Elbert v. Roundpoint Mortgage Servicing Corporation

Background

Amye Elbert alleged that she purchased a home in Antioch, California, in 2015 through a loan secured by a deed of trust issued by a Federal Housing Administration-approved lender and insured by the Federal Housing Administration. She alleged that RoundPoint, the loan servicer, charged her a $12 fee when she made mortgage payments by telephone, including on August 5 and September 4, 2019. According to Elbert, the deed of trust did not authorize those fees.

Elbert asserted three state-law claims, individually and on behalf of a proposed class: breach of contract, violation of the California Rosenthal Fair Debt Collection Practices Act, and violation of California's Unfair Competition Law. RoundPoint moved to dismiss all three claims for failure to state a claim. It also moved to strike portions of the complaint and the proposed class allegations.

Breach of contract

The court denied dismissal of Count I. The deed of trust allowed the lender to collect fees authorized by the Secretary of the Department of Housing and Urban Development and prohibited fees expressly barred by the security instrument or applicable law. A federal regulation concerning mortgages insured by the Federal Housing Administration listed specific fees that could be collected, but did not list the type of telephone-payment fee Elbert challenged. The court concluded that Elbert had alleged enough facts to support a finding that RoundPoint charged a fee not authorized by the Secretary and therefore violated the deed of trust.

The court also rejected RoundPoint's argument that Elbert could not show damages because she knew about the fees. The court explained that, unlike the charges in the case RoundPoint cited, the fees here were alleged to be unauthorized under the contract.

Rosenthal Act claim

The court dismissed Count II. Elbert alleged that the fees violated provisions of the Rosenthal Act barring a debt collector from falsely representing that a consumer debt could be increased by fees that could not legally be added, and from charging for collection services when the charge was not permitted by law.

The court explained that the Rosenthal Act covers a consumer debt, including mortgage debt, that is due or allegedly due. RoundPoint argued that Elbert had not alleged that any mortgage payment made by telephone was due or owing at the time. Elbert relied on a decision involving a payment made during a grace period, but she did not identify a document providing for a grace period or allege that any of her telephone payments occurred during one. The court therefore found Count II inadequately pleaded.

Unfair Competition Law claim

The court dismissed Count III. To the extent the claim was based on the alleged unlawfulness of the fees, it merely repeated the Rosenthal Act theory and failed for the same reason as Count II. To the extent it was based on unfairness, Elbert had not identified a public policy implicated by the fees or pleaded enough facts to show that the fees were immoral, unethical, oppressive, or unscrupulous. The court also found insufficient factual support for her allegation that the fees exceeded the actual cost of providing telephone payment services.

Requests to strike

The court denied RoundPoint's request to strike the first three numbered paragraphs of the complaint, finding that those paragraphs summarized Elbert's claims and were not irrelevant to her allegations.

The court granted RoundPoint's request to strike the proposed class allegations. Elbert's theory depended on uniform mortgage provisions in loans insured by the Federal Housing Administration, but the proposed class included all California borrowers whose loans were serviced by RoundPoint, without regard to whether their loans were federally insured. The class definition also included people who paid through the internet, although the complaint did not allege that RoundPoint charged a fee for internet payments. The court found that the complaint showed the proposed class requirements could not be met as defined.

Disposition

Judge Maxine Chesney ordered that RoundPoint's motion be GRANTED in part and DENIED in part. The motion was granted to the extent RoundPoint sought dismissal of Counts II and III and to the extent it sought to strike the class allegations. In all other respects, the motion was denied. The court gave Elbert leave to file a First Amended Complaint by September 10, 2020, and continued the case-management conference from September 4 to December 4, 2020.