to possession” of her property, she plausibly alleged a violation of the Fair Debt Collection Practices Act, or FDCPA.

Background

Mary Hill’s allegations in this lawsuit arise out of the reverse mortgage that she executed on her longtime home in Petersburg, Virginia in the spring of 2009. Champion Mortgage provided and serviced plaintiff’s reverse mortgage, which was secured by a deed of trust on plaintiff’s home. RAS Trustee Services LLC served as substitute trustee for Champion under the deed of trust and, at Champion’s request, undertook nonjudicial foreclosure proceedings on plaintiff’s home in late 2021.

Plaintiff alleges that RAS foreclosed on her property without providing proper notice under Virginia Code § 55.1-321(A). Plaintiff claims that the foreclosure therefore violated the FDCPA as RAS lacked a present right to possession of the property. RAS has filed a motion to dismiss.

Bootstrapping

Defendant contends that plaintiff cannot bootstrap an FDCPA claim on to an alleged violation of state law, because “the FDCPA may not be used as a means to enforce such [state] statutes.” Defendant’s argument both mischaracterizes plaintiff’s FDCPA claim and contradicts compelling caselaw from across the lower courts. Accordingly, the court rejects it.

Defendant mischaracterizes plaintiff’s claim when it argues that Count Three impermissibly attempts to use the FDCPA “as a means to enforce” Virginia law. Though plaintiff’s cause of action under the FDCPA turns to § 55.1-321 to illuminate why defendant lacked a “present right to possession” of her property, Count Three asserts an independent violation of the FDCPA under § 1692f(6)(A).

The core issue is whether the court may look to state law to determine if a debt collector enjoyed a present right to possession over the seized property at the time of repossession. Plaintiff cites numerous cases from across the lower courts suggesting the answer is “yes,” and defendant fails to convincingly rebut plaintiff’s showing. Because plaintiff may premise her allegation that defendant lacked a “present right to possession” of her property under § 1692f(6)(A) on defendant’s alleged failure to comply with Virginia Code § 55.1-321, the court now turns to consider whether plaintiff alleges sufficient facts to support a plausible inference that defendant failed to comply with the Virginia statute.

Virginia code

Defendant next argues that, even if plaintiff properly premises her FDCPA claim on an alleged violation of § 55.1-321, “the Court should find as a matter of law that RAS complied with all terms [in § 55.1-321] that are applicable to a reverse mortgage.” The court declines defendant’s invitation, for two reasons. First, a motion to dismiss is not the proper setting for the court to resolve factual disputes. Second, plaintiff’s amended complaint, viewed in the light most favorable to plaintiff, alleges sufficient facts to support an inference that defendant failed to provide proper notice under § 55.1-321.

Collection activity

Defendant next argues that plaintiff “fails to allege that RAS engaged in debt collection activity.” The court disagrees. So long as plaintiff’s factual allegations support an inference that defendant enforced a security interest when it foreclosed on her home, plaintiff adequately pleads that defendant subjected her to a “collection activity” under the statute. And indeed, plaintiff’s allegations, in combination with facts that the court draws from the October 2021 notice, prove sufficient for the court to conclude that defendant enforced a security interest by foreclosing on plaintiff’s home.

Defendant argues that the October 2021 notice to plaintiff, in which defendant informed plaintiff of the impending foreclosure sale, contains none of the hallmarks “of an attempt to collect a debt.” But plaintiff does not contend that the October 2021 letter itself constituted a collection activity under the FDCPA. Plaintiff instead argues that defendant subjected her to a collection activity by foreclosing on her home.

Defendant’s motion to dismiss denied.

Hill v. Nationstar Mortgage LLC, Case No. 3:22-cv-108, Nov. 15, 2022. EDVA at Richmond (Novak). VLW 022-3-523. 18 pp.

VLW 022-3-523