Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 1 of 87 PageID #: 42

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK ----------------------------------------------------------------------X JOSEPH WASHINGTON, ST. CLAIR BLACKETT, LUCILLE MASON, AND MELISSA TROTMAN on behalf of themselves and all others similarly situated,
Plaintiffs,

No. 16-cv-03948 (CBA) (SMG)

-against-
UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT (HUD), JULIÁN CASTRO IN HIS OFFICIAL CAPACITY AS SECRETARY OF HUD, EDWARD GOLDING IN HIS OFFICIAL CAPACITY AS COMMISSIONER OF THE FEDERAL HOUSING ADMINISTRATION, CALIBER HOME LOANS, INC., AND U.S BANK TRUST, N.A., AS TRUSTEE FOR LSF9 MASTER PARTICIPATION TRUST,

FIRST AMENDED CLASS ACTION
COMPLAINT
JURY TRIAL DEMANDED

Defendants. -----------------------------------------------------------------------X

Plaintiffs bring this First Amended Class Action Complaint against the Defendants

United States Department of Housing and Urban Development (“HUD”), Julián Castro in his

official capacity as Secretary of HUD, Edward Golding in his official capacity as Commissioner

of the Federal Housing Administration (“FHA”) (collectively the “Federal Defendants”), Caliber

Home Loans, Inc. (“Caliber”), and U.S. Bank Trust, N.A., as Trustee for LSF9 Master

Participation Trust (“U.S. Bank Trust”) (collectively the “Lone Star Defendants”) on behalf of

themselves and all other similarly situated African Americans in New York City (the “Class”).

1

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 2 of 87 PageID #: 43
PRELIMINARY STATEMENT 1. This class action seeks to vindicate the rights of thousands of African-American homeowners in New York City who are at risk of losing their homes without due process, in violation of fair housing laws and in contravention of Congress’s mandate for the Department of Housing and Urban Development (“HUD”) to expand housing opportunities to all Americans. As HUD shores up its funding sources on the backs of African-American homeowners by auctioning off mortgages out of the protections of its Federal Housing Administration’s (“FHA”) mortgage program, middle-class African-American communities throughout New York City are being destroyed. 2. In its annual report to Congress, HUD touts the fact that its mortgage product— the FHA-insured mortgage—is an important source of home financing for African-American families. HUD, through FHA, does not make mortgages but rather insures them. In other words, to increase homeownership among low- and moderate-income Americans, FHA insures the loans made by private, FHA-approved, mortgage companies to borrowers with lower credit scores and who have less than twenty percent for a down payment. As part of these insurance contracts with the private mortgage lenders, FHA will pay the full amount of the unpaid principal balance of the mortgage if the lender must foreclose. 3. As HUD has recognized in discussing the importance of its FHA-insured mortgage, homeownership is the pathway to a stable middle-class life. In fact, Congress has specifically mandated that HUD achieve the goal of “. . . a decent home and a suitable living environment for every American family. . .” Congress further requires that HUD achieve this objective in a manner that affirmatively furthers fair housing.
2

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 3 of 87 PageID #: 44
4. To achieve these congressionally mandated goals, HUD, through its FHA mortgage program, offers a panoply of benefits to ensure that these low- and moderate-income homeowners are able to maintain homeownership and reap the benefits of owning property. Homeowners with an FHA mortgage are entitled to benefits that do not exist in loans accessible on the private mortgage market. In addition to providing FHA mortgages to homeowners with lower credit scores and lower down payment requirements, HUD has designed its FHA mortgage program to also provide early and ongoing intervention when struggling homeowners fall behind on payments, a generous mortgage modification program, the ability to easily refinance into a lower interest rate mortgage, and the right to sell the property along with the FHA mortgage to another FHA-eligible homeowner (together “the FHA Mortgage Program”).
5. While generous, these benefits come at a cost. Homeowners pay to be a part of HUD’s FHA Mortgage Program, first through an upfront mortgage insurance premium financed at the closing of the FHA mortgage and then every month, as a monthly mortgage insurance payment. Though expensive, access to the FHA Mortgage Program benefits is a lifeline to longterm homeownership and financial stability for many African-American homeowners in New York City.
6. But in 2010, HUD created its Note Sale Program, whereby HUD pools delinquent FHA mortgages and auctions them to the highest bidder, usually private equity firms or hedge funds, and without notice to the homeowners. The homeowners are thus removed from the FHA Mortgage Program. As a consequence, benefits to which homeowners are entitled and for which they have been paying—often for years—are lost, without notice, consent or an opportunity to be heard. By unilaterally removing the homeowners from the FHA Mortgage Program, HUD puts homeowners’ property interests in jeopardy.
3

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 4 of 87 PageID #: 45
7. After the sale of the mortgages to private equity firms, including the Lone Star Defendants, HUD requires these purchasers to offer only one benefit similar to those offered through the FHA Mortgage Program: sustainable mortgage modifications that will preserve homeownership.
8. However, the Lone Star Defendants have failed to abide by HUD’s post-auction requirements. Instead, using fraudulent and deceptive statements, the Lone Star Defendants push homeowners into predatory modifications that will inevitably lead to default.
9. In New York City, African-American homeowners are disproportionately affected by HUD’s Note Sale Program and the Lone Star Defendants’ subsequent predatory mortgage servicing. As the foreclosure crisis subsides in other communities, the stability of AfricanAmerican middle-class neighborhoods is threatened as a result of HUD’s wholesale removal of homeowners from the FHA Mortgage Program without due process and in complete contravention of its mandate to preserve homeownership in these neighborhoods.
10. Federal Defendants’ discriminatory actions violate the Due Process Clause, the Fair Housing Act, 42 U.S.C. § 3601 et seq. (“the Fair Housing Act”), and are a breach of implied contract. Lone Star Defendants’ fraudulent and discriminatory actions violate the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. (“FDCPA”), the New York unfair and deceptive practices statute (General Business Law § 349), the Fair Housing Act, 42 U.S.C. § 3601 et seq., and the Real Estate Settlement and Procedures Act, 12 U.S.C. § 2601 et seq. (“RESPA”)
11. Plaintiffs seek to stop these unseemly and discriminatory practices that adversely impact African Americans and destabilize African-American neighborhoods in New York City. Plaintiffs are entitled to a declaration that HUD has violated their due process rights and has
4

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 5 of 87 PageID #: 46
implemented the Note Sale Program in violation of its congressional mandate to expand housing opportunities in a manner consistent with fair housing laws. Plaintiffs are entitled to a declaration that Lone Star Defendants have fraudulently, deceptively and in violation of their responsibilities under federal law, offered predatory mortgage modification products to African-American homeowners in New York City. Plaintiffs are also entitled to declaratory relief, damages, attorneys’ fees and injunctive relief, including disgorgement.
JURISDICTION AND VENUE 12. This Court has original subject matter jurisdiction over Plaintiffs’ federal claims pursuant to 28 U.S.C. § 1331, 42 U.S.C. § 3613(a)(1)(A), 15 U.S.C. § 1692k(d), and 12 U.S.C. § 2614. 13. This Court has jurisdiction over Plaintiffs’ breach of implied contract claims against the Federal Defendants under 28 U.S.C. § 1346(a)(2) as no individual Plaintiff’s claim exceeds $10,000. 14. Claims against the Federal Defendants for review under the Administrative Procedure Act are authorized by 5 U.S.C. § 703 et seq. 15. This Court has supplemental jurisdiction over Plaintiffs’ state law claim pursuant to 28 U.S.C. § 1367. 16. Venue is proper under 28 U.S.C. § 1391(b).
PARTIES Plaintiffs
17. Plaintiff Joseph Washington is a 53-year-old African-American homeowner who owns the home located at 118-04 203rd Street, Saint Albans, Queens, New York, 11412.
5

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 6 of 87 PageID #: 47
Plaintiff Washington lives there with his fiancé, her two daughters and her grandchild. Plaintiff Washington is a "consumer" as that term is defined in 15 U.S.C. § 1692a(3).
18. Plaintiff St. Clair Blackett is a 52-year-old African-American homeowner who owns the home located at 138-12 232nd Street, Laurelton, Queens, New York, 11413. Plaintiff Blackett lives in the home with his wife, adult daughter and 14-year old son. Plaintiff Blackett is a "consumer" as that term is defined in 15 U.S.C. § 1692a(3).
19. Plaintiff Lucille Mason is a 73-year-old African-American homeowner who owns the home located at 9413 Avenue A, Brooklyn, New York, 11236. Plaintiff Mason lives in her home with her two adult sons. Plaintiff Mason is a "consumer" as that term is defined in 15 U.S.C. § 1692a(3).
20. Plaintiff Melissa Trotman is a 53-year-old African-American homeowner who owns the home located at 203-14 116th Avenue, St. Albans, Queens, New York, 11412. Plaintiff Trotman lives in her home with her husband and her two adult sons. Defendants
21. Defendant United States Department of Housing and Urban Development ("HUD") is the federal agency responsible for administering the Federal Housing Administration ("FHA") Mortgage Program and the Note Sale Program.
22. Defendant Julián Castro is the Secretary of HUD, and is responsible for the administration of all HUD programs, including the FHA Mortgage Program and the Note Sale Program. Mr. Castro is sued in his official capacity only.
23. Defendant Edward Golding is Principal Deputy Assistant Secretary, Office of Housing and the Commissioner of the FHA. He has direct responsibility for oversight and
6

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 7 of 87 PageID #: 48
administration of the FHA Mortgage Program and the Note Sale Program. Mr. Golding is sued in his official capacity only.
24. Defendant HUD, Defendant Castro and Defendant Golding shall be referred to collectively as the “Federal Defendants.”
25. Defendant Caliber Home Loans, Inc. (“Caliber”) is a corporation incorporated under the laws of the State of Delaware with its principal place of business at 3701 Regent Blvd., Irving, Texas 75063. Caliber is a subsidiary of the private equity firm Lone Star Funds. In addition to originating mortgages, Caliber is a mortgage servicing company.
26. Defendant U.S. Bank Trust, as trustee for LSF9 Master Participation Trust (“U.S. Bank Trust”), is a trust with an address of 2711 North Haskell Avenue, Suite 1700, Dallas, Texas, 75204.
27. Defendant Calber and U.S. Bank Trust shall be referred to collectively as the “Lone Star Defendants.”
FACTUAL ALLEGATIONS The Mechanics of the FHA Mortgage Program
28. In 1934, Congress enacted the National Housing Act (“NHA”), which created the Federal Housing Administration (“FHA”). The goal of the FHA is to increase homeownership in the United States. In 1965, FHA became a part of HUD’s Office of Housing.
29. In 1949, Congress specifically tasked HUD with administering its programs in such a way that would fulfill the national housing goal of providing “a decent home and a suitable living environment for every American family, thus contributing to the development and redevelopment of communities and to the advancement of the growth, wealth, and security of the Nation.” 42 U.S.C. § 1441; 12 U.S.C. § 1701t.
7

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 8 of 87 PageID #: 49
30. Thus, HUD has described the mission of the FHA as: provid[ing] financing to homebuyers who, compared to those served by the conventional market, have lower wealth and pose moderately higher risks but are still credit worthy. For this reason, FHA-insured mortgages have been the product of choice, and sometimes necessity, for low income Americans, offering a pathway to the middle class and a chance to build wealth that can be passed down through generations. U.S. Dep’t of Housing and Urban Dev. Fed. Housing Admin., Annual Report to Congress: The Financial Status of the FHA Mutual Mortgage Insurance Fund, Fiscal Year 2015, p. 14 (Nov. 16, 2015). 31. FHA does not make mortgages, but rather insures lenders against losses on the mortgages. In other words, to increase homeownership among low-income Americans, HUD insures loans made to borrowers by FHA-approved mortgage companies. These borrowers often have lower credit scores, are permitted to tender a down payment as low as 3.5%, and are allowed to borrow money from family members to use for the down payment. 32. As part of the FHA insurance contract between HUD and these mortgage lenders, if a homeowner defaults on his or her mortgage and the loan owner must foreclose on the property, HUD will pay to the loan owner the full amount of the unpaid principal balance of the mortgage loan, plus some amount of delinquent interest. 33. In order to make these insurance payments in the event of a homeowner’s default, Congress created the Mutual Mortgage Insurance Fund (“the Insurance Fund”), administered by FHA, and funded through the collection of insurance premiums and fees. 34. It is the homebuyers, all of whom choose to take out an FHA mortgage, who ultimately fund the Insurance Fund, in two forms. The first is through the “Up-Front Mortgage Insurance Premium” (“UFMIP”) paid at the loan closing. This UFMIP is in addition to other closing costs and is a percentage of the loan amount. HUD changes the UFMIP periodically.
8

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 9 of 87 PageID #: 50
Between July 14, 2008 and April 4, 2010, the UFMIP was approximately 1.75% of the loan balance at closing. On April 5, 2010, the UFMIP was increased to 2.25% of the amount of the loan, but in October 2010 it was lowered to 1.00%. Today, the UFMIP is 1.75% of the loan amount.
35. The second way homeowners pay money to the Insurance Fund is through the “Annual Mortgage Insurance Premium” (“MIP”). This annual MIP is spread across a 12-month period and is included on the homeowner’s monthly mortgage statement. Unlike mortgage insurance in the private market, which generally expires once the unpaid principal balance of the loan is 80% of the value of the property, FHA MIP is not as simple. As of 2013, if the homebuyer contributes less than 10% of the purchase price as a down payment, the annual MIP continues for the entire 30-year life of the loan. When a homebuyer contributes 10% or more to the down payment, the annual MIP is assessed for only 11 years.
36. The vast majority of FHA homebuyers contribute less than 10% of the purchase price as a down payment. As a result, as of 2013, the vast majority of FHA homeowners pay the annual MIP for the life of the mortgage.1
37. Similar to the UFMIP, HUD periodically changes the annual MIP. Between July 14, 2008 and October 3, 2010, the annual MIP was between 0.50% and 0.55%, depending on the current loan-to-value (“LTV”) ratio. If the loan amount was less than or equal to 95% of the value of the property, then the annual MIP was only 0.50%. Today, the current annual MIP is 0.80% where LTV is less than or equal to 95% or 0.85% where LTV is greater than 95%.
38. The mortgage contract between the homeowner and the FHA-approved lender specifically references the annual MIP. HUD issues a standard FHA form mortgage contract that
1For FHA mortgages issued prior to 2013, homeowners paid the annual MIP until the loan-to-value ratio reached 78%.
9

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 10 of 87 PageID #: 51
all FHA mortgage lenders use. Paragraph 3 of FHA’s form mortgage contract requires the loan owner to apply payment to MIP first from the homeowner’s monthly payment on the account.
39. Since its founding in 1934, FHA has insured mortgages on over 34 million properties and is currently the largest insurer of mortgages in the world. The Benefits of the FHA Mortgage Program
40. In New York City, because of high housing prices, the cost of an FHA mortgage can be significant. A homeowner who obtained a $350,000 FHA mortgage in early 2010 (the approximate average amount of a mortgage in southeast Queens), would have paid an extra $6,125 for the UFMIP at closing. In the first year of the mortgage, the homeowner would have paid $160.41 per month for the annual MIP.
41. Although these costs are significant, the homeowner benefits by participating in the FHA Mortgage Program. These benefits can be broken down into five categories: (1) prepurchase benefits; (2) pre-foreclosure assistance benefits; (3) loss mitigation options; (4) streamline refinance benefit; and (5) assumability of the FHA mortgage loan.
42. These benefits enable HUD to further the national housing goal of “a decent home and a suitable living environment for every American family,” which Congress specifically mandated HUD to fulfill. See 42 U.S.C. § 1441; 12 U.S.C. § 1701t.
Pre-Purchase Benefits 43. The FHA Mortgage Program enables borrowers with credit scores as low as 580 to obtain an affordable loan: a 30-year, fully amortizing mortgage with an interest rate at market, fixed for the life of the loan. This type of mortgage is considered a responsible lending product.
10

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 11 of 87 PageID #: 52
44. An additional pre-purchase benefit of an FHA mortgage is that the down payment can be as low as 3.5% of the purchase price and monetary gifts from family or friends can be used as part or all of that down payment.
Pre-Foreclosure Assistance Benefits 45. Congress recognized that FHA homeowners—who typically have lower incomes, less savings and are subject to more frequent bouts of unemployment—were more likely to experience financial hardships that could cause them to fall behind on their mortgage payments than other homeowners. As a result, the National Housing Act requires HUD to establish a program that requires mortgage servicers to provide alternatives to foreclosure. See 12 U.S.C. § 1715u (“[up]on default or imminent default . . . of any mortgage insured under this subchapter, mortgagees shall engage in loss mitigation actions for the purpose of providing an alternative to foreclosure. . . .”). 46. To fulfill the requirement to avoid foreclosure, HUD has designed and implemented a pre-foreclosure assistance system for FHA homeowners. Central to that preforeclosure assistance system is early outreach by the mortgage servicer to FHA homeowners soon after they fall behind on payments in order to minimize the number of FHA foreclosures. 47. HUD has issued regulations, handbooks, and other guidance that encapsulate its pre-foreclosure assistance system. Sections 600 to 604 of the Code of Federal Regulations and Chapter III.A.2.h of the FHA Single Family Housing Policy Handbook 4000.1 (“the FHA Handbook”) describe the precise pre-foreclosure steps that every FHA mortgage servicer, the HUD-approved entity that accepts and processes the homeowner’s payments on behalf of the lender, must follow before resorting to foreclosure. See 24 C.F.R. § 203.606.
11

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 12 of 87 PageID #: 53
48. Under the FHA program, a homeowner is not considered late until the 15th day after the payment is due. On the 17th day after the payment due date—two days after the mortgage payment is officially declared delinquent—HUD requires the mortgage servicer to attempt telephonic contact to ascertain why the homeowner fell behind and to inform the homeowner about the FHA Mortgage Program’s various loss mitigation options.
49. By the 20th day after the payment due date, the mortgage servicer must attempt contact by mail or email.
50. By the 32nd day after the first missed payment, but no later than the 45th day after the payment due date, HUD requires the mortgage servicer to send a notice that informs the homeowner of the availability of free, HUD-approved housing counseling agencies and how to find a local housing counseling agency, along with HUD’s phone number. If the homeowner has previously designated that he or she speaks another language, the notice must be in that language.
51. Also by the 32nd day after the first missed payment, but no later than the 60th day, the mortgage servicer must mail the homeowner a letter that states the amount of the pastdue payments, the original due dates of the missed payments and an invitation to participate in loss mitigation. With this letter, the mortgage servicer must include the HUD-created pamphlet “Save Your Home – Tips to Avoid Foreclosure.”
52. By the 61st day after the first late payment, the mortgage servicer must have attempted a face-to-face meeting with the homeowner to discuss loss-mitigation options. The only exception to this requirement is if there is no branch office of the mortgage servicer within 200 miles of the home.
12

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 13 of 87 PageID #: 54
53. Within three months after the first missed payment, the mortgage servicer must evaluate the homeowner’s situation to identify FHA loss-mitigation options. In an effort to save the home, it must then continue this loss mitigation review on a monthly basis.
54. The mortgage servicer is prevented from moving forward with foreclosure until three, full monthly payments are due and unpaid.
55. Recognizing the importance of these pre-foreclosure assistance benefits to the homeowner, HUD has enshrined these benefits in its form FHA note and mortgage contract that all FHA mortgage lenders must use. Paragraph 6(b) of the FHA form note and Paragraph 9(d) of the FHA form mortgage require mortgage servicers to comply with these pre-foreclosure assistance benefits before accelerating the mortgage debt and beginning foreclosure proceedings.2 For each of the named Plaintiffs, these provisions are a part of his or her FHA note and mortgage.
56. HUD can impose monetary penalties against FHA mortgage servicers who fail to follow HUD’s pre-foreclosure assistance requirements.
57. The pre-foreclosure assistance benefits of the FHA Mortgage Program are in stark contrast to the private mortgage market. For mortgages not insured by FHA, contact with the delinquent homeowner is minimal and must occur within 36 days of default. For non-FHA mortgages, there is no requirement to make face-to-face contact with the homeowner, and there is no requirement that pertinent information be communicated in the language designated by each borrower.
2 In or around June 2015, HUD unilaterally removed this language from the form note and mortgage without notice and comment, in violation of the Administrative Procedures Act.
13

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 14 of 87 PageID #: 55
Loss Mitigation Options 58. Loss mitigation is a process where the mortgage servicer evaluates a delinquent homeowner for options that would avoid a foreclosure auction. 59. The most common loss mitigation option is a mortgage modification. With a mortgage modification, the mortgage servicer rewrites some of the loan terms in a way that produces payments that are affordable to the homeowner. This can include lowering the interest rate, extending the term, forbearing a portion of the unpaid principal balance so that it comes due at the end of the mortgage, or a combination of these options. 60. Before and during the foreclosure process, HUD requires its mortgage servicers to consider homeowners for various loss mitigation options, including a special forbearance, a repayment plan, a standard modification, and a modification known as “FHA-HAMP,” which is HUD’s version of the federal Home Affordable Modification Program (“HAMP”). These requirements are found in the HUD Handbook. See e.g., FHA Single Family Housing Policy Handbook (“HUD Handbook”), v. 4000.1 (Issued March 14, 2016), available at http://www.allregs.com/tpl/public/fha_freesite.aspx. 61. Although HUD has long offered loss mitigation to its FHA homeowners, in 2009, with the onset of the foreclosure crisis, it expanded its program, most notably by creating FHAHAMP. In 2012, after a critical report by the Government Accountability Office regarding HUD’s modification options, HUD overhauled its modification program to make it more effective. With these changes, there was a significant increase in the number of homeowners able to save their homes with an FHA-HAMP modification. 62. Under the loss mitigation options, the FHA Mortgage Program first provides for a special forbearance—where payments are reduced or suspended for a period of up to six
14

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 15 of 87 PageID #: 56
months—to homeowners who are facing a short-term hardship. This reduction in monthly payments enables the homeowner to focus on the short-term hardship or to sell the home. For homeowners who are able to get back on their feet, the special forbearance is followed by a repayment plan of the arrears that accumulated during the forbearance. As a modification usually alters the mortgage term and interest rate, a forbearance plan followed by a repayment plan is particularly beneficial to homeowners who have fallen behind on their mortgage later in the life of the mortgage or who have a mortgage with a low interest rate.
63. For homeowners with a long-term hardship, FHA offers two types of modifications: a standard modification and an FHA-HAMP modification. A standard modification lowers the interest to the current market rate and always extends the term of the mortgage to 30 years from the modification date.
64. Under an FHA-HAMP modification, the homeowner’s monthly mortgage payment can be reduced to as low as 25% of the homeowner’s gross monthly income. This target payment is lower than what Fannie Mae, Freddie Mac and non-government-sponsored entities (“non-GSE”) offer, which is usually 31% of the homeowner’s gross monthly income.
65. Further, under FHA-HAMP, the mortgage servicer is required to lower the interest rate to the current market rate and to extend the term of the mortgage to 30 years. But unlike the FHA standard modification, FHA-HAMP permits the mortgage servicer to seek a “partial claim” of some of the arrears of the principal balance. By submitting a “partial claim” to HUD, the mortgage servicer requests that HUD pay as much as 30% of the unpaid principal balance to the mortgage servicer so that it can achieve an affordable, modified monthly payment. However, this amount is not forgiven. Instead, this partial claim becomes a second mortgage that
15

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 16 of 87 PageID #: 57
the homeowner owes HUD and which is due at the end of the life of the modified mortgage. This partial claim mortgage is non-interest bearing.
66. During the life of the loan, HUD places no limitation on the number of times the mortgage may be modified as long as the homeowner has not received a modification within the previous 24 months and has not exhausted the full amount of his or her allotted partial claim. This is in contrast to Fannie Mae and Freddie Mac, which limit homeowners to three modifications over the life of the loan, and in contrast to non-GSEs, which limits homeowners to one HAMP Tier 1 modification over the life of the loan.
67. The non-GSE HAMP program is set to expire on December 31, 2016. Fannie Mae and Freddie Mac, two government-sponsored mortgage agencies, will also terminate their HAMP programs on December 31, 2016. However, HUD has stated that FHA-HAMP is a permanent addition to HUD’s loss mitigation program.
68. Additionally, under the FHA Handbook, mortgage servicers must regularly evaluate homeowners for a possible modification or other home-preserving opportunity during the time they are in default. In the private market, that review is only required if the homeowner submits all the documents necessary to complete a modification application.
69. Similar to the pre-foreclosure assistance benefits, if mortgage servicers fail to follow HUD’s loss mitigation program, HUD may seek monetary penalties.
70. Further, Paragraph 6(b) of the FHA form note and Paragraph 9(d) of the FHA form mortgage contract also require that the mortgage servicer consider each FHA homeowner for loss mitigation prior to the mortgage servicer initiating foreclosure.
16

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 17 of 87 PageID #: 58
Streamline Refinance Benefit 71. For FHA homeowners who have been current on their mortgage for at least 12 months, the FHA Mortgage Program includes a “Streamline Refinance.” A Streamline Refinance is particularly beneficial in an environment of decreasing interest rates or a decrease in the annual MIP. 72. A Streamline Refinance requires minimal documentation. There is no need for an appraisal or a review of the loan-to-value ratio. As a result, even homeowners who are “underwater”—where the mortgage debt is greater than the value of the home—are able to refinance and take advantage of the lower interest rate or the lower annual MIP. Aside from temporary Fannie Mae and Freddie Mac refinance programs, both of which will expire on December 31, 2016, underwater homeowners cannot refinance. 73. For certain Streamline Refinances, FHA does not require lenders to certify income or employment or perform a credit check. As a result, closing costs of a Streamline Refinance are usually lower than what would be paid if the homeowner refinanced in the private market. 74. In order for a homeowner to qualify for a Streamline Refinance, the Streamline Refinance must provide some tangible benefit to the homeowner. A five-percent reduction in the monthly principal, interest and MIP payment is considered a tangible benefit. 75. Finally, a Streamline Refinance is a “no cash” refinance. In other words, the homeowner is not allowed to take more than a nominal $500 in cash out of the refinance. 76. In 2013, FHA interest rates hit a record low of approximately 3.5%, and 511,843 FHA homeowners took advantage of the Streamline Refinance benefit. In 2012, when interest rates were approximately 4%, 274,061 FHA homeowners sought a Streamline Refinance.
17

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 18 of 87 PageID #: 59
Assumability of the FHA Mortgage Loan 77. Unlike the private market, all FHA mortgages can be sold with the home, pending the mortgage company’s determination that the buyer meets FHA’s minimum creditworthiness standards. In other words, an FHA mortgage is “assumable” by the next buyer so long as he or she meets FHA’s minimum credit score requirement. 78. This ability to assume the mortgage loan is not just found in the Code of Federal Regulations. HUD has also enshrined the homeowner’s right to sell the property, encumbered by the FHA mortgage, into the FHA form mortgage contract itself. Paragraph 9 delineates the precise circumstances in which the mortgage servicer can seek full repayment of the loan, or “accelerate” the loan. Unlike in the vast majority of mortgages, there is no traditional “due on sale” clause in an FHA loan, which allows the mortgage servicer to accelerate the loan when the homeowner sells or transfers his or her interest in the property. Instead, Paragraph 9(b) only permits acceleration when the transfer in ownership is to someone who does not occupy the property or the new owner-occupant did not have his or her credit score approved by HUD. 79. As a result of this assumability benefit, property encumbered by an FHA mortgage can be easier to sell in a housing environment where mortgage interest rates are rising or are likely to rise. A seller may also command a premium from a purchaser to buy a home with a below-market interest rate loan. 80. The ability to sell the property more quickly, and potentially earn a premium, can enable delinquent FHA homeowners to avoid foreclosure. Current Racial Composition of the FHA Mortgage Program and Continuing Adverse Effects of FHA’s Longstanding Historical Racial Discrimination 81. Currently in New York City, African-American households comprise only 18% of homeowners of one-to-four family, owner-occupied units even though 22% of New York City
18

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 19 of 87 PageID #: 60
households are African-American. Comparatively, white homeowner households comprise 53% of all owners of one-to-four family, owner-occupied units while constituting 32% of New York City households.
82. These African-American homeowners disproportionately have FHA loans when compared to white owners of one-to-four family, owner-occupied units in New York City. For example, in 2014, even though FHA mortgages only made up 24% of the market for new home purchases, 43% of all mortgages made to African-American homeowners were FHA mortgages. In contrast, approximately 21% of all mortgages during 2014 made to white homeowners were FHA mortgages.
83. Between 2007 and 2014, FHA insured 38,047 mortgages for one-to-four family, owner-occupied homes in New York City. Only 27% of these FHA mortgages, or 10,350, were made to white homeowners while 36%, or 13,665 were made to African-American households even though African-American households comprised only 22% of New York City residents.
84. As a result, in part, of the disproportionate participation in the FHA Mortgage Program by African Americans in New York City, changes to the FHA Mortgage Program that reduce the Program’s benefits and protections adversely impact black homeowners more than they do white homeowners. Even in light of this fact, HUD’s Note Sale Program has a disparate and adverse impact on predominately African-American neighborhoods in New York City in excess of African-American homeowners’ participation in the FHA Mortgage Program.
85. These discriminatory effects should come as no surprise to the Federal Defendants given the high level of residential segregation in New York City and FHA’s longstanding racially exclusionary and discriminatory past policies and practices, which denied homeownership opportunities to African-American households for decades and created and
19

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 20 of 87 PageID #: 61
maintained racially segregated neighborhoods. Perversely, now that these institutional barriers, designed and implemented by FHA, have been removed and African Americans are able to obtain FHA mortgages, the Federal Defendants, through their Note Sale Program, are stripping African-American families of the benefits and protections of the FHA Mortgage Program. And by designing pools that include a disproportionate number of homes located in predominantly African-American neighborhoods, the Federal Defendants are destabilizing the very neighborhoods in which FHA initially refused to provide home mortgages because of the racial composition of its residents.
86. In the decades after its creation in 1934, FHA fostered residential segregation, simultaneously promoting homeownership among white Americans in predominantly white areas while refusing to provide FHA financing to black buyers of a similar socioeconomic status. See Thomas Sugrue, The Origins of the Urban Crisis: Race and Inequality in Postwar Detroit 44 (Princeton Univ. Press 2d ed. 2005).
87. Official FHA policy promoted these discriminatory practices. In its underwriting manuals, FHA encouraged the use of racially restrictive covenants, believing such restrictions protected the “character” of a neighborhood and supported higher home values. Sugrue, supra, at 182. Out of this professed concern with actuarial soundness, FHA insisted that loans be restricted to racially homogenous neighborhoods. Id. at 62, 182.
88. These FHA-encouraged covenants proliferated. A 1948 survey found that 85.1 percent of new, large subdivisions in three New York counties—Westchester, Nassau and Queens—contained restrictive covenants. Martha Biondi, To Stand and Fight: The Struggle for Civil Rights in Postwar New York City 114 (Harvard Univ. Press 2d ed. 2006).
20

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 21 of 87 PageID #: 62
89. Once formally confined to live in racially segregated neighborhoods by FHA’s policies, a practice known as “redlining” further prevented African-American households from obtaining FHA home loans even in predominantly black neighborhoods. In conjunction with real estate brokers and lenders, the Federal Home Loan Bank Board drew up Residential Security Maps and Surveys, which professed to capture credit risk, but were in fact based on a property’s location and the racial composition of the area. Sugrue, supra, at 43-44. These maps ranked sections from A (green) to D (red) on a variety of factors, including building conditions and surrounding infrastructure. Id. But the paramount consideration was racial uniformity and the absence of “a lower grade population.” Id. The presence of even a small population of African Americans was sufficient to earn a D rating. Id. Buyers trying to purchase homes located in areas rated D—those within the red line—were unlikely to qualify for loans, and developers rarely secured financing to build in these neighborhoods. Id. FHA declined loans to buyers in racially mixed or non-white neighborhoods, while at the same time refusing to approve loans for African Americans seeking to purchase homes outside of these neighborhoods. Biondi, supra, at 114.
90. Though the Supreme Court struck down racial restrictions in Shelly v. Kramer, 334 U.S. 1 (1948), and FHA ceased insuring new mortgages on homes containing racial covenants in 1950, their presence cast a pall on post-Shelly homeownership. Biondi, supra, at 121. Racially restrictive covenants in deeds continued to signal a neighborhood’s racial composition to real estate brokers and housing developers. Sugrue, supra, at 45. Even after Shelly, securing loans for nonwhites in subdivisions with deeds restricted to “Caucasians only” was near impossible. Id. And real estate brokers followed suit by honoring the restrictions and steering prospective buyers to neighborhoods of their own race. Id. As late as the mid-1950s, a study by the National Committee Against Discrimination in Housing found that while 50 percent
21

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 22 of 87 PageID #: 63
of all mortgage loans for new construction were guaranteed by FHA or the Veterans Administration, only two percent of these mortgages were available to nonwhites, the majority of which were in the Southern United States. Biondi, supra, at 232.
91. This missed opportunity at homeownership during the time when FHA expressly prescribed residential segregation (approximately 1934 to 1950) has resulted in staggering differences in wealth accumulation among the races. By 1984, when many of these raciallyrestrictive, federally-insured mortgages had matured, the median white household had a net worth of $39,135, compared to $3,397 for the median African-American household. Ira Katznelson, When Affirmative Action was White: An Untold History of Racial Inequality in Twentieth-America 164 (Norton 2006).
92. The absence of homeownership explains much of this racial wealth gap. While seven in 10 whites owned homes in the 1980s, with an average value of $52,000, only four out of 10 African Americans owned homes, and those homes had an average value of less than $30,000. Id. The majority of African Americans who did not own homes had little or no wealth. Id.
93. This pattern continues into the present time. Today, 73% of white Americans own their homes, but only 45% of African Americans are homeowners. Laura Sullivan et al., The Racial Wealth Gap: Why Policy Matters 9 (Demos IASP 2015), available at http://www.demos.org/sites/default/files/publications/RacialWealthGap_1.pdf. Further, the impact of redlining, including by FHA, still exists as African-American homeowners live in neighborhoods with higher rates of poverty, lower home values and declining infrastructure. Id at 10.
22

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 23 of 87 PageID #: 64
94. Pursuant to the duty to affirmatively further fair housing as mandated by Section 3608 of the Fair Housing Act, HUD should have analyzed the anticipated effects or impact of the Note Sale Program prior to implementing the Program and before adopting any changes. In addition, HUD should have adopted policies and implemented procedures in the FHA loan program that do not discriminate based on race and do not create or maintain residential segregation.
95. However, in designing and implementing the Note Sale Program, HUD has not reviewed the impact of its changes to the Note Sale Program on African-American homeowners in New York City or on predominantly African-American neighborhoods in New York City. In creating the Note Sale Program, HUD identified the specific loans to sell out of the FHA Mortgage Program without knowing whether these decisions would have a racially discriminatory impact on African-American homeowners in New York City or on predominantly African-American neighborhoods in New York City.
96. If HUD had conducted the appropriate analysis, it would have known of (a) existing residential segregation in New York City; (b) the disproportionate participation in the FHA Mortgage Program by African Americans in New York City; and (c) the expected or anticipated discriminatory effects of its Note Sale Program.
97. However, HUD neither conducted the required analysis nor adopted or implemented non-discriminatory policies and procedures for the Note Sale Program as required by its duty to affirmatively further fair housing. Thus, it has utterly failed to comply with its obligations under the Fair Housing Act.
23

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 24 of 87 PageID #: 65
The Emergence of HUD’s Delinquent Note Sale Program 98. As a result of the 2008 financial crisis, FHA homeowners began to fall behind on
their mortgages. Some of these homes were auctioned in foreclosure and, as a result, HUD was required to pay out full insurance claims from the Insurance Fund. Approximately 303,492 homeowners saved their homes through an FHA-HAMP modification. However, many of these FHA-HAMP modifications could only be offered with a “partial claim” of the unpaid principal balance, further depleting the Insurance Fund.
99. Between 2007 and 2009, the Insurance Fund declined from $21 billion to just $4 billion. By 2012, its capital reserves ratio reached negative 1.44%, far below its congressionally mandated floor of 2%.
100. Because of the drain the foreclosure crisis had on the Insurance Fund, in 2010, HUD launched the Delinquent Note Sale Program (“Note Sale Program,” “Note Sale,” or “Note Sales”) to sell off delinquent mortgages it perceived as un-savable and to help shore up the Insurance Fund.
101. Between 2010 and the end of 2011, HUD referred to its Note Sale Program as the Single Family Loan Sale (“SFLS”). SFLS was merely a pilot project to determine if the Note Sale Program could succeed. Between 2010 and the end of 2011, HUD sold off 1,377 delinquent mortgages as part of the SFLS segment of its Note Sale Program.
102. In 2012, HUD substantially expanded the Note Sale Program and called this expanded version the Distressed Asset Stabilization Program (“DASP”).
103. Unlike the SFLS Note Sales, the DASP-version of the Note Sale Program included two types of sales, a national sale and a Neighborhood Stabilization Outcome (“NSO-
24

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 25 of 87 PageID #: 66
DASP”) sale, which required purchasers to achieve certain outcomes for a portion of the mortgages they purchased.
104. As of May 2016, HUD has sold more than 113,000 mortgages through its Note Sale Program.
105. Early in 2016, HUD announced a new type of auction under its Note Sale Program: the Aged Delinquent Portfolio Loan Sale (“ADPLS”). For a mortgage to be included in an ADPLS auction, as opposed to being auctioned under SFLS or DASP, the mortgage must be more than 48 months in default.
106. The Note Sale Program is merely an early insurance payout program to the mortgage servicer. Traditionally, HUD was permitted to pay out a full insurance claim to a mortgage servicer only if the servicer had foreclosed on the property. In exchange for this insurance payment, HUD would take title to the home. As a result, HUD became the owner of what is known as a Real Estate Owned (“REO”) property and would be responsible for disposing of it.
107. In 1999, Congress amended Section 204 of the NHA to permit HUD to pay claims on defaulted mortgages prior to a foreclosure auction. It is through these 1999 amendments that HUD administers the Note Sale Program, be it an SFLS, DASP or ADPLS auction.
108. Under the Note Sale Program, mortgage servicers are permitted to request a full claim of the unpaid principal balance plus a certain number of months of delinquent interest before any foreclosure auction.
109. The number of months of delinquent interest that an FHA mortgage servicer can collect on a Note Sale Program loan is limited by HUD.
25

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 26 of 87 PageID #: 67
110. HUD expects FHA mortgage servicers to properly review homes for loss mitigation options within the timeframes provided by the regulations. This limitation corresponds to what HUD determines to be reasonable diligence in prosecuting a foreclosure to completion.
111. Any delinquent interest months that exceeds HUD’s reasonable diligence timeframe is uncollectable.
112. HUD determines the reasonable diligence timeframe on a state-by-state basis, and, in certain circumstances, on a metropolitan basis.
113. Between 1990 and 2012, that reasonable diligence timeframe for New York City was 13 months.
114. In 2013, HUD increased the reasonable diligence timeframe to 19 months for New York City mortgages.
115. In 2016, HUD again increased the reasonable diligence timeframe to 21 months for New York City mortgages.
116. With HUD’s increased timeframe for “reasonable diligence,” mortgage servicers who submit a claim under HUD’s Note Sale Program, including the Program’s first ADPLS auction, can now claim 21 months of delinquent interest as opposed to only 19 months of delinquent interest just the year prior.
117. HUD only permits a mortgage to be included in the Note Sale Program if: (i) the mortgage is six months or more in default;3 and (ii) the mortgage servicer has exhausted all of the FHA’s loss mitigation options and determined that there is no home-saving solution.
118. It is the FHA mortgage servicer who, in submitting its claim, represents to HUD that it engaged in all HUD-required loss mitigation and that loss mitigation is not possible.
3 For ADPLS Note Sales, this requirement is extended to 48 months in default. See Paragraph 105, supra.
26

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 27 of 87 PageID #: 68
119. Upon information and belief, HUD does not independently verify the mortgage servicer’s claim that it properly engaged in loss mitigation. It does not inquire or confirm with the homeowner whether loss mitigation was ever attempted.
120. Once the mortgage servicer submits a claim under the Note Sale Program, it transfers title to the note and mortgage to HUD, without notice to the homeowner. From there, HUD pools the notes and mortgages it has acquired and sells them, in a silent auction, to the highest bidder, again, without notice to the homeowner.
121. Since 2010, HUD has conducted 16 Note Sale auctions. Each auction has multiple pools. The bidder must purchase the entire pool.
122. Each pool in a Note Sale includes mortgages from across the country, although New York State mortgages have increasingly become a larger portion of each Note Sale. In the May 16, 2016 Note Sale, New York State mortgages made up between 7 and 39% of each pool.
123. In designing the Note Sale Program and expanding it through its DASP version, HUD declared that the Note Sale Program would serve two purposes. The first was to shore up the Insurance Fund. The second was to save homes, because DASP ostensibly “. . . provides an alternative to nearly assured foreclosure by offering homeowners a second chance to keep their home.” U.S. Dep’t of Housing and Urban Dev. Fed. Housing Admin., Report to the Commissioner on Post-Sale Reporting FHA Single Family Loan Sale Program 1 (Jan. 22, 2016) (“2016 Note Sale Program Report”).
124. In claiming that the Note Sale Program provides a second opportunity for the homeowner to save his or her home, HUD assumes that because these Note Sale mortgages are
27

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 28 of 87 PageID #: 69
sold for between 40% and 60% of their value,4 the new post-Note Sale servicer will be inclined to pass along those savings to the homeowner in the form of a generous mortgage modification.
125. Since initiating the Note Sale Program, the successful bidders have largely been hedge funds and private equity firms. Because these hedge funds and private equity firms are not in the business of dealing directly with homeowners, most hire a mortgage servicer to interface with the homeowners on their behalf. Some even own their own mortgage servicer to service the mortgages they purchased through the Note Sale Program.
126. On or around July 11, 2016, HUD announced a new Note Sale auction to be held on September 14, 2016. Due Process Violations
127. Once a mortgage is sold in a Note Sale it is no longer a part of the FHA Mortgage Program. As a result, the homeowner loses all of the benefits of the FHA Mortgage Program that he or she had been paying for, including: pre-foreclosure assistance, FHA loss mitigation options, streamlined refinance, and the ability to sell the property encumbered by the FHA mortgage (“assumability of the mortgage”). At this point, HUD has devolved all responsibilities to the purchaser.
128. Prior to the Note Sale, the homeowners are not informed that their mortgage is about to be auctioned out of the FHA Mortgage Program. Neither HUD nor the FHA mortgage servicer gives any notice to homeowners prior to the Note Sale to inform them that their mortgage will be sold out of the FHA Mortgage Program. Thus, the homeowners lose the
4 Likely the discount that Note Sale purchasers receive is even greater. It appears that HUD only analyzes the discount based upon the percentage of the unpaid principal balance ("UPB") of the mortgage, not upon the full debt. UPB refers to the amount of the mortgage principal when the homeowner fell behind. It does not include arrears, such as delinquent interest, late fees and other foreclosure-related fees that accrue on a monthly basis once the homeowner is behind. However, when HUD auctions these mortgages, it auctions the full debt—UPB and arrears. The post-Note Sale purchaser seeks to collect on this full debt—UPB and arrears. Thus, HUD's analysis of the discount based on only UPB significantly underestimates the true discount that the purchasers receive through HUD's Note Sale Program.
28

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 29 of 87 PageID #: 70
benefits to which they are entitled—benefits designed to keep them in their homes and ensure that they and their families are on the path to middle class.
129. On June 30, 2016, HUD announced changes to one of its Note Sale Programs, DASP, including that HUD will now require a warning to be issued in the 120-day delinquency notice of the possibility that the loan may be sold.
130. This change comes too late for those homeowners who will be unsuspectingly included in the impending September 14, 2016 Note Sale. HUD requires that the loan be in default at least six months before it can be included in its Note Sale Program. As a result, the homeowners whose mortgages will be sold in the September 14, 2016 auction would have received their 120-day delinquency notice prior to the June 30, 2016 changes. Thus, even this limited warning that their mortgages might be sold could not have reached these homeowners.
131. As a result, these changes will not be applied to the homeowners set to be impacted by the September 14, 2016 sale as by definition, these mortgages included in HUD’s Note Sale must be at least six months in default.
132. Although under the Truth in Lending Act (“TILA”), the new post-Note Sale servicer is required to inform the homeowner in writing that there is a new owner of the mortgage, this notice does not state that the homeowner is no longer entitled to the FHA Mortgage Program and does not explain the consequences of the Note Sale. And, importantly, this notice is sent after the Note Sale.
133. For four years after the sale, the new post-Note Sale servicer is required to provide quarterly data on the status of each Note Sale Program loan to HUD. Since 2015, HUD has issued two reports analyzing the Note Sale Program, including both the SFLS and DASP
29

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 30 of 87 PageID #: 71
Note Sales. These reports summarize the modifications and other non-foreclosure relief homeowners have obtained after the sales.
134. However, if a post-Note Sale servicer sells the mortgage loan to another entity, HUD no longer tracks the mortgage. In the July 16, 2015 Note Sale, the purchasers either sold or “charged off”—meaning that the purchaser has written off the mortgage as an uncollectable bad debt—approximately 35% of the mortgages in that sale. In the 2014 Note Sales, approximately 32% of the mortgages were sold or charged off after purchase.
135. HUD does not track the outcome of the mortgages that the post-Note Sale purchaser re-sells to another entity or that the post-Note Sale purchaser charges off. As a result, HUD provides no information as to what happened to these mortgages and the homeowners.
136. In the 2016 Note Sale Program Report, which reviews all Note Sales since 2010, less than 7% of all the mortgages sold in the Note Sales held between 2012 and 2015 received a mortgage modification after the sale.5 Almost 35% of all mortgages sold through HUD’s Note Sale Program, and not “charged off” or resold, are foreclosed upon post-sale.
137. Until April 2015, aside from the loans sold through the Neighborhood Stabilization Outcome pools, HUD placed no loss mitigation requirements on the post-Note Sale purchasers. Up until April 2015, there was not even a requirement that the post-Note Sale purchaser offer a modification program.
138. On April 24, 2015, HUD, via a press release, announced that those post-Note Sale purchasers who participate in the DASP-version of the Note Sale Program must evaluate homeowners for a HAMP or a HAMP-like modification and the post-Note Sale purchaser is not
5 HUD's own analysis of the Note Sale Program overestimates its success and, as a result, lists a slightly higher rate, 10%, for mortgage modifications post-Note Sale. However, HUD's analysis only counts the mortgages the post-Note Sale purchaser holds at the time of HUD's review. As stated in Paragraphs 134 and 135, supra, in some of the recent Note Sales, the purchasers immediately sold or charged off over 30% of the pool. By excluding these “disappeared” loans, HUD is able to inflate its success results.
30

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 31 of 87 PageID #: 72
permitted to finalize any foreclosure action for 12 months after the purchase. Prior to this announcement, the moratorium on foreclosures was only six months.
139. In its April 24, 2015 press release, HUD provided no further details on what constitutes a HAMP-like modification. HUD also did not codify this change in the Code of Federal Regulations although it is now listed as a requirement in some of Note Sale contracts.
140. Further, this HAMP or HAMP-like modification requirement is only imposed upon the immediate post-Note Sale purchaser through the contract it enters into with HUD. For those mortgages that the post-Note Sale purchaser re-sells to another entity, HUD does not have the ability to enforce this HAMP modification requirement. Although HUD proclaimed these April 24, 2015 changes as efforts to better help homeowners avoid foreclosure, HUD has limited these protections to the DASP version of its Note Sale Program. The contracts HUD entered into with the May 18, 2016 ADPLS Note Sale purchasers do not contractually obligate the purchasers to offer a HAMP or HAMP-like product and only require a six month foreclosure moratorium. Nonprofit Organizations’ and Local Governments’ Role in the Note Sale Program
141. Between September 2012 and November 2015, each of HUD’s Note Sales have also included pools that have been designated as Neighborhood Stabilization Outcome (“NSO”) pools. HUD’s most recent Note Sale on May 18, 2016 does not appear to include NSO pools.
142. Unlike the non-NSO pools, which HUD refers to as the national pools, each NSO pool covers a very limited geographic area, usually just a single state, city or metropolitan area.
143. Purchasers of the NSO pools are required to achieve neighborhood stabilizing outcomes within four years on no less than 50% of the loans in each pool.
31

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 32 of 87 PageID #: 73
144. HUD has defined neighborhood stabilizing outcomes as the following: reperformance on the loan, rental to the borrower, sale to an owner-occupant, gift to a land bank, sale to an unaffiliated non-profit, or a loan payoff.
145. Although HUD added NSO pools to the Note Sale Program to “strengthen its strategic focus on community stabilization,” the vast majority of these NSO pools are purchased by hedge funds, private equity firms or investment companies.
146. Between September 2012 and November 2015, HUD conducted eight NSO Note Sales. Of the 24,536 loans sold in these NSO Note Sales, only 1,395 of the loans were purchased by non-profits, or just 5.7% of all NSO loans.
147. FHA mortgages encumbering New York City properties have never been offered in the NSO Note Sales.
148. In addition to the NSO Note Sales, HUD negotiates directly with local governments to purchase Note Sale Program mortgages and stabilize these neighborhoods with foreclosure alternatives such as modifications.
149. However, HUD has sold very few mortgages to local governments, undermining the ability of local governments to stabilize the neighborhoods most impacted by the Note Sale Program.
150. In 2015, HUD agreed to a direct sale of a certain number of New York City mortgages that were to be included in the July 16, 2015 Note Sale to New York City’s Housing Preservation & Development (“HPD”).
151. HPD provided HUD a list of 104 mortgages that it wanted to purchase.
32

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 33 of 87 PageID #: 74
152. After close to a year of negotiations, on June 30, 2016, HUD sold only 24 of the New York City mortgages to HPD. It is unclear what happened to the remaining 80 mortgages HPD bid on. Lone Star Defendants’ Denial of Benefits
153. As of January 2016, Lone Star Funds (“Lone Star”) has purchased 22% of all mortgages sold in the National Note Sale Program since the program was initiated in 2010. It is the second largest owner of mortgages sold through HUD’s Note Sale Program, purchasing over 24,128 mortgages.
154. At the June 11, 2014 Note Sale, Lone Star submitted the highest bid for all 16 national pools, purchasing all the mortgages in that sale.
155. Lone Star, founded in 1995, is a private equity fund that invests in distressed financial and real estate loans. Because of its focus on purchasing bad loans for significant discount, Lone Star is known in Wall Street parlance as a “vulture investor.”
156. Lone Star’s business model is focused on the short term with each of its funds having an investment period of four years or less. As a result, Lone Star focuses on profiting through the purchase of the distressed assets and selling them as quickly as possible.
157. To manage the servicing of the mortgages purchased through HUD’s Note Sale Program, two of Lone Star’s funds own Caliber Home Loans, Inc. (“Caliber”).
158. Because Caliber services Lone Star’s Note Sale mortgages, it is tasked with the responsibility under TILA of informing homeowners that their note and mortgage is owned by a new entity (“TILA Notice of Ownership Change”).
33

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 34 of 87 PageID #: 75
159. For those homeowners whose FHA mortgages were auctioned in HUD’s June 11, 2014 sale, the listed owner of their mortgages in the post-sale TILA Notice of Ownership Change is U.S. Bank Trust, as trustee for LSF9 Master Participation Trust.
160. In the TILA Notice of Ownership Change, Caliber does not inform the homeowner that the mortgage is no longer part of the FHA mortgage program.
161. On the contrary, in its TILA Notice of Ownership Change, Caliber states this transfer of ownership “. . . does not affect any term or condition of the mortgage instruments or the servicing of your mortgage loan.”
162. However, in negotiating with homeowners after the HUD Note Sale, Caliber refuses to consider any of these homeowners for an FHA-HAMP modification and informs homeowners that they are no longer eligible for FHA-HAMP.
163. Further, Caliber represents to former-FHA homeowners that it does not participate in HAMP and refuses to offer a HAMP or HAMP-like modification when a homeowner makes a request.
164. However, in April 2015, HUD required post-Note Sale purchasers to offer a HAMP or a HAMP-like modification for all loans it acquired as a result of HUD’s Note Sale Program.
165. Further, under the Real Estate Settlement Procedures Act (“RESPA”), these postNote Sale purchasers are required to review homeowners for all loss mitigation options available to them.
166. Instead, Caliber only offers former-FHA homeowners two types of modifications, both proprietary: a five-year interest-only modification and a five-year standard modification.
34

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 35 of 87 PageID #: 76
167. Upon information and belief, under both Caliber’s five-year interest-only modification and its five-year standard modification, Caliber usually takes some or all of the arrears and creates an interest-bearing balloon payment due at the end of the life of the mortgage. The modified mortgage does not extend the term but rather maintains the maturity date listed in the FHA mortgage contract.
168. Further, upon information and belief, under both of Caliber’s proprietary modifications, the loan modification agreement specifically repudiates the assumability of the mortgage. As a result, to the extent that the ability to sell the property with the mortgage survived the Note Sale, Caliber eliminates this benefit by explicitly repudiating it in the mortgage modification agreement.
169. Under both of Caliber’s proprietary modifications, the interest rate charged during the five-year period is between 4 and 4.88%, which is above the market interest rate.
170. Under Caliber’s five-year interest-only modification, the former-FHA homeowner makes monthly payments of interest, taxes and insurance only, for five years, at an interest rate that is usually between 4 and 4.88%. Principal is not paid down during that five-year period. After the five-year period is over, the homeowner must begin to pay down the principal. In addition, after the five-year period, the interest rate reverts to the interest rate found in the original FHA mortgage. This is generally higher than the 4 to 4.88% rate Caliber provided in the five-year term.
171. As a result, because Caliber requires homeowners to pay principal down over a shorter period of time and at an increased interest rate, former-FHA homeowners with a fiveyear interest-only modification will see their monthly payments increase anywhere between $500 and $1,600, based on calculations of Plaintiffs’ mortgages.
35

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 36 of 87 PageID #: 77
172. For former FHA homeowners, who are working class wage-earners, such a contractually obligated jump in monthly mortgage payments is crippling if not a guarantee of default.
173. Under Caliber’s five-year standard modification, the former-FHA homeowner makes monthly payments of principal, interest, taxes and insurance during the five-year period, at an interest rate that is usually between 4 and 4.88%. After the five-year period is over, the interest rate reverts to the interest rate found in the original FHA mortgage. This is generally higher than the 4 to 4.88% rate Caliber provided in the five-year term. As a result, former-FHA homeowners with a five-year standard modification will see their monthly payments increase over $300, based on calculations of Plaintiffs’ mortgages.
174. Further, both Caliber’s five-year interest-only and five-year standard modifications include a balloon payment due at the end of the loan term. Upon information and belief, that balloon payment is interest bearing.
175. Both of these Caliber proprietary modifications result in a higher cost to homeowners, based on the interest charged over the life of the loan, compared to a HAMP-like product. And both substantially increase the risk of re-default in five years when the monthly mortgage payment increases. Impact of HUD’s Note Sale Program and Lone Star Defendants’ Practices on African-American Homeowners in New York City__________________
176. Since HUD initiated the Note Sale Program, over 113,000 FHA homeowners have had their mortgages sold out of the FHA Mortgage Program to a hedge fund or private equity firm, including over 8,900 mortgages in New York State.
177. Between 2012 and June 2014, over 1,100 FHA homeowners residing in New York City have had their mortgages sold through HUD’s Note Sale Program.
36

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 37 of 87 PageID #: 78 178. In New York City, as the map below reflects, HUD’s Note Sales conducted
between 2012 and 2014 have disproportionately included mortgages in African-American communities, making these neighborhoods the hardest hit by HUD’s problematic Note Sale Program. Each mortgage sold in a Note Sale is represented by a dot on the map.
179. Of the 13,462 FHA mortgages issued in New York City between 2012 and 2014, only 4,746 were issued to African-American homeowners. African Americans compromised 36% of New York City homeowners who obtained an FHA mortgage during these two years.
37

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 38 of 87 PageID #: 79

180. But the percentage of African-American homeowners directly impacted by

HUD’s Note Sales is significantly higher than their market share of FHA mortgages in New

York City. More than 61% of all New York City mortgages sold in the Note Sales from 2012 to 2014 were for homes located in predominately African-American neighborhoods.6

181. As the below chart demonstrates, African-American homeowners in New York

City are the only group for which the percentage of mortgages sold through the Note Sale

Program is significantly higher than their market share. For example, the percentage of white

homeowners impacted by HUD’s Note Sale Program is significantly less than that group’s

market share of FHA mortgages. Only 15.5% of mortgages sold in HUD’s Note Sales from 2012

to 2014 were in predominately white neighborhoods, even though white homeowners make up

27% of the market share of FHA mortgages in New York City. For Asian homeowners, who

make up 9% of the FHA market share in New York City, only 3.5% of predominately Asian

neighborhoods were affected by HUD’s Note Sale Program. For Latino homeowners, the

percentage of predominately Latino neighborhoods impacted by the Note Sales, 19.9%,

approximately equates to their market share of 19%.

FHA Mortgage Borrowers in NYC - 2012 to 2014 (by borrower) FHA Mortgage Borrowers in NYC by Percentage – 2012 to 2014 NYC DASP-Sold Mortgages – 2012 to 2014 (by neighborhood) Racial Breakdown of NYC DASP-Sold Mortgages by percentage – 2012 to 2014 (by neighborhood)

NonHispanic
White 3,671

Hispanic 2,508

NonHispanic
Black 4,746

Asian 1,270

Other 1,267

Total 13,462

27%

19%

35% 9%

9% 100%

171

219

675

37

-- 1,102

15.5% 19.9% 61.3% 3.5%

-- 100%

6 “Predominately African-American” means a community that is 50.1% or more African-American or black.
38

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 39 of 87 PageID #: 80
182. Southeast Queens and eastern Brooklyn, historically working- and middle-class black neighborhoods, have been particularly impacted by HUD’s Note Sale Program. The six neighborhoods most affected by HUD’s Note Sale Program in New York City, measured by number of notes sold, have been: (i) Springfield Gardens with a black population of 86.9%; (ii) Canarsie with a black population of 85.4%; (iii) St. Albans with a black population of 88.9%; (iv) Jamaica with a black population of 64.9%; (v) Rosedale with a black population of 85.5%; and (vi) Laurelton with a black population of 92.2%.
183. Between 2012 and 2014, 278 FHA mortgages encumbering properties in Southeast Queens were sold through HUD’s Note Sale Program. This accounts for 25% of all the 1,102 mortgages sold through HUD’s Note Sale Program in New York City between 2012 and 2014. But these 278 Southeast Queens mortgages constitute 41% of all the 675 FHA mortgages encumbering properties located in predominantly African-American neighborhoods in New York City that were sold through HUD’s Note Sale Program between 2012 and 2014.
184. As a result of this disparity, African-American neighborhoods, particularly those in Southeast Queens, are disproportionately and negatively impacted by HUD’s Note Sale Program.
185. Once HUD sells these mortgages through its Note Sale Program, these AfricanAmerican homeowners can no longer benefit from the FHA Mortgage Program.
186. Further, by selling their mortgages out of the FHA Mortgage Program to hedge funds and private equity firms like Lone Star Defendants that only offer modifications that result in a mortgage payment increase in five years, these African-American homeowners and the neighborhoods in which they reside, are more susceptible to foreclosure, and the resultant blight, in five years.
39

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 40 of 87 PageID #: 81
187. These African-American neighborhoods will become less stable as a result of the disproportionate number of their FHA mortgages being sold through HUD’s Note Sale Program, because the homeowners in these neighborhoods will no longer be able to benefit from the FHA Mortgage Program’s mortgage assumability benefit, modification opportunities, pre-foreclosure assistance benefits, streamline refinance, and other benefits designed to maintain homeownership by low-income homeowners.
188. African Americans invest a greater portion of their wealth in their homes than whites. Homeownership constitutes approximately 92% of the net worth of African Americans. For whites, homeownership constitutes approximately 58% of their net worth. Peter Dreier et al., Haas Inst. for a Fair and Inclusive Society, Underwater America: How the So-Called Housing “Recovery” is Bypassing Many American Communities 5 (2014), available at http://haasinstitute.berkeley.edu/underwater-america.
189. Thus, HUD’s Note Sale Program, with its disproportionate adverse impact on African-American communities in New York City, further exacerbates the wealth gap between white and black households in New York City.
190. As a result, with the loss of the benefits of the FHA Mortgage Program and the resultant increased risk of foreclosure, African-American homeowners in New York City lose more than just their homes. Through HUD’s Note Sale Program and Caliber’s predatory modifications, African Americans in New York City also stand to lose the vast majority of their wealth.
191. This leaves African Americans in New York City with the inability to bequeath wealth, in the form of property, to future generations, increasing the historic racial wealth gap in America.
40

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 41 of 87 PageID #: 82
192. Pursuant to the Fair Housing Act, the Federal Defendants have a duty to affirmatively further fair housing, which includes a duty to take steps to ensure that their housing programs do not discriminate on the basis of race and do not maintain racial segregation in housing. 42 U.S.C. § 3608. In designing and implementing its Note Sale Program, HUD failed to consider the impact of its Note Sale Program on African-American FHA homeowners or on residential segregation, including in New York City.
193. In particular, in designing its Note Sale Program, HUD failed to analyze the race of the mortgagor or the racial composition of the neighborhoods impacted by the Note Sales even though HUD has access to this information.
INDIVIDUAL PLAINTIFF FACTS Joseph Washington
194. Originally born in North Carolina in 1963, Joseph Washington was sent to New York City when he was seven years old to live with his sister and her husband.
195. At the age of 18, Mr. Washington began working in New York City’s meat industry, first as a wholesaler and then as a butcher. With a secure union job, Mr. Washington was able to save money with the goal of someday owning a home.
196. Wishing to get out of his one-bedroom apartment in Brooklyn and move to a neighborhood with tree-lined streets, on October 31, 2011, Mr. Washington purchased the home located at 118-04 203rd Street, in the St. Albans section of Queens.
197. To purchase the home, Mr. Washington elected to take out an FHA-insured mortgage in the amount of $326,987.00 with First Residential Mortgage Services Corporation. The mortgage had a fixed interest rate of 4.5% over the life of the 30-year loan.
41

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 42 of 87 PageID #: 83
198. Originally, Mr. Washington purchased the home with his then-fiancé, but eventually their relationship ended and, in March 2014, she deeded her interest in the property to Mr. Washington.
199. In order to close on the FHA mortgage, Mr. Washington was required to finance HUD’s UFMIP in the amount of approximately $3,237.
200. Mr. Washington’s monthly principal and interest payments were $1,656.80. 201. In addition to the monthly principal and interest payment, Mr. Washington was also charged HUD’s MIP in an amount of $307.99 per month, property taxes of $238.26, and homeowner’s insurance of $78.39, for a total monthly housing payment of $2,281.47. 202. Mr. Washington’s mortgage was serviced by LoanCare Servicing Center, Inc. (“LoanCare”). 203. For two years, Mr. Washington remained current on his mortgage. During this time he worked as a butcher in Suffolk County, taking two buses to and from work each day, and travelling three hours in total to support himself and his then-fiancé. 204. On November 1, 2013, because his then-fiancé was moving out and no longer helping with the household expenses, Mr. Washington missed his first mortgage payment. 205. Soon after defaulting, in or around late 2013, Mr. Washington sought to modify his loan. 206. Mr. Washington’s loan servicer, LoanCare, left him adrift to navigate the lossmitigation process on his own. After he defaulted, LoanCare did not steer him to a free HUDapproved housing counselor for help with the modification application, leaving him susceptible to the loan modification scammers that prey on low-income homeowners.
42

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 43 of 87 PageID #: 84
207. At no point after falling behind did Mr. Washington receive the HUD-created pamphlet “Save Your Home – Tips to Avoid Foreclosure.”
208. Further, at no point when he was behind on payments did LoanCare reach out to him to conduct a face-to-face meeting.
209. Without this guidance, Mr. Washington fell prey to a loan modification scam, paying a company $1,000 to apply for a loan modification on his behalf.
210. On January 16, 2013, LoanCare mailed Mr. Washington a letter stating that he did not qualify for loss mitigation assistance because he did “not meet Investor requirements.” At the time, Mr. Washington’s loan had not been pooled into a trust, and so there was no investor whose requirements he would have to satisfy. The letter made no mention of FHA’s loss mitigation programs, or why he was denied any specific program, such as an FHA-HAMP modification.
211. Dismayed by this lack of progress, in or around March 2014, Mr. Washington called LoanCare for more information about his loss mitigation request. The LoanCare representative told Mr. Washington that it had not heard of the company working on Mr. Washington’s behalf.
212. Realizing that he had been scammed, Mr. Washington stopped working with the loan modification company in or around April of 2014.
213. In or around April of 2014, LoanCare offered Mr. Washington a Trial Period Plan, commencing with a May 1, 2014 payment of $2,269.69. In this offer, LoanCare told Mr. Washington that he did not qualify for a HAMP modification or a “traditional modification.” LoanCare claimed that for the latter, there was a “deficit of surplus income,” rendering Mr. Washington ineligible.
43

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 44 of 87 PageID #: 85
214. Mr. Washington declined this offer because the resulting monthly payment was no more affordable than his current payment, which he was already struggling to pay.
215. In or around June of 2014, Mr. Washington submitted another modification application.
216. On June 26, 2014, LoanCare mailed a letter acknowledging receipt of the lossmitigation application.
217. On August 19, 2014, LoanCare mailed a letter offering Mr. Washington a forbearance plan. Under this forbearance plan, Mr. Washington would make three payments of $1,487.89 in lieu of his regular monthly payments, starting with a payment due October 1, 2014. LoanCare promised to provide information about other loss-mitigation options, including a loan modification, before the end of the forbearance plan.
218. However, Mr. Washington was not unemployed at the time of the offer and thus, under HUD regulations, was ineligible for a forbearance plane. Mr. Washington should have been offered a modification.
219. In this August 19, 2014 letter, LoanCare did not state that it had reviewed Mr. Washington for any other loss-mitigation programs, including any loan modifications.
220. Nor did the forbearance plan LoanCare offered Mr. Washington conform to any loss-mitigation program in FHA’s loss mitigation hierarchy.
221. By letter dated August 25, 2014, Caliber, as agent of U.S. Bank Trust, informed Mr. Washington that his loan had been sold to LSF9 Master Participation Trust.
222. In this August 25, 2014 letter, Caliber claimed that this loan sale took place on July 17, 2014—three weeks after LoanCare promised to review Mr. Washington’s loss mitigation application, and more than a month before LoanCare finally completed that review
44

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 45 of 87 PageID #: 86
and offered him a forbearance plan. While LoanCare assured Mr. Washington that it was reviewing his loss mitigation application, unbeknownst to him, his loan had already been sold, and Caliber had already assumed the servicing rights.
223. At no point did Mr. Washington receive any notice from HUD that his loan was going to be sold and at no point did HUD confirm whether LoanCare had provided any of the benefits afforded with an FHA loan, or whether Mr. Washington had exhausted all of his mitigation options.
224. If Mr. Washington had received notice that his loan was going to be sold in the next month or two, he would have called HUD and requested that it not sell his loan in an impending Note Sale as he was actively working with LoanCare in applying for a modification that would likely be granted.
225. Further, in this August 25, 2014 letter, Caliber, as agent of U.S. Bank Trust, claimed that the “assignment, sale or transfer of the mortgage loan does not affect any term or condition of the mortgage instruments or the servicing of your mortgage loan.”
226. In or around September of 2014, Mr. Washington submitted a new loss-mitigation application to Caliber.
227. In or around October 1, 2014, Mr. Washington began making payments in the amount of $1,487.89 to Caliber under the forbearance plan LoanCare had put in place in its August 19, 2014 letter to Mr. Washington.
228. Between October 2014 and March 2015, to honor the agreement with LoanCare, Mr. Washington made monthly payments in the amount of $1,487.89 to Caliber, and Caliber, as agent of U.S. Bank Trust, accepted each of these payments.
45

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 46 of 87 PageID #: 87
229. In a letter dated December 9, 2014, Caliber, as agent of U.S. Bank Trust, stated that Mr. Washington had been approved for a “5 Year Interest Only” modification. This modification agreement required Mr. Washington to make interest-only payments of $1,091.88 from February 1, 2015 to January 1, 2020. At the end of this five-year period, on January 1, 2020, the interest rate would revert to the original note rate of 4.5%.
230. In this December 9, 2014 letter, Caliber, as agent of U.S. Bank Trust, claimed that it had reviewed Mr. Washington for a “5 Year Short Term” modification and a “Loan Modification (With Deferment).” Caliber denied Mr. Washington for both of these modification programs. Caliber did not describe the terms of either modification program, nor did it mention other modification programs in its list of loan modification options.
231. Anxious and worried about losing his home, on December 18, 2014, Mr. Washington signed the modification agreement, thinking he had no choice. Caliber, as agent of U.S. Bank Trust, never countersigned this agreement.
232. Instead, by letter dated March 6, 2015, Caliber, as agent of U.S. Bank Trust, offered Mr. Washington another Trial Period Plan for a loan modification. Under this Trial Period Plan, Mr. Washington would make three interest-only payments of $1,706.87, commencing with a payment due on April 1, 2015.
233. In this March 6, 2015 letter, Caliber did not say if it had reviewed Mr. Washington for any other modification program.
234. Mr. Washington accepted this offer by signing the Trial Period Plan agreement on March 21, 2015 and by making the first payment due under the plan.
235. On or around April 1, 2015, Mr. Washington made a mortgage payment in the amount of $1,706.87 to Caliber.
46

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 47 of 87 PageID #: 88
236. Mr. Washington made all the trial period plan payments for April 2015, May 2015 and June 2015.
237. On July 6, 2015, Caliber, as agent of U.S. Bank Trust, mailed a second letter stating that Mr. Washington had been approved for a “5 Year Interest Only” modification. This second modification agreement also provided for a five-year interest-only payment period, from September 1, 2015 to August 1, 2020, during which time Mr. Washington would make interestonly payments of $1,280.09. The interest rate charged during this five-year period would be 4.88%, above the current market rate.
238. As with the first modification agreement, at the end of this five-year period, on August 1, 2020, the interest rate would revert to the original note rate of 4.5%.
239. Because Caliber, as agent of U.S. Bank Trust, did not extend the term of Mr. Washington’s mortgage and the first five years of Caliber’s modification consist of interest-only payments, Mr. Washington will only have 21 years to pay down the unpaid principal balance. Thus, in year six, Mr. Washington’s monthly mortgage payment—which will include principal and interest payments—will jump to $1,933.09, a $653 difference.
240. At 53 years old, Mr. Washington does not anticipate that in five years he will be making appreciably more money than what he is making today and thus does not know how he will afford this significantly higher mortgage payment.
241. Furthermore, only $314,775.95 of Mr. Washington’s mortgage will actually be paid down during the life of the loan. Another $30,342 of Mr. Washington’s debt, upon information and belief, is an interest-bearing balloon payment due on November 1, 2041. When Mr. Washington is 78 years old, he will owe this balloon payment.
47

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 48 of 87 PageID #: 89
242. During the time that Mr. Washington was applying for a modification, Caliber, as agent of U.S. Bank Trust, called him almost every day, sometimes two to three times a day, pressuring him to accept the proposed modification, and causing him stress about losing his home. On these calls, Caliber would threaten Mr. Washington with foreclosure. Caliber also repeatedly called Mr. Washington while he was at work, which caused him to become distracted while at work.
243. Mr. Washington pleaded with Caliber, as agent of U.S. Bank Trust, to stop calling him, including at work, however Caliber refused to honor his requests.
244. With constant threats of foreclosure, Mr. Washington became anxious and worried that he would lose his home. Thus, believing he had no other choice, Mr. Washington signed the modification agreement with unfair and unconscionable terms on July 19, 2015. Caliber, as agent of U.S. Bank Trust, did the same on July 29, 2015.
245. The modification that Mr. Washington signed on July 19, 2015 includes a provision that strips him of his ability to sell his property encumbered by the mortgage. In other words, Caliber, as agent of U.S. Bank Trust, specifically repudiated Mr. Washington’s ability to sell his mortgage with a freely assumable loan.
246. At the time he submitted his loss-mitigation application to LoanCare, Mr. Washington was eligible for an FHA-HAMP modification the following terms:
a. A capitalized, interest-bearing principal balance of $241,463.18; b. An interest rate of 4.375 percent; c. A loan term of 360 months; and d. A monthly principal and interest payment of $1,205.59. As part of this HAMP modification, Mr. Washington would have also received a “Partial Claim” of $94,545.45. This Partial Claim is a sum excluded from the interest-bearing principal balance of $241,463.18 and secured by a subordinate mortgage to HUD. No interest would have accrued
48

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 49 of 87 PageID #: 90
on the Partial Claim principal balance and Mr. Washington would have made no monthly payments toward the principal. On the modified maturity date, Mr. Washington would have been responsible for paying the entire Partial Claim amount in one lump sum.
247. The unfair and unconscionable modification offered by Caliber, as agent of U.S. Bank Trust, with its higher interest rate and higher interest-bearing principal balance, is more expensive than what Mr. Washington would have received under FHA-HAMP. Further, the $653 increase in payment in year six all but guarantees that Mr. Washington will default.
248. If Caliber, as agent of U.S. Bank Trust, had offered a modification program akin to FHA-HAMP, Mr. Washington would have received a modification with the following terms:
a. A capitalized, interest-bearing principal balance of $244,579.41; b. An interest rate of 4.5 percent; c. A loan term of 360 months; and d. A monthly principal and interest payment of $1,239.25. As part of this FHA-HAMP modification, Mr. Washington would have also received a “Partial Claim” of $94,999.13. 249. Mr. Washington did not discover Lone Star Defendants’ false, deceptive, and misleading representations or that they used unfair and unconscionable means of collecting a debt until he met with a legal services attorney in June 2016, who explained that the mortgage servicers had misled him about his options and should have provided an alternative modification without unfair and unconscionable terms and without additional fees and interest. 250. Despite his continued eligibility for an affordable modification—both before and after the loan sale—Mr. Washington’s servicers have never explained why it did not offer him, or even consider him for, an FHA-HAMP modification or a like program.
49

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 50 of 87 PageID #: 91
251. Mr. Washington wants to keep his home and remain in St. Albans, Queens, a middle-class neighborhood he was originally attracted to in 2011, because of the prevalence of owner-occupied homes and the resulting neighborhood stability.
252. On July 15, 2016, Mr. Washington filed a complaint against Lone Star Defendants alleging violations of the FDCPA.
253. On July 20, 2016, when Mr. Washington attempted to log into his online Caliber mortgage account, a screen appeared that stated that Caliber was unable to provide access to his account and instructed him to call a specific phone number for assistance.
254. On July 20, 2016, Mr. Washington called the number that was listed when he attempted to log into his online Caliber mortgage account. The individual on the phone identified herself as a Caliber representative. When Mr. Washington inquired why he did not have access to his online account, the Caliber representative informed him that it was because he had sued Caliber. The Caliber representative also informed Mr. Washington that if he instructed his lawyer to drop the suit, he could have access to his online account. Angry that Caliber, as agent to U.S. Bank Trust, could withhold access to his account, Mr. Washington hung up the phone.
255. Mr. Washington has incurred out-of-pocket expenses as a result of Lone Star Defendants’ actions.
256. Mr. Washington has suffered emotional distress because of Lone Star Defendants’ actions. Since Lone Star Defendants purchased and began servicing his mortgage, Mr. Washington has been unable to sleep, worried that the Lone Star Defendants would not offer a modification. He continues to worry and lose sleep over the prospect of the mortgage payment increase on August 1, 2020, which he fears will cause him to default again and will ultimately jeopardize his ownership of his home. He continues to worry and lose sleep that Lone Star
50

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 51 of 87 PageID #: 92
Defendants, by shutting down his online account, will not accept payments, putting his account into default, enabling Lone Star Defendants to unfairly charge late fees and other default-related charges and eventually suing him in foreclosure, taking away his home. St. Clair Blackett
257. In 1991, St. Clair Blackett immigrated to the United States from his home country of Barbados and, for the next 25 years, worked as a car mechanic at a Toyota dealership in New York City.
258. In 2007, Mr. Blackett obtained a job with the Metropolitan Transit Authority (“MTA”).
259. With a secure city job, Mr. Blackett began to look to move his wife and their adult daughter and young son out of their Brooklyn basement apartment to their first home in a more suburban part of New York City.
260. On June 29, 2011, Mr. Blackett purchased his first home, located at 138-12 232rd Street in the Laurelton section of Queens. Mr. Blackett’s adult daughter also signed the deed and mortgage, with the understanding that it would be her parents’ responsibility to make the mortgage payments.
261. To purchase his Laurelton home, Mr. Blackett elected to take out an FHA mortgage, originated with Continental Home Loans, Inc. (“Continental”).
262. The mortgage was for $384,975, with a fixed interest rate of 5.25% over the 30year life of the loan.
263. In order to close on the FHA mortgage, Mr. Blackett was required to finance HUD’s UFMIP in the amount of approximately $3,811.75.
264. Mr. Blackett’s monthly principal and interest payments were $2,125.85.
51

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 52 of 87 PageID #: 93
265. In addition to the monthly principal and interest payment, Mr. Blackett was also charged HUD’s MIP in an amount of $362.94 per month, property taxes of $280.04 per month and homeowner’s insurance of $92.67.
266. As a result, Mr. Blackett’s monthly mortgage payment was approximately $2,861.50.
267. In or around March 2012, after his wife lost her job due to a long-term illness, Mr. Blackett began to fall behind on his mortgage payments.
268. By letter dated May 4, 2012, Continental informed Mr. Blackett that he was behind on payments and instructed him to pay the arrears with certified funds. The letter did not inform Mr. Blackett of the opportunity to modify his FHA mortgage, list any free housing counseling agencies that could assist him, or invite him to apply for a modification or other FHA loss mitigation options.
269. At no point after falling behind on his mortgage payments did Continental reach out to Mr. Blackett to arrange an in-person interview, even though its offices are on Long Island, less than 200 miles from Mr. Blackett.
270. At no point after falling behind did Mr. Blackett receive the HUD-created pamphlet "Save Your Home – Tips to Avoid Foreclosure."
271. After searching on the internet, Mr. Blackett learned that he could apply for a modification and possibly save his home.
272. In or around 2013, Mr. Blackett began working with a distressed property consultant to apply for a modification.
52

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 53 of 87 PageID #: 94
273. More than a year after Mr. Blackett had fallen behind on his mortgage, Continental sent him a letter dated August 2, 2013 with a list of housing counseling agencies accompanying ’a 90-day pre-foreclosure notice, required by New York State law.
274. Over the next year, Mr. Blackett provided every document that Continental requested as part of his modification application, including paystubs, bank statements, taxes, and an explanation as to why he fell behind on his mortgage.
275. During the year that he applied for a modification, Continental repeatedly requested the same documents every three months, explaining that the prior documents had “expired.” Mr. Blackett provided all of the documents in response to Continental’s repeated requests.
276. Although Mr. Blackett was actively applying for a modification, on or around April 30, 2014, Continental sued Mr. Blackett to foreclose on his home. Continental filed an action in Queens Supreme Court bearing index number 702940/2014.
277. Two months later, Mr. Blackett’s loan was sold as part of HUD’s June 11, 2014 Note Sale and was auctioned to Lone Star. As a result, in or around late summer 2014, Caliber began servicing Mr. Blackett’s mortgage.
278. At no point did Mr. Blackett receive any notice from HUD that his loan was going to be sold and at no point did HUD confirm whether Continental had provided any of the benefits afforded with an FHA loan, or whether Mr. Blackett had exhausted all of his mitigation options.
279. If Mr. Blackett had received notice that his loan was going to be sold in the next month or two, he would have called HUD and requested that it not sell his loan in an impending
53

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 54 of 87 PageID #: 95
Note Sale as he was actively working with Continental in applying for a modification that would likely be granted.
280. At the time he submitted his loss-mitigation application to Continental, Mr. Blackett was eligible for an FHA-HAMP modification, and if Continental had provided an FHAHAMP modification during the requisite timeframe, it would have had no basis to sue Mr. Blackett in foreclosure.
281. If Continental had provided an FHA-HAMP modification in April 2014, Mr. Blackett would have received an FHA-HAMP modification the following terms:
a. A capitalized, modified principal balance of $335,879.04; b. An interest rate of 4.5 percent; c. A loan term of 360 months; and d. A monthly principal and interest payment of $1,701.85. As part of this FHA-HAMP modification, Mr. Blackett would have also received a “Partial Claim” of $106,614. This Partial Claim is a sum excluded from the modified principal balance of $335,879.04 and secured by a subordinate mortgage to HUD. No interest would have accrued on the Partial Claim principal balance and Mr. Blackett would have made no monthly payments toward the principal. On the modified maturity date, Mr. Blackett would have been responsible for paying the entire Partial Claim amount in one lump sum. 282. However, in or around December 2014, Caliber, as agent of U.S. Bank Trust, offered Mr. Blackett its standard modification. Upon information and belief, under the terms of this standard modification, for the first five years of the modification, Mr. Blackett would pay down both interest and principal at a rate of 4.33%, making monthly principal and interest payments of $2,015.07. 283. Upon information and belief, at the end of this five-year period, the interest rate would revert to the original note rate of 5.25%.
54

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 55 of 87 PageID #: 96
284. In or around January 2015, thinking that he had no choice and anxious and worried that he would lose his home, Mr. Blackett signed this modification agreement. Lone Star Defendants’ modification, with its higher interest rate and higher interest-bearing principal balance, is more expensive than what Mr. Blackett would have received under FHA-HAMP. Further, the $174.93 increase in payment in year six would put Mr. Blackett at risk of defaulting.
285. In or around April 2016, Mr. Blackett began to have trouble making his mortgage payment. On or around June 22, 2016, Caliber, as agent of U.S. Bank Trust, mailed Mr. Blackett a new modification offer, its five-year interest-only modification. This second modification agreement, which states that it is a subprime home loan subject to New York Banking Law § 6m, provides for a five-year interest-only period, from July 1, 2016 to June 1, 2021. During that interest-only time period, Mr. Blackett would make interest-only payments of $1,281.77. The interest rate charged during this five-year period is 4.125%, above the current market rate.
286. At the end of this five-year period, on July 1, 2021, the interest rate reverts to the original note rate of 5.25%.
287. Because Caliber, as agent of U.S. Bank Trust, did not extend the term of Mr. Blackett’s mortgage and the first five years of Caliber’s modification is interest-only payments, Mr. Blackett will have only 20 years to pay down the unpaid principal balance. Thus, in year six, Mr. Blackett’s monthly mortgage payment—which will include principal and interest—will jump to $2,512.61, a $1,230.84 difference from what he is currently paying.
288. Mr. Blackett did not discover Lone Star Defendants’ false, deceptive, and misleading representations or that they used unfair and unconscionable means of collecting a debt until he met with a legal services attorney in July 2016, who explained that the mortgage
55

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 56 of 87 PageID #: 97
servicers had misled him about his options and should have provided an alternative modification without unfair and unconscionable terms and without additional fees and interest.
289. At 53 years old, Mr. Blackett does not anticipate that in five years he will be earning significantly more than what he is earning today, and thus does not know how he will afford this much higher mortgage payment.
290. Furthermore, only $372,877.26 of Mr. Blackett’s mortgage will actually be paid down during the life of the loan. Another $63,907 of Mr. Blackett’s debt, upon information and belief, is an interest-bearing balloon payment due on June 30, 2041, when Mr. Blackett is 77 years old.
291. Scared that he would lose his home and believing that he had no other choice, on June 24, 2016, Mr. Blackett signed the new modification offered and mailed it back to Caliber, U.S. Bank Trust’s agent.
292. The modification that Mr. Blackett signed on June 24, 2016 includes a provision that strips him of his ability to sell his property with the mortgage. In other words, Caliber specifically repudiated Mr. Blackett’s ability to sell his mortgage with a freely assumable loan.
293. At the time Mr. Blackett accepted Caliber’s five-year interest-only modification, he was eligible for an FHA-HAMP modification. If Caliber offered Mr. Blackett a modification akin to FHA-HAMP today, Mr. Blackett would have received a modification with the same principal and interest payment of $1,701.85 as he would have received if Continental had properly reviewed him when he applied for a modification in or around April 2014. However, because the current market interest rate is approximately 3.75%, lower than what was offered in April 2014, a current FHA-HAMP modification would have a smaller Partial Claim.
56

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 57 of 87 PageID #: 98
294. Despite his continued eligibility for an affordable modification—both before and after the loan sale—Mr. Blackett’s servicers have never explained why they did not offer him, or even consider him for, an FHA-HAMP modification or a like program.
295. Mr. Blackett wants to keep his home and remain in Laurelton, Queens, a middleclass neighborhood he was originally attracted to in 2011 because of its stability as a result of its prevalence of its owner-occupied homes.
296. On or around July 6, 2016, Mr. Blackett called Caliber, U.S. Bank Trust’s agent, to make his first payment under the June 22, 2016 interest-only modification over the phone. However, the Caliber representative informed Mr. Blackett that it would not accept his payment, without any explanation.
297. Instead, on or around July 8, 2016, Caliber, as agent of U.S. Bank Trust, mailed Mr. Blackett a solicitation to apply for a modification.
298. Knowing how long the modification process is, Mr. Blackett is further anxious and stressed that he will be unable to save his home.
299. Mr. Blackett has incurred out-of-pocket expenses as a result of Defendants’ actions.
300. Mr. Blackett has suffered emotional distress because of Lone Star Defendants’ actions. Since Lone Star Defendants purchased and began servicing his mortgage, Mr. Blackett has been unable to sleep, worried that the Lone Star Defendants would not offer a modification. He continues to worry and lose sleep since Lone Star Defendants are not even honoring the interest-only modification he signed on June 22, 2016. He continues to worry and lose sleep that Lone Star Defendants refusal to honor the modification and require him to re-apply will result in the loss of his home.
57

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 58 of 87 PageID #: 99
Lucille Mason 301. On June 13, 1997, Lucille Mason, a home health aide, purchased her first home, a
three-family house located at 9413 Avenue A, in the Canarsie section of Brooklyn for herself, her two sons, and her daughter.
302. On January 20, 2010, Ms. Mason refinanced the home, choosing to take out an FHA-insured 30-year mortgage in the amount of $529,627.00 with The Money Source, Inc.
303. In order to close on the FHA mortgage, upon information and belief, Ms. Mason was required to finance HUD’s UFMIP in the amount of approximately $9,268.47.
304. The FHA mortgage terms provided for an annual interest rate of 5.0% and principal and interest payments of $2,843.15.
305. Ms. Mason was also required to pay HUD’s Mortgage Insurance Premium (MIP) in the amount of approximately $242.75 per month, in additional to her monthly property taxes of approximately $292.49 and homeowners insurance of approximately $100 for a monthly housing payment of $3,478.39.
306. For two and a half years, Ms. Mason made her monthly mortgage payments to the mortgage servicer, J.P. Morgan Chase ("Chase"), until summer 2012, when Ms. Mason’s tenants stopped paying their rent regularly.
307. At the same time, Ms. Mason was forced to take several weeks of unpaid leave from her job due to a medical condition.
308. On August 1, 2012, Ms. Mason missed her first mortgage payment because of this unforeseen leave from work and because of her unreliable tenants.
309. After Ms. Mason returned to work, she tried submitting her missed mortgages payments to Chase. Chase accepted some of her payments, but on January 8, 2013, Chase
58

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 59 of 87 PageID #: 100
rejected the payments and sent Ms. Mason a check in the amount of $4,273.67, the money that she had submitted to Chase in order to catch up on some of her missed payments.
310. At no point after falling behind did Ms. Mason receive the HUD-created pamphlet “Save Your Home – Tips to Avoid Foreclosure.”
311. Further, at no point after falling behind did Chase make any attempts to conduct a face-to-face interview with Ms. Mason even though there is a Chase branch within 200 miles of her home.
312. During the time she was in default, Chase never informed Ms. Mason in writing of the opportunity to modify her FHA mortgage, nor did it provide a list of free housing counseling agencies that could assist her in applying for loss mitigation.
313. Not knowing what else to do and desperate to save her home, in or around March 2013, Ms. Mason reached out to her councilman’s office and began working with a constituent advocate in the office (“the Advocate” or “her Advocate”).
314. The Advocate first informed her about the various modification programs and helped her apply for a modification. In or around March 2013, Ms. Mason, through her Advocate, submitted a modification application to Chase.
315. Although Ms. Mason’s modification application was pending, on April 17, 2013, Chase sued Ms. Mason in Kings County Supreme Court to foreclose on her home. That foreclosure action bears index number 7166/2013 and is still pending.
316. From the period of approximately March 2013 through November 2013, on almost a monthly basis, Ms. Mason or her Advocate received repeated document requests from Chase for updated paystubs and bank statements. Each time, Ms. Mason submitted the requested documents.
59

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 60 of 87 PageID #: 101
317. Ms. Mason never received a decision from Chase approving or denying her for a modification even though her foreclosure case is ongoing and she has appeared in court 19 times in her efforts to obtain a modification.
318. Despite the dedication and goodwill from the councilman’s office, her Advocate was not an attorney or housing counselor familiar with the modification and foreclosure processes.
319. Had she been provided with a list free housing counselors, as part of the FHA mandated loss mitigation procedures, Ms. Mason may have been able to obtain a proper FHAHAMP modification before her loan was sold to Lone Star Defendants on or around June 11, 2014.
320. In or around June 2014, as a result of her loan being sold out of the FHA program, Ms. Mason’s mortgage was assigned to Lone Stare Defendants with Caliber as her new mortgage servicer. Lone Star Defendants continued prosecuting the foreclosure action that Chase had initiated in 2013 and has appeared in court 12 times in the case against Ms. Mason (without substituting in as a party).
321. At no point did Ms. Mason receive any notice from HUD that her loan was going to be sold and at no point did HUD confirm whether Chase had provided any of the benefits afforded with an FHA loan, or whether Ms. Mason had exhausted all of her mitigation options.
322. If Ms. Mason had received notice that her loan was going to be sold in the next month or two, she would have called HUD and requested that it not sell her loan in an impending Note Sale as she was actively working with Chase in applying for a modification that would likely be granted.
60

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 61 of 87 PageID #: 102
323. Although frustrated and upset, Ms. Mason and her Advocate continued to apply for a modification with Caliber. In or around February 2016, Ms. Mason submitted another application to Caliber.
324. In or around April 2016, Ms. Mason received an interest-only three-month Trial Period Plan (“TPP”) from Caliber, as agent of U.S. Bank Trust, to make monthly interest-only payments in the amount of $2,010.40.
325. Based on the TPP offer and similar products provided by Caliber, upon information and belief, the final modification will likely provide for five years of interest-only payments, set at an interest rate of 4.75%. Upon information and belief, after the five-year interest-only period expires, the modification will revert to Ms. Mason’s original interest rate of 5.0% for the remainder of the loan.
326. Upon information and belief, Caliber, as agent of U.S. Bank Trust, is likely keeping the original maturity date of the mortgage, resulting in the final payment due on February 1, 2040.
327. As a result, upon information and belief, an unpaid principal balance of $507,891.49 would need to be paid down within 19 years. Thus, upon information and belief, in year six of the modification, Ms. Mason’s mortgage payment of principal and interest will jump to $3,602.93, a $1,592.53 difference.
328. In September 2021, when her monthly mortgage payment increases, Ms. Mason will be 78 years old. Although Ms. Mason currently works, at 73 years old, she desperately wishes to retire. If Ms. Mason accepts Lone Star Defendants’ five-year interest-only modification, her default in five years is all but certain.
61

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 62 of 87 PageID #: 103
329. Upon information and belief, the Caliber interest-only modification would include an interest-bearing balloon payment of $107,926.01.
330. In or around May 2016, recognizing the unsustainability of Lone Star Defendants’ offer, Ms. Mason rejected the five-year interest-only modification. She is currently putting together another modification application and requesting that Caliber review her for a HAMP or HAMP-like modification.
331. If Caliber, as agent of U.S. Bank Trust, were to offer a modification akin to FHAHAMP, Ms. Mason would receive a modification with the following terms:
a. A capitalized, modified principal balance of $463,453; b. An interest-rate of 3.875%; c. A loan term of 360 months; and d. A monthly principal and interest payment of $2,179. As part of this FHA-HAMP modification, Ms. Mason would also receive a “Partial Claim” from HUD of $152,367. This Partial Claim is a sum excluded from the modified principal balance of $463,453 and secured by a subordinate mortgage. No interest would accrue on the Partial Claim principal balance and Ms. Mason would have made no monthly payments toward the principal. On the modified maturity date, Ms. Mason would be responsible for paying the entire Partial Claim amount due in one lump sum. 332. Although eligible for a HAMP or HAMP-like product, on or around June 6, 2016, Lone Star Defendants’ counsel in the Kings County foreclosure action informed Ms. Mason that she would not be reviewed for HAMP. 333. Ms. Mason did not discover Lone Star Defendants’ false, deceptive, and misleading representations or that they used unfair and unconscionable means of collecting a debt until she met with a legal services attorney in June 2016, who explained that the mortgage
62

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 63 of 87 PageID #: 104
servicers had misled her about her options and should have provided an alternative modification without unfair and unconscionable terms and without additional fees and interest.
334. Ms. Mason has lost income as a result of Defendants’ actions. Since Lone Star Defendants purchased Ms. Mason’s mortgage on or around June 11, 2014, Ms. Mason has attended court 12 times. Unless she has the day off, Ms. Mason must take unpaid time from work to attend these court conferences.
335. Ms. Mason has also suffered damages because as the Lone Star Defendants drag her case out in court, refusing to offer her a HAMP or HAMP-like product, they charge delinquent interest, late fees and other foreclosure related fees to her account that, even if provided an affordable modification, would be unfairly capitalized into her new, modified debt.
336. Ms. Mason has also has incurred out-of-pocket expenses as a result of Defendants’ actions.
337. Mr. Mason has suffered emotional distress because of Lone Star Defendants’ actions. Since Lone Star Defendants purchased and began servicing his mortgage, Mr. Mason has been unable to sleep, worried that the Lone Star Defendants will never offer a modification that she can afford.
338. Ms. Mason wants to keep her home and remain in Canarsie, Brooklyn, a neighborhood she was originally attracted to in 1997 because of the prevalence of owneroccupied homes and the resulting neighborhood stability.
63

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 64 of 87 PageID #: 105
Melissa Trotman 339. In 1974, with two daughters in a cramped Corona apartment, Melissa Trotman’s
parents purchased their first home, the house located at 203-14 116th Avenue in the St. Albans section of Queens.
340. Ms. Trotman was 11 years old when she moved to her new home in St. Albans. She grew up in St. Albans and attended the local high school.
341. Although Ms. Trotman left the family home as an adult, she eventually returned to the house she always considered her home. In 1981, she joined her husband in Texas, where he was stationed in the Army. In the early 1980s, she moved back to Queens, living with her parents for a while before settling in Massachusetts.
342. By 1997, Ms. Trotman’s parents had paid off their $20,000 mortgage and owned their home free and clear.
343. Also in 1997, Ms. Trotman decided to return to St. Albans. With her parents retiring to Florida, Ms. Trotman desired to move back to the home where she grew up, to raise her family where her parents had raised her.
344. In February 2008, Ms. Trotman’s father passed away. Her mother followed him in July of that year. With her parents’ passing, Ms. Trotman and her sister inherited the home.
345. On March 26, 2010, Ms. Trotman took out an FHA-insured mortgage in the amount of $167,850 with First Franklin Financial, Ltd. ("First Franklin") to purchase her sister’s interest in the property. Ms. Trotman’s mortgage had a fixed interest rate of 5.5% over the life of the 30-year loan.
346. In order to close on the mortgage, Ms. Trotman was required to finance HUD’s UFMIP in the amount of approximately $2,887.50.
64

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 65 of 87 PageID #: 106
347. Ms. Trotman’s monthly principal and interest payments were $953.03. 348. In addition to the monthly principal and interest payment, Ms. Trotman was also charged HUD’s MIP in the amount of $68.31 per month, property taxes of approximately $240.27 per month, and homeowner’s insurance of $100 per month, for a total monthly housing payment of $1,361.61. 349. Although Ms. Trotman took out her mortgage with First Franklin, her mortgage was almost immediately serviced by Hartford Funding Ltd. ("Hartford"). 350. For two years, Ms. Trotman made her mortgage payments. However, when she changed jobs in late 2011, her new job paid significantly less, straining the family’s budget. 351. Further, in or around April 2012, Ms. Trotman’s husband began a long spell of unemployment. Ms. Trotman’s husband is a sheet metal mechanic and, because of the nature of the work, is out of work one to two months every year. But in 2012, Ms. Trotman’s husband was not re-employed until October 2012. Because of this long spell of unemployment, Ms. Trotman fell behind on her mortgage. 352. Because she was still working, Ms. Trotman applied for an FHA mortgage modification with Hartford. 353. After approximately six months of updating documents and re-submitting the same documents, on or around October 30, 2014, Ms. Trotman was finally able to enter into a permanent modification ("the October 2014 Modification”). However, it was not Hartford that signed the modification but rather LoanCare. Up until that point, Ms. Trotman had never heard of LoanCare. Her monthly mortgage statements had always come from Hartford. 354. Under the modification, Ms. Trotman’s arrears were capitalized into her unpaid principal balance for a new balance of $201,607.92. The FHA modification lowered her interest
65

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 66 of 87 PageID #: 107
rate to 4.375%, with a higher monthly principal and interest payments of $1,066.60. The modification also extended the term of her loan to 30 years.
355. Even with the modification, Ms. Trotman is still charged the HUD monthly MIP in an amount of approximately $84. Because her unpaid principal balance increased, so did her monthly MIP.
356. After Ms. Trotman modified her loan, her husband again became unemployed. As a result, on or around April 2015, Ms. Trotman fell behind on her October 2014 Modification.
357. Soon thereafter, Ms. Trotman reached out to Hartford to apply for a modification and began submitting documents.
358. On September 10, 2015, Hartford brought a foreclosure action against Ms. Trotman in Queens County Supreme Court bearing the index number 709532/2015. This case is ongoing.
359. Since being sued in foreclosure, Ms. Trotman has attended six court-mandated settlement conferences in an effort to save her home of 42 years.
360. At the most recent settlement conference, held on June 13, 2016, Hartford’s attorney informed Ms. Trotman that to apply for a modification, she would have to submit documents to Cenlar. Ms. Trotman had never heard of Cenlar and Ms. Trotman’s mortgage statements continue to come from Hartford.
361. Under HUD regulations, Ms. Trotman cannot be offered another modification until two years after her prior modification.
362. As a result, Ms. Trotman cannot begin to apply for an FHA-HAMP Modification until around August 2016.
66

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 67 of 87 PageID #: 108
363. However, because she is almost two years behind on her mortgage, is AfricanAmerican and lives in Southeast Queens, Ms. Trotman stands the very real risk that her mortgage will be sold out of the FHA Mortgage Program at the September 14, 2016 Note Sale, or at another auction soon thereafter. If her loan were to be sold in a Note Sale, she would no longer be able to apply for an FHA-HAMP Modification.
364. Based on Ms. Trotman’s current income, she is eligible for an FHA-HAMP modification that would include the following terms:
a. A capitalized, modified principal balance of $160,650.82; b. An interest rate of 3.875%; c. A loan term of 360 months; and d. A monthly principal and interest payment of $755.44. As part of this FHA-HAMP modification, Ms. Trotman would also receive a "Partial Claim" of $60,154.71. This Partial Claim is a sum excluded from the interest-bearing principal balance of $160,650.82 and secured by a subordinate mortgage to HUD. No interest would accrue on the Partial Claim principal balance and Ms. Trotman would make no monthly payments toward the principal. On the modified maturity date, Ms. Trotman would be responsible for paying the entire Partial Claim to HUD. 365. To the extent that Ms. Trotman is unable to obtain an FHA-HAMP modification, she would likely want to be able to sell her property and reap the economic benefits of selling her mortgage with an assumable FHA-insured mortgage. Currently, she has close to $200,000 of equity in her property. Sale of her FHA-insured mortgage at the next HUD Note Sale would relinquish her of her ability to sell her home with the FHA-insured mortgage. 366. Ms. Trotman has received no notice from HUD or her current mortgage servicer that her mortgage could potentially be sold out of the FHA Mortgage Program.
67

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 68 of 87 PageID #: 109
367. If Ms. Trotman were provided this notice, she would immediately call HUD and inform HUD that she is now able to re-apply for a modification as HUD’s two-year moratorium on offering her another modification is about to expire. She would request that her mortgage stay in the FHA Mortgage Program and that she be reviewed for an FHA-HAMP modification, a modification that will lower her monthly mortgage payments.
368. Ms. Trotman has been a resident of St. Albans, Queens for the better part of 42 years. It is where she was raised and where she chose to raise her daughter. She wants to keep her family home and the stable life that the neighborhood offers her and her family because of the prevalence of owner-occupied homes and the resulting neighborhood stability.
CLASS ACTION ALLEGATIONS 369. Plaintiffs bring this case as a class action on behalf of Plaintiffs and all AfricanAmerican New York City homeowners whose mortgages were auctioned through one of HUD’s Note Sales or who are at risk of having their mortgage sold through one of HUD’s Note Sales, seeking equitable, injunctive and other relief pursuant to Fed. R. Civ. P. 23(b)(1)(A) and 23(b)(2). 370. The exact number or identification of the Rule 23(b)(1)(A) and/or 23(b)(2) Class members is presently known only by Federal Defendants. On information and belief that Class includes more than 1,000 individuals. The identity of Class members is ascertainable and can be determined based on available records. 371. The questions of law and fact common to the Class predominate over questions affecting only individual Class members, and include, but are not limited to, the following:
a. whether the Note Sale Program violates the due process clause of the United States Constitution because homeowners impacted by the program were not informed
68

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 69 of 87 PageID #: 110
prior to the auction that their mortgages were to be sold out of the FHA Mortgage Program and/or were provided no opportunity to be heard about the decision;
b. whether the Note Sale Program is an abuse of discretion and/or contrary to law because it fails to affirmatively further fair housing;
c. whether the Note Sale Program has a negative, disparate impact on African-American homeowners in New York City in violation of the Fair Housing Act; and
d. whether Federal Defendants breached an implied contract because it collected UFMIP and monthly MIP without providing Class members all the benefits of the FHA Mortgage Program.
372. Plaintiffs’ claims are typical because they were subject to or affected by Federal Defendants’ Note Sale Program, or are likely to be subjected to the program. The claims of the named Plaintiffs do not conflict with the interest of any other member of the Class in that both Plaintiffs and the other members of the Class were subject to the effects of the same unlawful conduct and experienced the same damages as a result of the manner in which the Federal Defendants conduct their Note Sale Program. The Class will benefit from the remedial and monetary relief sought against Federal Defendants.
373. Plaintiffs also seek to certify an overlapping class consisting of all AfricanAmerican New York City homeowners whose mortgages were auctioned to Lone Star Defendants or who are at risk of having their mortgages sold to Lone Star Defendants through one of HUD’s Note Sales, seeking equitable and injunctive relief pursuant to Fed. R. Civ. P. 23(b)(1)(A) and 23(b)(2) and damages pursuant to Fed. R. Civ. P. 23(b)(3) (the “Lone Star Class”).
69

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 70 of 87 PageID #: 111
374. The exact number or identification of the Lone Star Class is presently only known by Federal Defendants and Lone Star Defendants. On information and belief, that Class includes more than 500 individuals. The identity of Class members is ascertainable and can be determined based on available records.
375. The Lone Star Class claims are based upon Caliber’s post-Note Sale conduct and misrepresentations to Class members. The questions of law and fact common to the Lone Star Class predominate over questions affecting only individual Class members, and include, but are not limited to, the following:
a. whether Lone Star Defendants falsely stated or misrepresented to Class members important terms that impact their mortgages, including, but not limited to, informing Class members that the sale of their mortgage out of the FHA Mortgage Program did not affect any term or condition of the mortgage, stating that they do not offer a HAMP or HAMP-like modifications, and refusing to provide a HAMP-like modification;
b. whether Lone Star Defendants’ false statements and/or misrepresentations constitute a violation of the Fair Debt Collection Practices Act ("FDCPA");
c. whether Lone Star Defendants’ false statements and/or misrepresentations constitute a "deceptive practice” in violation of New York’s General Business Law § 349 ("GBL § 349");
d. whether Lone Star Defendants’ interest-only modification and standard modification products have a negative, disparate impact on African-American homeowners in New York City in violation of the Fair Housing Act; and
70

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 71 of 87 PageID #: 112
e. whether Caliber’s refusal to review post-Note Sale homeowners for a HAMP or HAMP-like modification violates the Real Estate Settlement Procedure Act ("RESPA").
376. Plaintiffs’ claims are typical of the claims of the Lone Star Class because Plaintiffs and Class members were subject to or affected by Lone Star Defendants’ post-Note Sale behavior. The claims of the named Plaintiffs do not conflict with the interest of any other member of the Class in that both Plaintiffs and the other members of the Class were subject to the effects of the same unlawful conduct and experienced the same damages as a result of Lone Star Defendants’ unlawful conduct, namely, Lone Star Defendants’ various misrepresentations to homeowners and a modification program that has a disparate impact on African Americans in New York City in violation of the Fair Housing Act. The Class will benefit from the remedial and monetary relief sought against Lone Star Defendants.
377. The individual Plaintiffs have no conflict of interest with any putative absent class members, and they are committed to the vigorous prosecution of all class claims. They have retained counsel that is competent and experienced in federal class actions, civil rights actions, unfair debt collection practice litigation, fair lending actions, and RESPA litigation.
378. This action is superior to any other method for the fair and efficient adjudication of this legal dispute, as joinder of all members of the class is impracticable, and the damages suffered, although substantial, are small in relation to the extraordinary expense and burden of individual litigation and therefore it is highly unlikely that individual actions will be pursued.
379. Managing this case as a class should not present any particular difficulty. 380. Plaintiffs reserve the right to modify or amend the definition of the proposed Class before the Court determines whether certification is appropriate.
71

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 72 of 87 PageID #: 113
FIRST CAUSE OF ACTION (Due Process Against Federal Defendants) 381. Plaintiffs restate, reallege and incorporate by reference all foregoing paragraphs. 382. The FHA Mortgage Program is designed to provide and preserve homeownership among low-income Americans. 383. To achieve this objective, HUD has provided various benefits to homeowners through the FHA Mortgage Program, including pre-foreclosure assistance benefits, loss mitigation options, a streamline refinance benefit, assumablity of the FHA mortgage, and other benefits. 384. Various federal law, federal statutes, federal regulation and HUD documents, including its Handbook, mortgagee letters and other guidelines, establish the procedure by which the FHA Mortgage Program’s benefits are distributed to homeowners. 385. Further, HUD has required some of the FHA Mortgage Program’s benefits to be enshrined in the HUD-form note and mortgage into which homeowners and the lender enter. 386. Plaintiffs all chose to purchase their homes with an FHA-insured mortgage. 387. As part of the purchase, Plaintiffs paid HUD’s UFMIP at the closing of the FHA mortgage loan. 388. Further, Plaintiffs paid HUD the monthly MIP. 389. As a result, Plaintiffs had a reasonable expectation of continued receipt of the benefits provided in the FHA Mortgage Program. 390. Plaintiffs have a legitimate claim of entitlement to the FHA Mortgage Program, creating a property interest.
72

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 73 of 87 PageID #: 114
391. However, through HUD’s Note Sale Program, Federal Defendants sold Plaintiffs’ mortgages out of the FHA Mortgage Program to entities that do not provide the same benefits as the FHA Mortgage Program.
392. Plaintiffs were not informed or notified prior to the Note Sales that their mortgages were going to be sold out of the FHA Mortgage Program, thereby depriving them of all the benefits of an FHA-insured mortgage.
393. Plaintiffs were not provided any opportunity to be heard before Federal Defendants auctioned their mortgages out of the FHA Mortgage Program through a Note Sale.
394. Federal Defendants have violated Plaintiffs’ right to due process under the Fifth Amendment of the United States Constitution for failing to provide sufficient notice and an opportunity to be heard regarding Federal Defendants’ decision to sell Plaintiffs’ loans out of the FHA Mortgage Program.
395. As a result of Federal Defendants’ violation, Plaintiffs are entitled to declaratory and injunctive relief and reasonable attorney’s fees and costs as authorized by 28 U.S.C. § 2412(b).
SECOND CAUSE OF ACTION (Fair Housing Act § 3608(e)(5) Against Federal Defendants) 396. Plaintiffs restate, reallege and incorporate by reference all foregoing paragraphs. 397. The Fair Housing Act (“Act”) imposes an affirmative duty on HUD to “administer the programs . . . in a manner affirmatively to further the policies of [the Act].” 42 U.S.C. § 3608(e)(5). 398. As a result, Federal Defendants are required to consider the impact of HUD’s housing policies and actions to ensure they do not discriminate based on race and do not create or maintain residential segregation. Based on their analysis, Federal Defendants are required to
73

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 74 of 87 PageID #: 115
adopt policies and implement procedures in HUD’s housing programs that do not discriminate based on race and do not create or maintain residential segregation.
399. In designing and implementing the Note Sale Program, Federal Defendants have not reviewed the impact of the Note Sale Program on African-American homeowners in New York City or on predominantly African-American neighborhoods in New York City. Because Federal Defendants did not perform this analysis, they created the criteria and rules for the Note Sale Program and identified the specific loans to sell out of the FHA Mortgage Program without knowing whether their decisions would have a racially discriminatory impact on AfricanAmerican homeowners in New York City or on predominantly African-American neighborhoods in New York City.
400. Because of their failure to conduct such an analysis and then adopt and implement non-discriminatory policies and procedures for the Note Sale Program, Federal Defendants have failed to affirmatively further fair housing as required by Section 3608(e)(5) of the Act.
401. Plaintiffs have a claim for relief for Federal Defendants’ failure to affirmatively further fair housing pursuant to the Administrative Procedures Act because of the Federal Defendants’ abuse of discretion and otherwise acting contrary to law in creating, authorizing, permitting and supporting the Note Sale Program, including identifying the specific loans to sell out of the FHA Mortgage Program. 42 U.S.C. §§ 702, 706.
402. Sovereign immunity is waived by 5 U.S.C. § 702 for the injunctive and declaratory relief requested.
403. As a result of Federal Defendants’ violation, Plaintiffs are entitled to declaratory and injunctive relief and reasonable attorney’s fees and costs as authorized by 28 U.S.C. § 2412(b).
74

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 75 of 87 PageID #: 116
THIRD CAUSE OF ACTION (Fair Housing Act § 3604(a) and (b) Against Federal Defendants) 404. Plaintiffs restate, reallege and incorporate by reference all foregoing paragraphs. 405. Under the Fair Housing Act (“the Act”), it is unlawful to otherwise make unavailable or deny a dwelling to any person because of race. 42 U.S.C. § 3604(a). 406. The Act also prohibits discriminating against any person in the terms, conditions or privileges of sale of a dwelling or in the provision of services in connection therewith because of race. 42 U.S.C. § 3504(b). 407. Liability can be established under the Act if actions cause a discriminatory effect, even if not motivated by discriminatory intent, unless there is a legally sufficient justification to avoid liability. 24 CFR § 100.500. 408. Federal Defendants’ Note Sale Program has a disparate impact on AfricanAmerican homeowners and predominantly African-American neighborhoods in New York City in violation of the Act, because a disproportionately high number of loans sold through the Note Sale Program are secured by homes located in predominately African-American neighborhoods. 409. Federal Defendants’ Note Sale Program makes housing unavailable to AfricanAmerican homeowners in New York City in violation of section 3604(a) of the Act. Over a third of all the mortgages sold through the Note Sale Program result in foreclosure post-sale and only 7% of mortgages sold through the Note Sale Program have resulted in a home-saving solution, such as a modification. 410. Further, by auctioning FHA mortgages to private investors that refuse to offer HAMP or HAMP-like mortgage modifications, and that only offer more expensive and unsustainable modification products, Federal Defendants violate sections 3604(a) and 3604(b) of the Act by making housing unavailable to African-American homeowners, imposing less
75

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 76 of 87 PageID #: 117
favorable terms, conditions and privileges of sale, and providing discriminatory services in connection with the sale of a dwelling.
411. Federal Defendants have failed to employ practices that serve HUD’s interests with a less discriminatory effect, including ensuring that the FHA homeowners receive the benefits to which they are entitled and working with the homeowner before selling the loans through the Note Sale Program and further, ensuring that every homeowner with an FHA mortgage who qualifies for a HAMP modification be provided with an affordable HAMP modification to preserve affordable homeownership for African-American homeowners.
412. HUD’s Note Sale Program has caused and continues to cause direct injury to African-American homeowners and predominantly African-American neighborhoods in New York City by increasing the likelihood of African-American homeowners losing their homes to foreclosure and threatening neighborhood stability.
413. As a result of Federal Defendants’ breach, Plaintiffs are entitled to declaratory and injunctive relief and reasonable attorney’s fees and costs as authorized by 42 U.S.C. § 3613.
FOURTH CAUSE OF ACTION (Breach of Contract Against Federal Defendants) 414. Plaintiffs restate, reallege and incorporate by reference all foregoing paragraphs. 415. Through Plaintiffs’ payment of the UFMIP and the monthly MIP, Federal Defendants have entered into an implied in fact contract with Plaintiffs to provide the benefits of the FHA Mortgage Program. 416. Plaintiffs’ intention to contract with Federal Defendants is evidenced by their choice to obtain an FHA mortgage, their payment of the UFMIP at closing and their payment and/or HUD’s charge of the monthly MIP.
76

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 77 of 87 PageID #: 118
417. Federal Defendants’ intention to contract with Plaintiffs is evidenced through the regulations, Handbook, mortgagee letters and other guidance that HUD publishes regarding the UFMIP and monthly MIP, the fact that the UFMIP and MIP payments are a part of the closing and the monthly mortgage statement, and the determination of benefits included in the FHA Mortgage Program.
418. Offer and acceptance is unambiguous through Plaintiffs’ tendering of the UFMIP and the monthly MIP and Federal Defendants’ acceptance of these payments.
419. The Secretary of HUD and the FHA Commissioner have the authority to bind the government. In fact, that authority is manifested in the various regulations, Handbook provisions, mortgagee letters and guidelines that Federal Defendants pronounce regarding the Insurance Fund and the FHA Mortgage Program.
420. By selling Plaintiffs’ mortgages through the Note Sale Program and out of the FHA Mortgage Program, Federal Defendants have breached this implied in fact contract.
421. As a result of Federal Defendants’ breach, Plaintiffs are entitled to actual damages and reasonable attorney’s fees and costs as authorized by 28 U.S.C. § 2412(b). .
422. None of Plaintiffs’ individualized damages exceed $10,000, or alternatively, Plaintiffs waive any damages over $10,000.
FIFTH CAUSE OF ACTION (FDCPA Against Lone Star Defendants) 423. Plaintiffs restate, reallege and incorporate by reference all foregoing paragraphs. 424. Congress enacted the Fair Debt Collection Practices Act (“FDCPA”) to stop “the use of abusive, deceptive and unfair debt collection practices by many debt collectors.” 15 U.S.C. § 1692(a).
77

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 78 of 87 PageID #: 119
425. Under the FDCPA, a debt collector is prohibited from making any false, deceptive or misleading representation in connection with the collection of a debt. 15 U.S.C. § 1692e.
426. Such prohibition includes the use of any false representation or deceptive means to collect or attempt to collect a debt. 15 U.S.C. § 1692e(10)
427. A debt collector may not “use unfair or unconscionable means to collect any debt.” 15 U.S.C. § 1692f.
428. Under the FDCPA, a debt collector is prohibited from engaging in any conduct, the natural consequence is to harass or abuse any person in connection with the collection of a debt. 15 U.S.C. § 1692d.
429. Each Plaintiff is a “consumer” as defined by 15 U.S.C. § 1692a(3) because each Plaintiff is alleged to owe a debt.
430. Each Plaintiff’s mortgage loan is a “debt” as defined by 15 U.S.C. § 1692a(5). 431. Caliber and U.S. Bank Trust are each a “debt collector” as defined by 15 U.S.C. § 1692a(5) because Plaintiffs’ mortgages were, by definition, in default at the time the Lone Star Defendants acquired them. 432. Caliber’s actions, as an agent of U.S. Bank Trust, constitute attempts to collect a debt or were taken in connection with attempts to collect a debt within the meaning of the FDCPA. 433. The Lone Star Defendants violated the FDCPA, 15 U.S.C. §§ 1692e, 1692f and 1692d, by making false and misleading representations, engaging in unfair and deceptive practices, and engaging in harassing and abusive conduct. Those violations include, but are not limited to:
78

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 79 of 87 PageID #: 120
a. Falsely stating in the TILA Notice of Ownership Change to former-FHA homeowners that transfer of ownership of Plaintiffs’ mortgages “. . . does not affect any term or condition of the mortgage instruments or the servicing of your mortgage loan;”
b. Misrepresenting that Caliber does not offer a HAMP modification when Caliber not only has a HAMP modification option, but is required by HUD to offer a HAMP or HAMP-like modification;
c. Failing to review homeowners for all modification programs offered, including the HAMP or HAMP-like modification program, in violation of federal law; and
d. Forcing homeowners to accept unfair and unconscionable modifications. 434. As a direct and proximate result of these violations of the FDCPA, Plaintiffs and Class members have sustained actual damages in the form of out-of-pocket expenses, lost income, and emotional harm in an amount to be proved at trial. 435. Plaintiffs and the Class are therefore entitled to actual damages, statutory damages, and reasonable attorney’s fees, including litigation expenses and costs. 15 U.S.C. § 1692k.
SIXTH CAUSE OF ACTION (GBL § 349 Against Lone Star Defendants) 436. Plaintiffs restate, reallege and incorporate by reference all foregoing paragraphs. 437. New York General Business Law (“GBL”) § 349(a) prohibits “deceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in this state . . . ” where that conduct is consumer-oriented.
79

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 80 of 87 PageID #: 121
438. Under GBL § 349(h), an individual “injured by reason of any violation of this section may bring an action in his own name to enjoin such unlawful acts or practice, an action to recover his actual damages or fifty dollars, whichever is greater, or both such actions.”
439. At all relevant times, the Lone Star Defendants conducted a business or furnished a service as those terms are used in GBL § 349.
440. As U.S. Bank Trust’s agent, Caliber violated, and continues to violate, GBL § 349 by:
a. Falsely stating in the TILA Notice of Ownership Change to former-FHA homeowners that transfer of ownership of Plaintiffs’ mortgages to LSF9 Master Participation Trust “. . . does not affect any term or condition of the mortgage instruments or the servicing of your mortgage loan;”
b. Misrepresenting that Caliber does not offer a HAMP modification when Caliber not only has a HAMP modification option, but is required by HUD to offer a HAMP or HAMP-like modification; and
c. Violating HUD regulations and RESPA by refusing to review Plaintiffs’ loans for a HAMP or HAMP-like modification.
441. The Lone Star Defendants committed the above-described acts willfully and/or knowingly.
442. These acts and practices are consumer oriented and have had, and will continue to have, a broad impact on consumers at large, because U.S. Bank Trust purchased over 22,000 loans from the June 11, 2014 Note Sale and Caliber, upon information and belief, services over 22,000 loans purchased through HUD’s Note Sale Program, including those loans purchased by U.S. Bank Trust on June 11, 2014.
80

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 81 of 87 PageID #: 122
443. These deceptive acts have caused injury and damage to the Plaintiffs and Class members, and unless enjoined, will cause further irreparable injury.
444. As a direct and proximate result of these violations of GBL § 349, Plaintiffs and members of the Class have suffered compensable harm and are entitled to permanent injunctive relief, and to recover actual and treble damages, costs and attorney’s fees.
SEVENTH CAUSE OF ACTION (Fair Housing Act §§ 3604 and 3605 against Lone Star Defendants) 445. Plaintiffs restate, reallege and incorporate by reference all foregoing paragraphs. 446. Under the Fair Housing Act (“Act”), it is unlawful to otherwise make unavailable or deny a dwelling to any person because of race. 42 U.S.C. § 3604(a). 447. The Act also prohibits discrimination in making available residential real-estate related transactions and in the terms and conditions of such transactions because of race. 42 U.S.C. § 3605(a). 448. Liability can be established under the Act if actions cause a discriminatory effect, even if not motivated by discriminatory intent, unless there is a legally sufficient justification to avoid liability. 24 CFR § 100.500. 449. At all relevant times Lone Star Defendants were, and continue to be, entities “engaging in residential real estate-related transactions” as defined by 42 U.S.C. § 3605(b). 450. The Lone Start Defendants’ policy of refusing to offer HAMP or a HAMP-like modification such as an FHA-HAMP and instead offering a five-year interest-only or a five-year standard modification at a higher-than-HAMP interest rate to post-Note Sale homeowners has and continues to have a disproportionate adverse impact on African-American homeowners and predominantly African-American communities in New York City. The Lone Star Defendants’ policy makes housing unavailable by causing housing to become unaffordable based on the
81

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 82 of 87 PageID #: 123
unsustainable modifications Caliber, as the agent of U.S. Bank Trust, has offered instead of a HAMP or HAMP-like product such as an FHA-HAMP modification. This same policy also makes residential real-estate related transactions unavailable and discriminates in the terms and conditions of such transactions because of race.
451. U.S. Bank Trust and Caliber’s polices have caused and continue to cause direct injury to African-American homeowners and other individuals living in predominantly AfricanAmerican neighborhoods by increasing the likelihood of African-American homeowners losing their homes to foreclosure and threatening neighborhood stability.
452. As a result of U.S. Bank Trust and Caliber’s conduct, Plaintiffs are entitled to actual and punitive damages, reasonable attorney’s fees, including litigation expenses and costs, and an order directing that Plaintiffs be reviewed for a HAMP modification and be provided with such a modification if they are eligible. 42 U.S.C. § 3613(c).
EIGHTH CAUSE OF ACTION (RESPA Against Caliber)
453. Plaintiffs restate, reallege and incorporate by reference all foregoing paragraphs. 454. Under 12 USC § 2605(k)(1)(E), servicers shall not “fail to comply with any other obligation found by the Bureau of Consumer Financial Protection, by regulation, to be appropriate to carry out the consumer protection purposes of this chapter.” 455. Under 12 C.F.R. § 1024.41, the implementing regulations of the Real Estate Settlement Procedures Act (“RESPA”), if a mortgage servicer receives a complete loss mitigation application more than 37 days before a foreclosure sale, it must “[e]valuate the borrower for all loss mitigation options available to the borrower.” 12 C.F.R. § 1024.41(c)(1)(i). 456. If the servicer denies this application for any trial or permanent loan modification option available to the borrower, it shall state in the notice sent to the borrower “the specific
82

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 83 of 87 PageID #: 124
reason or reasons for the servicer’s determination for each such trial or permanent loan modification option.” 12 C.F.R. § 1024.41(d).
457. At all relevant times, Caliber was, and continues to be, a “servicer” under 12 C.F.R. § 1024.2(b).
458. At all relevant times, each of Plaintiffs’ loans was, and continues to be, a “mortgage loan” under 12 C.F.R. § 1024.31.
459. Each of Plaintiffs’ applications was a “loss mitigation application” because each was a “written request for a loss mitigation option” and each included “information required by the servicer for evaluation.” 12 C.F.R. § 1024.31.
460. Each of Plaintiffs’ applications was submitted more than 37 days before a foreclosure auction date.
461. A HAMP modification, or a similar loss mitigation program, is a “loss mitigation option” because it is an “alternative to foreclosure,” which Caliber may offer borrowers on behalf of the owners of the mortgage loans. 12 C.F.R. § 1024.31.
462. Caliber violated 12 C.F.R. § 1024.41(c)(1)(i) by not evaluating Plaintiffs for a HAMP or HAMP-like modification, even though this program was required to be a part of Caliber’s loss mitigation in accordance with HUD guidance.
463. In the alternative, if Caliber did evaluate Plaintiffs for a HAMP modification, or a similar loss mitigation program as required by HUD, Caliber violated 12 C.F.R. § 1024.41(d) by not providing Plaintiffs with the specific reasons for its determination not to offer them a HAMP modification or a HAMP-like modification, such as an FHA-HAMP modification.
83

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 84 of 87 PageID #: 125
464. Caliber has engaged in a pattern or practice of violating these provisions of 12 C.F.R. § 1024.41 as three of the five named Plaintiffs entered into or were offered Interest Only Modifications even though Caliber was required to have a HAMP or HAMP-like product.
465. Additionally, Defendant U.S. Bank Trust purchased all of the mortgages sold during the June 11, 2014 Note Sale, which was over 22,000 mortgages. Caliber services all of these mortgages on behalf of U.S. Bank Trust. Thus, upon information and belief, Caliber has engaged in a pattern or practice of violating these provisions of 12 C.F.R. § 1024.41 by maintaining a policy of refusing to offer HAMP or HAMP-like modifications to homeowners whose notes were sold as part of the June 11, 2014 Note Sale, even though Caliber was required to have a HAMP or HAMP-like product.
466. These regulations are enforceable against Defendant Caliber through RESPA. 12 U.S.C. § 2605(f).
467. As a direct and proximate result of these violations of 12 C.F.R. § 1024.41, Plaintiffs and the members of the Class have suffered actual damages.
468. As a result of the above violations of RESPA, Defendant Caliber is liable to Plaintiff and the Class for actual damages and the maximum amount of statutory damages provided under 12 U.S.C. § 2605(f), attorney’s fees, litigation expenses and costs, and such other and further relief as this Court deems just and proper.
PRAYER FOR RELIEF WHEREFORE, Plaintiffs respectfully request the following relief:
i. An order certifying this case as a class action under Fed. R. Civ. P. 23 and designating the Plaintiffs as the Class Representatives and their counsel as Class Counsel;
84

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 85 of 87 PageID #: 126
ii. A judgment declaring that Defendants have committed the violations of law alleged in this action;
iii. An order enjoining Federal Defendants from continuing to harm Plaintiffs and members of the Class by conducting future Note Sales;
iv. An order enjoining and directing Federal Defendants, without limitation, to: a. Review the racial impact of prior Note Sales on African-American homeowners and communities in New York City; b. To the extent that future note sales are permitted, ensure that such note sales are in accordance with the Fair Housing Act; and c. To the extent that future note sales are permitted, ensure that homeowners whose mortgages are contemplated to be sold in the note sales are provided sufficient notice and an opportunity to be heard;
v. An order enjoining and directing Lone Star Defendants to comply with federal and state law in its modification program, including without limitation: a. Directing Lone Star Defendants to cease engaging in practices that violate the FDCPA, GBL § 349, and the Fair Housing Act; b. Directing Caliber to cease engaging in practices that violate RESPA; c. Directing Lone Star Defendants to review homeowners for a HAMP or HAMP-like modification; d. Directing Lone Star Defendants to locate class members and notify them that they can be re-reviewed for a HAMP or HAMP-like product;
85

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 86 of 87 PageID #: 127
e. Directing Lone Star Defendants to cease from including a repudiation of the assumability of the mortgage in future modification agreements of mortgages purchased through HUD’s Note Sale Program;
vi. Actual and/or compensatory damages against all Defendants, except the individual defendants sued in their official capacity only, in an amount to be proven at trial;
vii. Statutory damages against the Lone Star Defendants pursuant to the FDCPA, 15 U.S.C. § 1692k;
viii. Treble damages against the Lone Star Defendants pursuant to GBL § 349(h); ix. Additional damages against the Lone Star Defendants pursuant to RESPA, 12 U.S.C. § 2605(f); x. Punitive damages pursuant to the Fair Housing Act, 42 U.S.C. § 3613(c); xi. Reasonable costs and litigation expenses of this action as set forth above; xii. Reasonable attorney’s fees;
xiii. Pre-judgement and post-judgement interest, to the extent allowable by law; and xiv. Such other and further relief as this Court finds may be just and proper.
86

Case 1:16-cv-03948-CBA-SMG Document 11 Filed 08/12/16 Page 87 of 87 PageID #: 128
JURY TRIAL DEMANDED Plaintiffs request a jury on all claims so triable. Dated: August 12, 2016 New York, New York
MFY LEGAL SERVICES, INC. By: _/s/ Elizabeth M. Lynch__________
Elizabeth M. Lynch, Christopher Fasano, Linda Jun, of counsel to Jeanette Zelhof, Esq. 299 Broadway, 4th Floor New York, NY 10007 Tel: (212) 417-3700
EMERY CELLI BRINCKERHOFF & ABADY LLP
By: _/s/ Matthew D. Brinckerhoff____ Matthew D. Brinckerhoff Diane L. Houk 600 Fifth Avenue, 10th Floor New York, NY 10020 Tel: (212) 763-5000
87

 
 Case 1:16-cv-03948-CBA-SMG Document 1 Filed 07/15/16 Page 1 of 12 PageID #: 1

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK
----------------------------------------------------------------------)(
JOSEPH WASHINGTON,

Plaintiff,

Index No. 16-cv-3948

-against-

COMPLAINT

CALIBER HOME LOANS, INC., AND U.S BANK TRUST, N.A., AS TRUSTEE FOR LSF9 MASTER PARTICIPATION TRUST,

JURY TRIAL DEMANDED

Defendants.
-----------------------------------------------------------------------)(
Plaintiff Joseph Washington ("Plaintiff' or "Mr. Washington"), brings thi s suit against
Defendants Caliber Home Loans, Inc. ("Caliber") and U.S. Bank Trust, N.A. , as Trustee for

LSF9 Master Participation Trust ("US Bank Trust") (collectively "Defendants") for violations of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq. ("FDCPA"). Defendants used unfair and unconscionable means to collect Mr. Washington' s mortgage and made false, deceptive and mi sleading statements about the terms and conditions of Mr. Washington's

mortgage loan and the loan modification options available to him. Mr. Washington seeks actual damages, statutory damages, attorney's fees, and any further relief this Court deems appropriate.

JURISDICTION AND VENUE

1.

This Court has federal question jurisdiction over the lawsuit pursuant to 15

U.S.C. § 1692k(d) and 28 U.S.C. § 1331.

2. Venue is proper under 28 U.S.C. § 1391 (b), because a substantial part of the

events or omissions giving rise to the claims occurred in the Eastern District of New York.

Case 1:16-cv-03948-CBA-SMG Document 1 Filed 07/15/16 Page 2 of 12 PageID #: 2
PARTIES Plaintiff
3. Plaintiff Joseph Washington is a 53-year-old homeowner who owns the home located at 11 8-04 203rd Street, Saint Albans, New York, 1141 2. Plaintiff Washington lives there with his fiancee, her two daughters and her grandchild. Plaintiff Washington is a "consumer" as that term is defined in 15 U.S.C. § 1692a(3). Defendants
4. Defendant Caliber Home Loans, Inc. ("Caliber") is a corporation incorporated under the laws of the State of Delaware with its principal place ofbusiness at 3701 Regent Blvd., Irving, Texas 75063. Caliber is a subsidiary of the private equity firm Lone Star Funds. In addition to originating mortgages, Caliber is a mortgage servicing company.
5. Defendant U.S. Bank Trust, as Trustee for LSF9 Master Participation Trust ("U.S. Bank Trust"), is a trust with an address of 2711 North Haskell Avenue, Suite 1700, Dallas, Texas, 75204.
6. Defendants are engaged in the collection of debts from consumers using the mail and telephone. Defendants regularly attempt to collect consumer debts alleged to be due to another. Defendants are "debt collectors" as defined by the FDCPA, I5 U.S.C. § I692a(6).
FACTUAL ALLEGATIONS Mr. Washington Purchases His Home with an FHA Mortgage
7. On October 31,2011 , Plaintiff Joseph Washington purchased the home located at 11 8-04 203rd Street, in the St. Albans section ofQueens, New York.
8. To purchase the home, Mr. Washington elected to take out a mortgage insured by the United States Department of Housing and Urban Development's ("HUD") Federal Housing
2

Case 1:16-cv-03948-CBA-SMG Document 1 Filed 07/15/16 Page 3 of 12 PageID #: 3
Administration ("FHA") and issued by First Residential Mortgage Services Corporation ("the Mortgage" or "Mr. Washington's Mortgage").
9. Mr. Washington's mortgage with First Residential Mortgage Services Corporation was in the amount of $326,987.00, with a fixed interest rate of 4.5% over the life of the 30-year loan term.
10. From the outset, Mr. Washington's mortgage was serviced by a different company from his lender, LoanCare Servicing Center, Inc. ("LoanCare").
11. As an FHA mortgage, Mr. Washington's Mortgage is insured by HUD. If Mr. Washington were to fall behind on his mortgage, and the mortgage servicer were to foreclose on his home, the servicer could file an insurance claim with HUD for the unpaid principal balance of the loan and a certain amount of arrears. After paying out the insurance claim, HUD takes ownership of the foreclosed property.
12. With a HUD-insured mortgage, Mr. Washington is entitled to certain benefits including but not limited to, pre-foreclosure assistance and FHA loss mitigation options. HUD's Creation of its Note Sale Program
13. In or around 2010, HUD instituted a note sale program (the "Note Sale Program"). Under its Note Sale Program, HUD pays out insurance claims to the mortgage servicer before the servicer forecloses on the home. It then pools these delinquent mortgages and sells them to the highest bidder through an auction.
14. Once a mortgage is sold through the Note Sale Program, it is no longer insured by HUD and the mortgage is no longer governed by FHA regulations. As a result, the homeowner loses a number of benefits, including, pre-foreclosure assistance and FHA loss mitigation options.
3

Case 1:16-cv-03948-CBA-SMG Document 1 Filed 07/15/16 Page 4 of 12 PageID #: 4
15. HUD is required to track mortgages sold through the Note Sale Program for four years after the sale. The post-Note Sale purchaser is required to inform HUD about the status of each mortgage it purchases.
16. Although HUD originally placed no requirements on the note purchaser for how it serviced loans after the sale, in April 2015, HUD issued a statement requiring note purchasers to offer Home Affordable Modification Program ("HAMP") modifications, or HAMP-like modifications, for all loans they acquired as a result of HUD's Note Sale Program. Defendants Participation in HUD's Note Sale Program
17. As of January 2016, Caliber's parent company, Lone Star, has purchased 22% of all mortgages sold in the Note Sale Program since HUD initiated the program in 2010. It is the second-largest owner of mortgages sold through the Note Sale Program, purchasing over 24, 128 mortgages.
18. At the June 11, 2014 note sale auction, Lone Star submitted the highest bid for all 16 national pools, purchasing all the mortgages in that sale. Mr. Washington Falls Behind and Defendants Purchase his Mortgage at a HUD Note Sale
19. For the first two years of his mortgage term, Mr. Washington remained current on his mortgage.
20. On November 1, 2013, Mr. Washington missed his first mortgage payment. 21. Soon after defaulting, in or around late 2013, Mr. Washington applied for a modification of his loan with his mortgage servicer at the time, LoanCare. 22. Although actively pursuing a modification with LoanCare, in or around July 2014, HUD sold Mr. Washington's mortgage through its Note Sale Program.
4

Case 1:16-cv-03948-CBA-SMG Document 1 Filed 07/15/16 Page 5 of 12 PageID #: 5
23. On August 25, 2014, Caliber, as agent ofU.S. Bank Trust, mailed Mr. Washington a letter. In that letter, Caliber stated that Mr. Washington's loan had been sold to LSF9 Master Participation Trust (the "TILA Notice of Ownership Change").
24. In this August 25, 2014 letter, Caliber claimed that this loan sale took place on July 17, 2014.
25. Further, in this August 25, 2014 letter, Caliber falsely claimed that the "assignment, sale or transfer of the mortgage loan does not affect any term or condition of the mortgage instruments or the servicing of your mortgage loan."
26. In or around September of2014, Mr. Washington submitted a new loss mitigation application to Caliber.
27. In a letter dated December 9, 2014, Caliber, as agent ofU.S. Bank Trust, stated that Mr. Washington had been approved for a "5 Year Interest Only" modification. Thi s modification agreement provided that Mr. Washington would make interest-only payments of $1,091.88 from February 1, 2015 to January 1, 2020. At the end ofthis five-year period, on January 1, 2020, the interest rate would revert to the original note rate of 4.5%.
28. In this December 9, 2014letter, Caliber, as agent ofU.S. Bank Trust, claimed that it had reviewed Mr. Washington for a "5 Year Short Term" modification and a "Loan Modification (With Deferment)." Caliber denied Mr. Washington for both of these modification programs. Caliber, as agent of U.S. Bank Trust, refused to communicate clearly with Mr. Washington and did not describe the terms of either modification program. Nor did it list any other modification programs in its list of loan modification options.
5

Case 1:16-cv-03948-CBA-SMG Document 1 Filed 07/15/16 Page 6 of 12 PageID #: 6
29. Worried that he might lose his home, on December 18, 2014, Mr. Washington signed the modification agreement, thinking he had no choice. Neither Caliber nor U.S. Bank Trust countersigned this agreement.
30. Instead, by letter dated March 6, 2015, Caliber, as agent of U. S. Bank Trust, offered Mr. Washington a Trial Period Plan for a loan modification. Under this Trial Period Plan, Mr. Washington would make three interest-only payments of$1,706.87, commencing with a payment due on April!, 2015.
31. In this March 6, 2015 letter, Caliber did not say if it had reviewed Mr. Washington for any other modification program and did not communicate whether other options existed for Mr. Washington.
32. Mr. Washington accepted this offer by signing the Trial Period Plan agreement on March 21 , 2015 and by making the first payment due under the plan before April 1, 2015.
33. Mr. Washington made all the payments under this Trial Period Plan. 34. By Jetter dated July 6, 2015, Caliber, as agent of U.S. Bank Trust, approved Mr. Washington for another "5 Year Interest Only" modification. This second modification agreement also provided for a five-year interest-only period, from September 1, 2015 to August 1, 2020, during which time Mr. Washington would make interest-only payments of$1 ,280.09. Caliber unfairly charged Mr. Washington an interest rate during this five-year period that was 4.88%, above the current market rate. 35. As with the first modification agreement, at the end of this five-year period, the interest rate will revert to the original note rate of 4.5%. 36. Because Caliber and U.S. Bank Trust did not extend the term of Mr. Washington's mortgage, and the first five years of the modification consist of interest-only
6

Case 1:16-cv-03948-CBA-SMG Document 1 Filed 07/15/16 Page 7 of 12 PageID #: 7
payments, Mr. Washington will only have 21 years to pay down the unpaid principal balance. Thus, on August 1, 2020, Mr. Washington's monthly mortgage payment - which only then will include principal - will jump to $1,933.09, a $653 difference.
37. At 53 years old, Mr. Washington does not anticipate that in five years he will be making appreciably more than what he is making today, and thus he does not know how he will make this significantly higher mortgage payment.
38. Furthermore, only $31 4,775.95 of Mr. Washington's mortgage will actually be paid down during the life of the loan. Upon information and belief, another $30,342 of Mr. Washington' s debt will be an interest-bearing balloon payment due on November 1, 2041. When Mr. Washington is 78 years old, he will owe this balloon payment and all the interest that has been silently accruing.
39. During the time that Mr. Washington was applying for a modification, Caliber, as agent of U.S. Bank Trust, called him almost every day, sometimes two to three times a day, pressuring him to accept the proposed modification, and causing him stress about losing his home. On these calls, Caliber would threaten Mr. Washington with foreclosure. Defendants also repeatedly call ed Mr. Washington while he was at work, which caused him to become distracted while at work.
40. Mr. Washington pleaded with Caliber, as agent of U.S. Bank Trust, to stop calling him, however Caliber refused to honor his requests.
41. With constant threats of foreclosure, Mr. Washington became anxious and worried that he would lose his home. Thus, believing he had no other choice, Mr. Washington signed this modification agreement with unfair and unconscionable tenns on July 19, 20 15. Caliber, as agent of U.S. Bank Trust, did the same on July 29, 2015.
7

Case 1:16-cv-03948-CBA-SMG Document 1 Filed 07/15/16 Page 8 of 12 PageID #: 8
42. The modification that Mr. Washington signed on July 19,20 15 also includes an unfair provision that strips him of his ability to sell his property encumbered by the mortgage. In other words, Caliber specifically repudiated Mr. Washington's ability to sell his property encumbered by the mortgage.
43. The unfair and unconscionable modification offered by Caliber as agent of U.S. Bank Trust, with its higher interest rate and higher interest-bearing principal balance, is more expensive than what Mr. Washington would have received under an FHA-HAMP modification. Further, the $653 payment increase in year six of the modification agreement all but guarantees that Mr. Washington will default.
44. If Caliber, as agent ofU.S . Bank Trust, had offered a modification program akin to HAMP or FHA-HAMP, Mr. Washington would have received a modification with the following, approximate terms:
a. A capitalized, interest-bearing principal balance of $244,579.41, b. An interest rate of 4.5 percent, c. A Joan term of 360 months, and d. A monthly principal and interest payment of$1,239.25. 45. As part of this HAMP modification, Mr. Washington would have also received a "Partial Claim" of approximately $94,999.13. Under HUD's FHA-HAMP program, a Partial Claim is an insurance claim on a portion of the capitalized unpaid principal balance that the mortgage servicing company submits to HUD. The amount of the partial claim is then deducted from the debt owed to the mortgage servicing company, lowering the unpaid principal amount and enabling the mortgage servicing company to make an affordable monthly payment for the homeowner. The homeowner still owes this amount. It becomes a second mortgage on the property owed to HUD. It is non-interest bearing and does not need to be paid to HUD until the homeowner pays off the modified mortgage, sells the property or refinances.
8

Case 1:16-cv-03948-CBA-SMG Document 1 Filed 07/15/16 Page 9 of 12 PageID #: 9
46. Despite his continued eligibility for an affordable modification, Caliber, as agent of U.S. Bank Trust, has never explained why it did not offer him, or even consider him for, an FHA-HAMP modification or another HAMP-like program.
47. Mr. Washington did not discover Defendants' false, deceptive, and misleading representations or that they used unfair and unconscionable means of collecting a debt until he met with a legal services attorney in June 2016, who explained that the mortgage servicers had mislead him about his options and should have provided an alternative modification without unfair and unconscionable tenns and without additional fees and interest.
48. Mr. Washington has incurred economic harm in the form of out-of-pocket expenses as a result of Defendants' actions.
49. Mr. Washington has suffered emotional distress because of Defendants' actions. Since Defendants purchased and began servicing his mortgage, Mr. Washington has been unable to sleep, worried that Defendants would not offer a modification. He continues to worry and lose sleep over the prospect of the mortgage payment increase on August I , 2020, which he fears will cause him to default again and will ultimately jeopardize his ownership of his home.
FIRST CAUSE OF ACTION VIOLATION OF FAIR DEBT COLLECTION PRACTICES ACT 50. Plaintiff restates, realleges and incorporates by reference all foregoing paragraphs. 51. Congress enacted the Fair Debt Collection Practices Act (FDCPA) to stop "the use of abusive, deceptive and unfair debt collection practices by many debt collectors." 15 U. S.C. § 1692(a). 52. Under the FDCPA, a debt collector is prohibited from making any false, deceptive or misleading representation in connection with the collection of a debt. 15 U.S.C. § 1692e.
9

Case 1:16-cv-03948-CBA-SMG Document 1 Filed 07/15/16 Page 10 of 12 PageID #: 10
53. Such prohibition includes the use of any false representation or deceptive means to collect or attempt to collect a debt." 15 U.S.C. § 1692e(10).
54. A debt collector may not "use unfair or unconscionable means to collect any debt." 15 U.S.C. § 1692f.
55. Under the FDCPA, a debt collector is prohibited from engaging in any conduct, the natural consequence is to harass or abuse any person in connection with the collection of a debt. 15 U.S.C. § 1692d.
56. Plaintiff is a "consumer" as defined by 15 U.S.C. § 1692a(3) because he is alleged to owe a debt.
57. Plaintiff s mortgage loan is a "debt" as defined by 15 U.S.C. § 1692a(5). 58. Caliber and U. S. Bank Trust are each a "debt collector" as defined by 15 U. S.C. § 1692a(5) because Plaintiffs mortgage loan was in default at the time LSF9 Master Participation Trust acquired it. 59. Caliber's actions, as an agent of U.S. Bank Trust, constitute attempts to collect a debt or were taken in connection with attempts to collect a debt within the meaning of the FDCPA. 60. The Defendants' violations of the FDCPA, 15 U.S.C. §§ 1692e, 1692f and 1692d include, but are not limited to:
a. Using false representations or deceptive means to collect or attempt to collect any debt;
b. Using unfair or unconscionable means to collect or attempt to collect a debt;
10

Case 1:16-cv-03948-CBA-SMG Document 1 Filed 07/15/16 Page 11 of 12 PageID #: 11
c. Falsely stating in the TILA Notice of Ownership Change to Mr. Washington that the transfer of ownership of Plaintiffs' mortgages "... does not affect any term or condition of the mortgage instruments or the servicing of your mortgage loan";
d. Misrepresenting that Caliber does not offer a HAMP or HAMP-like modification when Caliber not only has a HAMP modification option but is required by HUD to offer a HAMP or HAMP-like modifications;
e. Failing to review Mr. Washington for all modification programs Caliber offers, including the HAMP or HAMP-like modification program; and
f. Calling Mr. Washington repeatedly, including at work, even after Mr. Washington requested that Defendants stop.
61. As a direct and proximate result of these violations of the FDCPA, Plaintiff has sustained actual damages in the fonn of out-of-pocket expenses and emotional harm in an amount to be proved at trial.
62. Plaintiff is therefore entitled to actual damages, statutory damages, and reasonable attorney' s fees, including litigation expenses and costs. 15 U.S.C. § 1692k.
PRAYER FOR RELIEF WHEREFORE, Plaintiff respectfully requests the following relief:
1. A judgment declaring that Defendants have committed the violations oflaw alleged in this action;
11. An order directing Defendants to comply with federal and state law in administering its modification programs, including without limitation directing Defendants to cease engaging in practices that violate the FDCPA;
1 1

Case 1:16-cv-03948-CBA-SMG Document 1 Filed 07/15/16 Page 12 of 12 PageID #: 12
111. Actual and/or compensatory damages against all Defendants in an amount to be proven at trial;
tv. Statutory damages pursuant to the FDCPA, 15 U.S.C. § 1692k; v. Award Plaintiff reasonable costs and litigation expenses of this action as set forth
above; v1. Award Plaintiff reasonable attorney's fees; vn. Award pre-judgement and post-judgement interest, to the extent allowable by law;
and vn1. Grant Plaintiffother and further relief as this Court finds may be just and proper.
JURY TRIAL DEMANDED Plaintiffs requests a jury on all claims so triable.
Dated: July 15,2016 New York, New York
Respectfully Submitted, MFY LEGAL SERVICES, INC.
B y:~~~~~~~~~~ . Lyn h,
Christ er Fasano, of counsel to eanette Zelhof, Esq. 299 Broadway, 4th Floor New York, NY 10007 Tel: (212) 41 7-3 700
12

Washington v. Caliber Home Loans, Inc. et al, Docket No. 1:16-cv-03948 (E.D.N.Y. Jul 15, 2016), Court Docket
General Information

Court
Federal Nature of Suit Docket Number

United States District Court for the Eastern District of New York; United States District Court for the Eastern District of New York
Consumer Credit[480]
1:16-cv-03948

© 2017 The Bureau of National Affairs, Inc. All Rights Reserved. Terms of Service // PAGE 13

 
 Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 1 of 74 PageID #: 4404

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

---------------------------------------------------------------------- x

JOSEPH WASHINGTON, ST. CLAIR BLACKETT, :

LUCILLE MASON, and MELISSA TROTMAN on

:

behalf of themselves and all others similarly situated, :

:

Plaintiffs,

:

:

-against-

:

:

UNITED STATES DEPARTMENT OF HOUSING

:

AND URBAN DEVELOPMENT, BENJAMIN CARSON :

in his official capacity as secretary of HUD, BRIAN

:

MONTGOMERY in his official capacity as commissioner :

of the Federal Housing Administration, CALIBER HOME :

LOANS, INC., and U.S. BANK TRUST, N.A., as

:

Trustee for LSF9 Master Participation Trust,

:

:

Defendants.

:

---------------------------------------------------------------------- x

REPORT & RECOMMENDATION 16-CV-3948 (ENV) (SMG)

Table of Contents INTRODUCTION ............................................................................................................................... 3 FACTUAL BACKGROUND ................................................................................................................ 4
A. The FHA Mortgage Program ........................................................................................... 5 B. The Note Sale Program .................................................................................................... 7 C. Caliber’s Role as Purchaser and Servicer of the Plaintiffs’ Loans ................................. 9 D. Individual Plaintiffs........................................................................................................ 10
1. Plaintiff Joseph Washington ....................................................................................... 10 2. Plaintiff St. Clair Blackett .......................................................................................... 12 3. Plaintiff Lucille Mason ............................................................................................... 14 4. Plaintiff Melissa Trotman ........................................................................................... 16 E. Class Allegations............................................................................................................ 17 DISCUSSION................................................................................................................................... 17 I. Justiciability......................................................................................................................... 18 A. Standing.......................................................................................................................... 18 1. Injury-in-Fact.............................................................................................................. 23 2. Traceability ................................................................................................................. 28 3. Redressability ............................................................................................................. 31

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 2 of 74 PageID #: 4405
B. Mootness......................................................................................................................... 37 II. HUD’s Motion to Dismiss for Failure to State a Claim ................................................... 40
A. Count II: Segregated Communities Under the Fair Housing Act .................................. 40 1. Legal Standard ............................................................................................................ 40 2. Application ................................................................................................................. 41
B. Count III: Disparate Impact Under the Fair Housing Act............................................. 43 1. Legal Standard ............................................................................................................ 43 2. Application ................................................................................................................. 45
C. Count IV: Breach of Implied-in-Fact Contract.............................................................. 50 1. Legal Standard ............................................................................................................ 50 2. Application ................................................................................................................. 51
III. Plaintiffs’ Motion to Amend ........................................................................................... 57 A. Relevant Facts ................................................................................................................ 58 B. Legal Standards Governing Motions for Leave to Amend ............................................. 60 C. Standing.......................................................................................................................... 61 D. Timeliness....................................................................................................................... 63 1. Independent Timeliness of Proposed Count IX.......................................................... 64 2. Relation Back Under Rule 15(c) ................................................................................ 68 3. Failure to Join Indispensable Parties .......................................................................... 71
CONCLUSION ................................................................................................................................ 72
2

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 3 of 74 PageID #: 4406
GOLD, STEVEN M., U.S. Magistrate Judge:
INTRODUCTION
Plaintiffs Joseph Washington, St. Clair Blackett, Lucille Mason, and Melissa Trotman
(collectively, “plaintiffs”) financed home purchases with mortgages insured by the Federal
Housing Administration (“FHA”) and later defaulted. Plaintiffs bring this action challenging
various actions taken by defendants in response to their defaults that, they claim, unlawfully altered their status as FHA mortgagors. See First Amended Complaint (“FAC”), Dkt. 11.1
Specifically, plaintiffs challenge the manner in which the United States Department of Housing and Urban Development and its officers named in their official capacity2 (together, “HUD”)
designed and implemented a “note sale program” that allowed HUD to take title to and
ultimately sell their notes and mortgages—stripped of certain benefits and protections previously
afforded to them as FHA mortgagors—to a private entity, Caliber Home Loans, Inc. (with U.S.
Bank Trust, N.A. as Trustee for LSF9 Master Participation Trust, the “Caliber defendants”).
HUD’s program, they contend, denied them due process, breached an implied contract, and
violated the Fair Housing Act.
HUD has moved to dismiss the FAC pursuant to Rule 12 of the Federal Rules of Civil
Procedure, and plaintiffs have moved for leave to amend the FAC. United States District Judge
1 The Court uses the following abbreviations herein: First Amended Complaint (“FAC” or “complaint”), Dkt. 11; Mem. of Law in Supp. of the Federal Defs.’ Mot. to Dismiss Pls.’ Am. Compl. (“Defs.’ Mem.”), Dkt. 56-5; Pls.’ Mem. of Law in Opp’n to Federal Defs.’ Mot. (“Pls.’ Mem.”), Dkt. 57; Reply in Supp. of the Federal Defs.’ Mot. to Dismiss (“Defs.’ Reply”), Dkt. 58; Pls.’ Mem. of Law in Supp. of Mot. for Leave to File Second Am. Compl. (“Pls.’ Rule 15 Mem.”), Dkt. 68; Federal Defs.’ Opp’n to Pls.’ Mot. for Leave to File Second Am. Compl. (“Defs.’ Rule 15 Mem.”), Dkt. 70; Pls.’ Reply Mem. of Law in Further Supp. of Mot. for Leave to File Second Am. Compl. (“Pls.’ Rule 15 Mem.”), Dkt. 71; Tr. of Civil Cause for Hr’g dated Mar. 6, 2018 (“Tr.”), Dkt. 73; Federal Defs.’ Letter dated Mar. 13, 2018 (“Defs.’ Mar. 13 Letter”), Dkt. 74; Pls.’ Letter dated Mar. 19, 2018 (“Pls.’ Mar. 19 Letter”), Dkt. 76. 2 The FAC names Julián Castro as secretary of HUD and Edward Golding as commissioner of the FHA. The caption above reflects the current holders of these offices, Benjamin Carson and Brian Montgomery, respectively. See Fed. R. Civ. P. 25(d).
3

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 4 of 74 PageID #: 4407
Eric N. Vitaliano referred the motions to me for Report and Recommendation by orders dated October 5, 2017 and January 22, 2018, respectively. Oral argument on the motions was held on March 6, 2018. See Min. Entry dated Mar. 6, 2018, Dkt. 72; Tr., Dkt. 73. The parties subsequently submitted letter briefs in further support of their respective positions. See Defs.’ Mar. 13 Letter; Pls.’ Mar. 19 Letter.
For the reasons described below, I respectfully recommend that HUD’s motion to dismiss be granted and that plaintiffs’ motion for leave to amend be denied.3
FACTUAL BACKGROUND4 Plaintiffs are African-American homeowners living in predominantly African-American neighborhoods in New York City who took out FHA-insured, mortgage-backed loans to finance their purchases of homes. FAC ¶¶ 17–20, 196–197, 260–261, 301–302, 343–345. As described in greater detail below, an FHA mortgage loan provides a borrower certain benefits both during the course of the loan and in the event of default. Each of the plaintiffs eventually fell into default. FAC ¶¶ 204, 267, 308, 351. The notes and mortgages of three of the plaintiffs were then sold pursuant to a HUD note sale program (“NSP”),5 under which the agency took title to their loans, bundled them with others from around the country, and sold them to private entities such as, in this case, the Caliber defendants. FAC ¶¶ 6, 221–222, 277, 320. As a result, these plaintiffs are no longer entitled to the benefits they
3 The FAC also asserts claims against the Caliber defendants for violating the Fair Housing Act and state and federal consumer protection laws. The Caliber defendants moved to dismiss, Dkt. 59, and for partial summary judgment, Dkt. 79, 81. However, the Caliber defendants and plaintiffs have since reached agreements in principle to resolve plaintiffs’ claims. Letter of Benjamin R. Nagin dated Apr. 22, 2019, Dkt. 105. 4 The facts set forth in the text are drawn primarily from the First Amended Complaint. 5 HUD states that the NSP is properly referred to as the Distressed Asset Stabilization Program (“DASP”). Defs.’ Mem. at 1. For ease of reference, the term “note sale program” and abbreviation NSP are used in this Report and are intended as references to DASP.
4

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 5 of 74 PageID #: 4408
once enjoyed as FHA mortgagors. FAC ¶ 6. Rather, defendant Caliber Home Loans, Inc. (“Caliber”) began servicing each loan after the sale and, in that role, became responsible for considering plaintiffs’ applications for loan modifications and for sending plaintiffs certain notices required by statute and regulation. Caliber, though, is neither insured by the FHA nor subject to the requirements and limitations imposed on FHA-insured lenders.
A. The FHA Mortgage Program Congress has tasked HUD with implementing “the goal of a decent home and a suitable living environment for every American family, thus contributing to the development and redevelopment of communities and to the advancement of the growth, wealth, and security of the Nation.” 42 U.S.C. § 1441. One means by which HUD seeks to achieve this goal is by insuring lenders who offer loans to borrowers with less wealth and lower credit scores than would ordinarily be required to obtain a loan to purchase a home. FAC ¶¶ 30–31. The insurance is provided through the FHA, a part of HUD. FAC ¶¶ 28, 30. If a borrower defaults on an insured loan and the lender proceeds to foreclosure, HUD will pay any remaining unpaid principal and a portion of the delinquent interest to the lender. FAC ¶ 32. With some of the risk of default and eventual foreclosure thus covered, lenders are willing to offer loans to less credit-worthy borrowers who would otherwise be unable to obtain the financing required to purchase a home. The FHA maintains the Mutual Mortgage Insurance Fund (the “Insurance Fund”), which is the source of the funds it uses to pay lenders any principal remaining due and that portion of the delinquent interest covered by the insurance after a foreclosure sale. FAC ¶ 33. Homebuyers contribute to the fund though an Up-Front Mortgage Insurance Premium (“UFMIP”) paid as a percentage of their FHA-insured loan amount at closing. FAC ¶ 34. Homeowners also pay an Annual Mortgage Insurance Premium (“MIP”) in an amount that is spread over twelve monthly
5

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 6 of 74 PageID #: 4409
payments and billed in a homeowner’s monthly mortgage statement. FAC ¶ 35. Both the UFMIP and the MIP are paid to the loan’s servicer, who then remits payment to HUD; that is, the homeowner does not pay the premium directly to HUD. See 24 C.F.R. § 203.259.
An FHA-insured mortgage affords a borrower several benefits not typically made available to individuals who obtain traditional mortgage financing in the private market. Plaintiffs specifically identify five benefits that FHA-insured mortgages provide a borrower.
First, as described above, FHA loans are made available to borrowers with less ability to make down payments and lower credit scores than those typically required by private lenders. FAC ¶¶ 43–44. Individuals who would otherwise be unable to afford a home are thus able to obtain financing allowing them to purchase one.
Second, when a borrower defaults or is likely to default, an FHA-insured lender must engage in pre-foreclosure loss mitigation assistance actions designed to provide the borrower an opportunity to avoid foreclosure. FAC ¶ 45; see also 12 U.S.C. § 1715u. HUD has issued regulations and guidance that together set out procedures that FHA-insured loan servicers must follow before foreclosing on a defaulted loan. See FAC ¶ 47. For example, the servicer must not consider a payment late until fifteen days after it was due; at specified points, must attempt to contact a delinquent borrower by phone, through the mail, and in person to discuss loss mitigation options; must notify a borrower about the availability of HUD-approved counseling agencies; and must send the defaulting borrower a HUD-created pamphlet entitled “Save Your Home - Tips to Avoid Foreclosure.” FAC ¶¶ 48–52.
Third, an FHA loan servicer must evaluate a borrower in default to identify appropriate loss-mitigation options within three months of the first missed payment and on a monthly basis thereafter, and may not initiate foreclosure proceedings until three months of payments are
6

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 7 of 74 PageID #: 4410
unpaid and overdue. FAC ¶¶ 53–54; see also 24 C.F.R. §§ 203.606(a). Common loss mitigation options include mortgage modifications “lowering the interest rate, extending the term, forbearing a portion of the unpaid principal balance so that it comes due at the end of the mortgage, or a combination of these options.” FAC ¶ 59. Another common modification is a period of special forbearance during which payments are reduced or suspended while a homeowner goes through a short-term hardship, such as a period of disability or unemployment. FAC ¶ 62.
Fourth, FHA borrowers who have been current on their mortgage for at least one year are eligible for what is referred to as a “Streamline Refinance” benefit. FAC ¶¶ 71–76. This benefit allows homeowners to refinance their loan when interest rates go down, with minimal documentation and without the need for an appraisal.
Fifth, and finally, FHA-insured mortgages are freely assumable by any other buyer who meets FHA’s minimum credit score requirement. FAC ¶ 77. As the operative complaint asserts, “[t]he ability to sell the property more quickly, and potentially earn a premium, can enable delinquent FHA homeowners to avoid foreclosure.” FAC ¶ 80.
B. The Note Sale Program The 2008 financial crisis severely depleted the Insurance Fund; between 2007 and 2009, the amount held by the Insurance Fund declined from $21 billion to $4 billion and its capital reserves fell far below a congressionally mandated floor. FAC ¶¶ 98–99. In response, HUD implemented a program to sell off delinquent mortgages that it determined to be beyond rescue. FAC ¶ 100. Several different specific programs fall within the general description of the NSP, but certain essential features are common to all of them. See FAC ¶¶ 101–122. The NSP allows a mortgage servicer to submit an insurance claim prior to foreclosure on a defaulted loan. FAC
7

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 8 of 74 PageID #: 4411
¶¶ 106–107. A servicer may submit such a claim when a loan has been in default for at least six months, and the servicer has engaged in all HUD-required loss mitigation actions and determined that there is no home-saving solution available. FAC ¶ 117. HUD relies upon a certification from the mortgage servicer that these preconditions have been satisfied and does not independently verify a servicer’s representation that it properly and completely engaged in loss mitigation. FAC ¶¶ 118–119. Homeowners are not notified in advance that their loans will be sold pursuant to the NSP. FAC ¶ 128.
A servicer who makes a claim through the NSP recovers from HUD the remaining unpaid principal on the loan as well as a HUD-determined number of months of delinquent interest. FAC ¶¶ 108–109. Title to the note and mortgage is then transferred to HUD, which pools notes and mortgages from around the country and auctions off the pool. FAC ¶¶ 120, 122. The notes reflecting the indebtedness of plaintiffs Washington, Blackett, and Mason were each sold as part of the NSP in or about June or July of 2014. FAC ¶¶ 154, 221–222, 277, 334.
A borrower whose note has been sold in the NSP no longer has access to the benefits associated with holding an FHA-insured mortgage. FAC ¶ 127. For example, until April of 2015, HUD did not require purchasers who acquired loans through the NSP to offer homeowners any specific loan modifications, or any modification program at all. FAC ¶ 137. On April 24, 2015, though, HUD published a press release indicating that “[i]n an effort to better serve homeowners looking to avoid foreclosure, loan servicers will now be required . . . to evaluate all borrowers for the Home Affordable Modification Program (HAMP) or a similar loss mitigation program.” FAC ¶ 137; Press Release, U.S. Dep’t of Hous. & Urban Dev., HUD Announces
8

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 9 of 74 PageID #: 4412
Changes to Distressed Asset Stabilization Program (April 24, 2015), https://archives.hud.gov/news/2015/pr15-048.cfm.6
C. Caliber’s Role as Purchaser and Servicer of the Plaintiffs’ Loans LSF9 Master Participation Trust (“Lone Star”) is a private firm that purchased the pooled mortgages included in HUD’s June 11, 2014 sale. FAC ¶¶ 153–154. Lone Star owns Caliber, which services the mortgages Lone Star has purchased from HUD. FAC ¶ 157. When plaintiffs whose mortgages were sold in 2014 received Notices of Ownership Change mandated by the Truth in Lending Act (“TILA”), the notices identified the new owner of their notes as U.S. Bank Trust, as trustee for LSF9 Master Participation Trust, and added that the transfer of ownership “does not affect any term or condition of the mortgage instruments or the servicing of your mortgage loan.” FAC ¶¶ 159–161. Plaintiffs contend, however, that the terms or conditions of the sold mortgages did in fact change, because Caliber will not consider them for a HAMP or HAMP-like loan modification and in fact represents that it offers no such modification. FAC ¶¶ 162–163. Instead, Caliber offers these borrowers only two types of modifications, and each creates an interest-bearing balloon payment due at the end of the mortgage, maintains the term of the note, does not preserve the assumability of the mortgage, charges an above-market interest rate for a period of time, and eventually increases monthly payments by $500 to $1,600. FAC ¶¶ 166–175.
6 The FHA’s Single Family Housing Policy Handbook (“Handbook”) defines HAMP as “a Loss Mitigation Option using a Loan Modification and/or Partial Claim to allow the Mortgage to be reinstated, by establishing an affordable monthly payment and providing for principal deferment as needed.” Fed. Hous. Admin., FHA Single Family Housing Policy Handbook, v. 4000.1 (2017), https://www.allregs.com/tpl/Home/GetIndex?Id=62ab7b5e-461345e7-b5a8-dddb8f34a66c. Plaintiffs explain that a “partial claim” is a claim made by a mortgage servicer, who may request that HUD pay as much as 30% of the unpaid principal balance to the servicer so that an affordable, modified monthly payment can be achieved. The partial claim amount is not forgiven but becomes a second mortgage that the homeowner owes HUD. The amount does not bear interest and does not become due until the end of the life of the modified mortgage. FAC ¶ 65.
9

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 10 of 74 PageID #: 4413
Prior to 2015, HUD did not impose any loss mitigation requirements on NSP purchasers. FAC ¶¶ 137–140. Any such requirement, plaintiffs acknowledge, would be imposed only in the contract a purchaser entered into with HUD, and the contract HUD entered into with Lone Star for the 2014 Note Sale—which included mortgages belonging to Washington, Blackett, and Mason—contains no requirement that the purchaser offer a HAMP or HAMP-like modification. FAC ¶ 140.
D. Individual Plaintiffs 1. Plaintiff Joseph Washington
Joseph Washington purchased a home in St. Albans, Queens on October 31, 2011. FAC ¶ 196. Washington financed the purchase with an FHA-insured mortgage in the amount of $326,987 and paid a UFMIP of about 1%. FAC ¶¶ 197, 199. At the time, his monthly principal and interest payments were $1,656.80; with the addition of taxes, homeowner’s insurance, and an MIP of $307.99, Washington’s monthly payment totaled $2,281.47. FAC ¶¶ 200–201. His loan servicer at the time was LoanCare Servicing Center, Inc. (“LoanCare”). FAC ¶ 202.
Washington defaulted on the loan about two years later. FAC ¶ 204. LoanCare neither steered him toward free HUD-approved counseling services, sent him HUD’s pamphlet entitled “Save Your Home - Tips to Avoid Foreclosure,” nor contacted him to arrange a personal meeting. FAC ¶¶ 206–208. Washington then hired an unnamed company to negotiate a loan modification on his behalf. FAC ¶ 209. LoanCare responded by informing Washington that he did “not meet Investor requirements,” and so did not qualify for loss mitigation assistance. FAC ¶ 210. LoanCare’s letter did not mention FHA’s loss mitigation programs and did not explain why Washington was denied the opportunity to participate in one. FAC ¶ 210.
10

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 11 of 74 PageID #: 4414
When Washington called LoanCare to learn more about his request, he learned that LoanCare had never heard of the unnamed company he had engaged to negotiate on his behalf, and he stopped working with that company. FAC ¶¶ 210–212. Around the same time, LoanCare offered Washington a modified payment plan under which his new payment would have been virtually identical to his old one and explained that he did not qualify for a HAMP modification. FAC ¶ 213. Because the required monthly payment was about the same, the proposed modification was of no real help, and Washington therefore declined the offer and submitted another modification application two months later. FAC ¶¶ 214–215.
Although LoanCare eventually offered Washington a forbearance plan that would have lowered his monthly payments by about $800, Washington was in fact ineligible for that plan under applicable HUD regulations. FAC ¶¶ 217–218. Then, in a letter dated August 25, 2014, Caliber informed Washington that his loan had been sold to Lone Star and that the “assignment, sale or transfer of the mortgage loan does not affect any term or condition of the mortgage instruments or the servicing of your mortgage loan.” FAC ¶¶ 221, 225.
Shortly thereafter, Washington submitted a new loss-mitigation application, this time to Caliber. FAC ¶ 226. Washington also began making payments consistent with the forbearance plan that LoanCare had offered before Caliber bought Washington’s note, and Caliber accepted those payments. FAC ¶ 228. On March 6, 2015, Caliber sent Washington another letter, this time offering a Trial Period Plan that would require three monthly payments of $1,706.87; the letter did not indicate whether Caliber had reviewed Washington for any other modifications. FAC ¶¶ 232–233. Washington made those payments, and on July 6, 2016, Caliber informed him that he was approved for a “5 Year Interest Only” modification. FAC ¶¶ 236–237.
11

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 12 of 74 PageID #: 4415
Under the terms of this modification, which Washington and Caliber eventually both signed, the total repayment period of Washington’s note remained unchanged (twenty-one more years), but Washington was permitted to make interest-only payments of $1,280.99, based on a 4.8% interest rate, for five years. FAC ¶¶ 237, 244. After five years, Washington’s payment will again include a principal component, and the interest rate will drop to 4.5%, resulting in monthly payments of $1,933.09, with a balloon payment of $30,342 due at the end of the loan period in 2041. FAC ¶¶ 239, 241. Washington is in his mid-fifties now and will be seventyeight when the balloon payment becomes due. FAC ¶¶ 240–241.
Washington has never been the subject of a foreclosure action. Tr. at 109:10–13. Washington alleges, however, that had Caliber offered him a HAMP-like modification rather than the modification it did offer, Washington’s loan term would have been thirty years, his interest rate would have been fixed at 4.5% for the remaining life of the loan, and his monthly payment would have remained fixed at $1,239.25. FAC ¶ 248. Under this modification, Washington would have been subject to a Partial Claim of $94,999.13 on which he would neither make payments nor accrue interest, but which he would be required to repay in a lump sum at the end of the loan term. FAC ¶¶ 246, 248.
2. Plaintiff St. Clair Blackett St. Clair Blackett purchased a home in Laurelton, Queens, on June 29, 2011. FAC ¶ 260. Blackett took out a thirty-year FHA-insured mortgage for $384,975 and paid a UFMIP of about 1%. FAC ¶¶ 261–263. At the time, his monthly principal and interest payments were $2,125.85; with the addition of taxes, homeowner’s insurance, and an MIP of $362.94, Blackett’s monthly payment totaled $2,861.50. FAC ¶¶ 264–266. His loan servicer at the time was Continental Home Loans, Inc. (“Continental”). FAC ¶ 261.
12

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 13 of 74 PageID #: 4416
Blackett defaulted on the loan approximately nine months later. FAC ¶ 267. At that point, Continental neither informed Blackett of any opportunity to modify his mortgage, alerted him to the existence of free housing counseling agencies, invited him to apply for a modification, sent him HUD’s pamphlet entitled “Save Your Home - Tips to Avoid Foreclosure,” nor contacted him to arrange a personal meeting. FAC ¶¶ 268–270. Blackett conducted his own internet research and learned that he could apply for a modification that might let him keep his home, and also began working with a consultant to apply for one. FAC ¶¶ 271–272.
On August 2, 2013, Continental sent Blackett a letter containing a 90-day pre-foreclosure notice and a list of housing counseling agencies. FAC ¶ 273. Blackett continued his efforts to obtain a modification throughout the following year, but Continental brought a foreclosure action against Blackett while that process was underway. FAC ¶¶ 274–276.
Blackett’s note was sold in HUD’s June 11, 2014 Note Sale and acquired by Lone Star; as a result, Caliber became Blackett’s loan servicer. FAC ¶ 277. In December of 2014, Caliber offered and Blackett accepted a standard modification, which lowered Blackett’s monthly principal and interest payment by about $100 for five years, but subjected him to a $174.93 increase thereafter. FAC ¶¶ 264, 282, 284. A little over a year after accepting the modification, Blackett began missing payments again, and on June 22, 2016 Caliber sent a new modification offer, which Blackett accepted on June 24, 2016. FAC ¶¶ 285, 291.
Under this second modification, Blackett makes interest-only payments of $1,281.77 for five years at a rate of 4.125%. FAC ¶ 285. At the end of the five-year period, Blackett’s payments will again include a principal component and his interest rate will revert to the original note rate of 5.25%, resulting in monthly payments that will total $2,512.61. FAC ¶¶ 286–287. At the end of the life of the loan, in 2041, another $63,907 will be due as a balloon payment.
13

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 14 of 74 PageID #: 4417
FAC ¶ 290. Moreover, under the terms of this modification, Blackett may not sell his home and allow the buyer to assume his mortgage. FAC ¶ 292. At oral argument, plaintiffs clarified that, presumably as a result of the modification, Blackett is no longer subject to active foreclosure proceedings. Tr. at 109:21–25.
The complaint alleges that, had Caliber offered Blackett a HAMP-like modification, his loan term would have been thirty years; his interest rate would have been lower; and his monthly principal and interest payment would have been $1,701.85. FAC ¶¶ 281, 293. Blackett also would have been subject to a Partial Claim of $106,614, on which he would neither make payments nor accrue interest, but which he would be required to repay in a lump sum at the end of the loan term. FAC ¶¶ 281, 293.
3. Plaintiff Lucille Mason On January 20, 2010, Lucille Mason refinanced the mortgage on her three-family home in Canarsie, Brooklyn. FAC ¶ 302. Mason took out a thirty-year FHA-insured mortgage in the amount of $529,627 and paid a UFMIP of about 1.75%. FAC ¶¶ 302–303. At the time, her monthly principal and interest payments were $2,843.15; with the addition of taxes, homeowner’s insurance, and an MIP of $242.75, Mason’s monthly payment totaled $3,478.39. FAC ¶¶ 304–305. Her loan servicer at the time was J.P. Morgan Chase (“Chase”). FAC ¶ 306. Mason began to miss mortgage payments in August of 2012. FAC ¶ 308. She later tried to submit her missed payments to Chase, but Chase sent her a letter on January 8, 2013 rejecting at least some of those payments and sending back the money she had attempted to pay. FAC ¶ 309. Although Mason was now in default, Chase neither sent her HUD’s pamphlet entitled “Save Your Home - Tips to Avoid Foreclosure,” contacted her to arrange a personal meeting,
14

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 15 of 74 PageID #: 4418
informed her in writing of any opportunity to modify her mortgage, nor alerted her to the existence of free housing counseling agencies. FAC ¶¶ 310–312.
Mason began working with a constituent advocate she found through her councilman’s office, who informed her of various modification options. In March of 2013, the advocate submitted a modification application to Chase on Mason’s behalf. FAC ¶¶ 313–314.
Mason never received a decision from Chase on her modification application. FAC ¶ 317. On April 17, 2013, while that application was pending, Chase brought a foreclosure action against Mason in the Supreme Court of New York, Kings County. FAC ¶ 315. After her note was sold in the June 11, 2014 Note Sale, Caliber became her new mortgage servicer and continued prosecuting the foreclosure action. FAC ¶ 320.
In February of 2016, Mason submitted another modification application to Caliber, and Caliber offered her a three-month interest-only Trial Period Plan. FAC ¶¶ 323–324. The plan is comparable to what Caliber offered Washington, and Mason expects that the final modification offered by Caliber would provide for five years of interest-only payments and include terms comparable to those offered to Washington and Blackett. FAC ¶¶ 325–329. Mason rejected Caliber’s offer. FAC ¶ 330. Finally, like Washington and Blackett, Mason met with an attorney in June of 2016 who advised her that her mortgage servicers had misled her and should have offered her more favorable modification options. FAC ¶ 333. At oral argument, however, plaintiffs noted that at some point since filing the complaint in this action, Mason “has in fact received a HAMP-like modification.” Tr. at 118:1–2. Moreover, as a result of that modification, the foreclosure action against Mason has been dismissed. Tr. at 109:14–16.
15

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 16 of 74 PageID #: 4419
4. Plaintiff Melissa Trotman After Melissa Trotman and her sister inherited their parents’ St. Albans, Queens home in 2008, Trotman decided to take out a thirty-year FHA-insured mortgage to purchase her sister’s interest. FAC ¶¶ 344–345. On March 26, 2010, Trotman procured an FHA-insured mortgage in the amount of $167,850 and paid a UFMIP of about 1.72%. FAC ¶¶ 345–346. At the time, her monthly principal and interest payments were $953.03; with the addition of taxes, homeowner’s insurance, and an MIP of $68.31, Trotman’s monthly payment totaled $1361.61. FAC ¶¶ 347– 348. The loan was serviced by Hartford Funding, Ltd. (“Hartford”). FAC ¶ 349. Trotman eventually fell behind on her mortgage payments and applied for an FHA mortgage modification with Hartford. FAC ¶¶ 350–352. On or about October 30, 2014, Trotman entered into a permanent modification,7 the terms of which increased her principal balance by capitalizing arrears, lowered her interest rate, increased her monthly principal and interest payment, and extended the term of her loan to thirty years. FAC ¶ 354. She continues to pay a monthly MIP, now in an increased amount of $84. FAC ¶ 355. Trotman eventually also fell behind on the payments required pursuant to her 2014 modification. FAC ¶ 356. Although she applied to Hartford for a new modification, Hartford brought a foreclosure action against her on September 10, 2015 in the Supreme Court of New York, Queens County. FAC ¶ 358. At oral argument, plaintiffs noted that since the First Amended Complaint was filed, Trotman has caught up on her note and is now no longer in default, and that the foreclosure action filed against her has been discontinued. Tr. at 110:3–15.
7 The FAC notes that, for reasons unknown to Trotman, LoanCare signed her modification rather than Hartford, even though her monthly statements had always come from Hartford. FAC ¶ 353. The FAC further alleges that in a settlement conference in Trotman’s foreclosure action, Hartford’s attorney informed her that modification documents should be submitted to a different entity named Cenlar. FAC ¶ 360. These representations are somewhat confusing, but they are not material to the pending motions.
16

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 17 of 74 PageID #: 4420
Plaintiffs acknowledge that Trotman was ineligible for another modification until August of 2016, and that her note is now ineligible for sale because she is not in default. FAC ¶ 363; Pls.’ Mar. 19 Letter at 1.
E. Class Allegations Pursuant to Rule 23 of the Federal Rules of Civil Procedure, plaintiffs bring this action on behalf of both themselves and a putative class consisting of “all African-American New York City homeowners whose mortgages were auctioned through one of HUD’s Note Sales or who are at risk of having their mortgage sold through one of HUD’s Note Sales.” FAC ¶ 369. Plaintiffs also identify a putative overlapping subclass consisting of “all African-American New York City homeowners whose mortgages were auctioned to Lone Star Defendants or who are at risk of having their mortgages sold to Caliber Defendants through one of HUD’s Note Sales.” FAC ¶ 373.
DISCUSSION To survive a motion to dismiss, a complaint must contain sufficient factual material that, if accepted as true, would “state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. When deciding a motion brought under Rule 12(b), a court may consider “(1) facts alleged in the complaint and documents attached to it or incorporated in it by reference, (2) documents ‘integral’ to the complaint and relied upon in it, even if not attached or incorporated by reference, (3) documents or information contained in defendant’s motion papers if plaintiff has knowledge or possession of the material and relied on it in framing the complaint, . . . and (5) facts of which
17

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 18 of 74 PageID #: 4421
judicial notice may properly be taken under Rule 201 of the Federal Rules of Evidence.” Abiuso v. Donahoe, 2015 WL 3487130, at *3 (E.D.N.Y. June 3, 2015) (citation omitted); see also Carlin v. Davidson Fink LLP, 852 F.3d 207, 212 (2d Cir. 2017) (noting that a court may also consider documents attached to a complaint or incorporated in it by reference).
I. Justiciability HUD raises two issues related to justiciability. First, in its original briefing, HUD
challenges plaintiffs’ standing to pursue their claims. Defs.’ Mem. at 12–22. Second, after certain facts came to light during oral argument on the pending motions, HUD argued that plaintiffs’ claims are now moot. See generally Tr.; Defs.’ Mar. 13 Letter; Pls.’ Mar. 19 Letter. I address these justiciability issues in turn, beginning with standing.
A. Standing Standing is a threshold issue that must be resolved before reaching the merits of a claim because “putative plaintiffs lacking standing are not entitled to have their claims litigated in federal court.” Lower E. Side People’s Fed. Credit Union v. Trump, 289 F. Supp. 3d 568, 575 (S.D.N.Y. 2018) (quoting Shearson Lehman Hutton, Inc. v. Wagoner, 944 F.2d 114, 117 (2d Cir. 1991)). “If a dispute is not a proper case or controversy, the courts have no business deciding it, or expounding the law in the course of doing so.” Town of Chester, New York v. Laroe Estates, Inc., 137 S. Ct. 1645, 1650 (2017) (quoting DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 341 (2006)). Accordingly, “when a defendant moves to dismiss both for lack of subject matter jurisdiction and on other grounds . . . the Court must address the issue of subject matter jurisdiction first.” Thompson v. Donovan, 2014 WL 5149037, at *5 (S.D.N.Y. Oct. 14, 2014). “To satisfy the irreducible constitutional minimum of standing, a plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant,
18

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 19 of 74 PageID #: 4422
and (3) that is likely to be redressed by a favorable judicial decision.” John v. Whole Foods Mkt. Grp., Inc., 858 F.3d 732, 736 (2d Cir. 2017) (internal quotation marks omitted) (quoting Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016)). Each of these three elements must be met; “a failure of any of the three elements deprives a plaintiff of standing to maintain an action in federal court.” Trump, 289 F. Supp. 3d at 575 (quoting Dickerson v. Feldman, 426 F. Supp. 2d 130, 134 (S.D.N.Y. 2006)).
First, “[t]o establish injury in fact, a plaintiff must show that he or she suffered ‘an invasion of a legally protected interest’ that is ‘concrete and particularized.’” Spokeo, 136 S. Ct. at 1548 (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992)). To be particularized, “the injury must affect the plaintiff in a personal and individual way.” Lujan, 504 U.S. at 560 n.1. To be concrete, an injury must be real, not abstract; put another way, “it must actually exist.” Spokeo, 136 S.Ct. at 1548. “Although tangible injuries are perhaps easier to recognize, . . . intangible injuries can nevertheless be concrete.” Id. at 1549.
To rise to the level of an injury-in-fact sufficient for standing, a plaintiff’s injury must be “actual or imminent, not conjectural or hypothetical.” Id. at 1548 (quoting Lujan, 504 U.S. at 560). “This does not mean, however, that the risk of real harm cannot satisfy the requirement of concreteness.” Id. at 1549 (citing Clapper v. Amnesty Int’l USA, 568 U.S. 398, 410 (2013)). “An allegation of future injury may suffice if the threatened injury is ‘certainly impending,’ or there is a ‘substantial risk’ that the harm will occur.” Trump, 289 F. Supp. 3d at 575 (quoting Susan B. Anthony List v. Driehaus, 573 U.S. 149, 158 (2014)).
The Second Circuit has recognized that an increased risk of injury may be sufficient to satisfy the injury-in-fact requirement. See, e.g., Nat. Res. Def. Council, Inc. v. U.S. Food & Drug Admin. (NRDC v. FDA), 710 F.3d 71, 83 (2d Cir. 2013), as amended Mar. 21, 2013
19

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 20 of 74 PageID #: 4423
(“‘[I]ncreased health-related uncertainty’ . . . [is] a form of injury that this Court has recognized as sufficient to constitute an injury in fact.” (quoting N.Y. Pub. Interest Research Grp. v. Whitman, 321 F.3d 316, 325 (2d Cir. 2003))). Two types of exposure allegations may be sufficient to establish injury-in-fact: “(1) ‘uncontested exposure to a potentially harmful substance,’ . . . and (2) ‘potential exposure to an undisputedly dangerous contaminant.’” Id. (quoting Baur v. Veneman, 352 F.3d 625, 634 n.8 (2d Cir. 2003)). Because exposure-to-risk cases depend on statistical proofs to demonstrate the increased threat of harm, “allegation of a credible risk may be sufficient at the pleading stage without further factual confirmation or quantification of the precise risk at issue. Adopting a more stringent view of the injury-in-fact requirement . . . would essentially collapse the standing inquiry into the merits.” Baur, 352 F.3d at 642.
By the same token, “it [may be] tempting, from the perspective of judicial efficiency, to treat a meritless claim—one in which a plaintiff’s theory of liability comes up short—as a claim in which the plaintiff has not been injured in the first instance. But where the legislature has created a framework that offers injured plaintiffs an opportunity to seek redress, ‘[courts] must avoid conflating the requirement for an injury in fact with the validity of [a plaintiff’s] claim’ to constrain the scope of judicial authority and ensure that legislative decisions are left to the legislature.” Dubuisson v. Stonebridge Life Ins. Co., 887 F.3d 567, 573–74 (2d Cir. 2018) (third alteration in original) (citation omitted).
The second showing required for standing is that the injury complained of be fairly traceable to the challenged conduct of the defendant. To establish that an injury is “fairly traceable” to a defendant’s conduct, the plaintiff must allege a causal connection that is not severed by “the independent action of some third party not before the court.” Carter v.
20

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 21 of 74 PageID #: 4424
HealthPort Techs., LLC, 822 F.3d 47, 55 (2d Cir. 2016) (quoting Lujan, 504 U.S. at 560). The requirement of traceability does not impose “an onerous standard” but rather one even “lower than that of proximate causation.” Id. at 56 (citing Rothstein v. UBS AG, 708 F.3d 82, 91–92 (2d Cir. 2013)). Injuries may be fairly traced even where a defendant’s conduct harms another person only indirectly, and even when a third party’s conduct also contributed to the harm. See id. at 55–56 (“A defendant’s conduct that injures a plaintiff but does so only indirectly, after intervening conduct by another person, may suffice for Article III standing.”); see also Nat. Res. Def. Council v. Nat’l Highway Traffic Safety Admin. (NRDC v. NHTSA), 894 F.3d 95, 104 (2d Cir. 2018) (“[F]or standing purposes, petitioners need not prove a cause-and-effect relationship with absolute certainty; substantial likelihood of the alleged causality meets the test. This is true even in cases where the injury hinges on the reactions of the third parties . . . to the agency’s conduct.” (quoting Competitive Enter. Inst. v. Nat’l Highway Traffic Safety Admin., 901 F.2d 107, 113 (D.C. Cir. 1990))). If “the defendants have engaged in conduct that may have contributed to causing the injury, it would be better to recognize standing.” NRDC v. FDA, 710 F.3d at 85.
With respect to the final element, redressability, “it must be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.” Carter, 822 F.3d at 55 (quoting Lujan, 504 U.S. at 560–61); see also Spokeo, 136 S. Ct. at 1547 (“[A] plaintiff must have . . . suffered an injury . . . that is likely to be redressed by a favorable judicial decision.”)
Plaintiffs bear the burden of establishing the three elements of standing discussed above and, at the pleading stage, must “clearly allege facts demonstrating each element.” Ross v. AXA Equitable Life Ins. Co., 680 F. App’x 41, 44 (2d Cir. 2017) (summary order) (quoting Spokeo, 136 S. Ct. at 1547); accord Residents & Families United to Save Our Adult Homes v. Zucker,
21

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 22 of 74 PageID #: 4425
2018 WL 1175152, at *4 (E.D.N.Y. Mar. 6, 2018), appeal dismissed per stipulation, 2018 WL 3454963 (2d Cir. July 9, 2018). Still, “[a]t the pleading stage, general factual allegations of injury resulting from the defendant’s conduct may suffice, for on a motion to dismiss we presum[e] that general allegations embrace those specific facts that are necessary to support the claim.” Carter 822 F.3d at 56 (quoting Lujan, 504 U.S. at 561); see also Harry v. Total Gas & Power N. Am., Inc., 889 F.3d 104, 110–11 (2d Cir. 2018) (“While the pleading of a cause of action must possess enough heft to show that the pleader is entitled to relief, to plead standing, the pleader need only show that allowing her to raise her claim in federal court would not move so beyond the court’s ken as to usurp the power of the political branches.” (citing Clapper, 568 U.S. at 408)). While a court may require an increased showing from plaintiffs as a case proceeds, general factual allegations suffice at this early stage in litigation because “[f]undamentally, standing simply means that the plaintiff is entitled to walk through the courthouse door and raise his grievance before a federal court.” Baur, 352 F.3d at 643 (internal quotation marks and citation omitted).
When considering a dispute over standing, courts must bear in mind that “standing is not dispensed in gross.” Town of Chester, 137 S. Ct. at 1650 (quoting Davis v. Fed. Election Comm’n, 554 U.S. 724, 734 (2008)). Rather, to proceed, plaintiffs “must demonstrate standing for each claim and form of relief sought.” Carver v. City of New York, 621 F.3d 221, 225 (2d Cir. 2010) (quoting Baur, 352 F.3d at 642 n.15); see also Nicosia v. Amazon.com, Inc., 834 F.3d 220, 239 (2d Cir. 2016) (“For each form of relief sought, a plaintiff ‘must demonstrate standing separately.’” (quoting Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 185 (2000))). Moreover, plaintiffs must establish that they, and not merely members of any putative class described in the FAC, have standing; “[t]hat a suit may be a class action . . . adds
22

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 23 of 74 PageID #: 4426
nothing to the question of standing, for even named plaintiffs who represent a class must allege and show that they personally have been injured, not that injury has been suffered by other, unidentified members of the class to which they belong and which they purport to represent.” Simon v. E. Ky. Welfare Rights Org., 426 U.S. 26, 40 n.20 (1976); accord Dodge v. County of Orange, 103 Fed. App’x 688, 690 (2d Cir. 2004) (summary order).
I now consider whether plaintiffs have established standing to bring each of the claims asserted against HUD in the First Amended Complaint.
1. Injury-in-Fact Counts I and IV of the FAC assert due process and breach of contract claims, respectively, against HUD based upon the sale of plaintiffs’ notes and mortgages pursuant to the NSP. FAC ¶¶ 381–395; 414–422. More specifically, Washington, Blackett, and Mason allege that they were at one time entitled to a variety of benefits as FHA mortgagors, including (1) the opportunity to obtain financing to purchase a home despite lower credit scores and less money available for a down payment than private lenders typically require, FAC ¶¶ 43–44; (2) a “preforeclosure assistance system” whereby mortgage servicers promptly reach out to homeowners who have fallen behind on mortgage payments in an effort to avoid foreclosure, FAC ¶¶ 45–57; (3) a requirement that the FHA-insured mortgage servicer consider various loss mitigation options—including special forbearance, a repayment plan, a standard loan modification, or a HAMP modification—and not commence foreclosure proceedings until three months of mortgage payments are unpaid and overdue, FAC ¶¶ 58–70; (4) a “Streamline Refinance” benefit that affords homeowners the opportunity to refinance after a decrease in interest rates with minimal supporting documentation and without requiring a home appraisal, FAC ¶¶ 71–76; and (5) the ability of a prospective buyer who also meets FHA’s creditworthiness requirements
23

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 24 of 74 PageID #: 4427
to assume the FHA mortgage and all its benefits when purchasing the home from the original mortgagor, and the resulting ability of the original mortgagor to avoid foreclosure by selling the home quickly and possibly at a premium, FAC ¶¶ 77–80.
Plaintiffs allege that these benefits were taken from them as a consequence of the sale of their notes and mortgages pursuant to HUD’s NSP. In their due process claim, with respect to which they seek declaratory and injunctive relief, plaintiffs allege that HUD denied them due process by taking these benefits from them without notice and an opportunity to be heard. FAC ¶¶ 392–395. In their breach of contract claim, with respect to which they seek compensatory damages, plaintiffs contend that HUD breached an implied-in-fact contract when it deprived them of the benefits they enjoyed as FHA mortgagors. FAC ¶¶ 420–422.
While plaintiffs may have fully realized some of the benefits of their status as FHA mortgagors prior to the sale of their notes and mortgages, they allege that they were stripped of others. For example, plaintiffs’ mortgages were freely assumable prior to being sold but not after. In addition, as set forth in detail above, Washington, Blackett, and Mason allege that the loan modifications they obtained after their notes and mortgages were sold have more onerous terms and require higher monthly payments than the modifications they claim they were entitled to pursuant to their original FHA mortgages. These plaintiffs contend that, as a result, their risk of defaulting in the future was significantly increased by the sales of their notes and mortgages. This alone suffices for standing, because “threatened harm in the form of an increased risk of future injury may serve as injury-in-fact for Article III standing purposes,” provided the risk is real and not merely speculative. Baur, 352 F.3d at 633; cf. Preserve at Connetquot Homeowners Ass’n v. Costco Wholesale Corp., 2019 WL 337093, at *6 (E.D.N.Y. Jan. 28, 2019) (remarking that injury-in-fact encompasses future harms but concluding that plaintiff, who merely alleged
24

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 25 of 74 PageID #: 4428
one clog in a sewage system six years prior, “failed to plead facts that establish a likelihood of future harm from clogging because of flushable wipes”).
Accordingly, plaintiffs Washington, Blackett, and Mason have alleged a sufficiently concrete injury-in-fact to establish their standing to assert their due process and breach of contract claims. The same cannot be said, however, of plaintiff Melissa Trotman. Unlike the other plaintiffs, Trotman’s note has never been sold, and her mortgage continues to afford her the FHA benefits the other plaintiffs claim they no longer have. In the complaint, plaintiffs contend that “because she is almost two years behind on her mortgage, is African-American and lives in Southeast Queens, [Trotman] stands the very real risk that her mortgage will be sold.” FAC ¶ 363. During oral argument, plaintiffs’ counsel reported that Trotman has come up to date on her mortgage and that her note and mortgage were “no longer at risk of being sold.” See Tr. at 110:3–22. Before Trotman could suffer the injuries described in the complaint, then, she would have to default on her mortgage, her mortgagee would have to seek relief under HUD’s NSP, and her note and mortgage would have to be selected by HUD as part of a pool of notes and mortgages to be sold. Under these circumstances, Trotman’s injuries are neither actual nor imminent, but are instead conjectural and hypothetical. See Spokeo, 136 S. Ct. at 1548.
Counts II and III assert claims under the Fair Housing Act. “Under the [Fair Housing Act], a plaintiff need only allege ‘injury in fact’ within the meaning of Article III of the Constitution . . . .” Winfield v. City of New York, 2016 WL 6208564, at *3 (S.D.N.Y. Oct. 24, 2016) (citing LeBlanc-Sternberg v. Fletcher, 67 F.3d 412, 424 (2d Cir. 1995)). “In other words, there are no prudential limits on standing under the [Fair Housing Act].” Fair Hous. in Huntington Comm. Inc. v. Town of Huntington, New York, 316 F.3d 357, 362 (2d Cir. 2003) (citing Havens Realty Corp. v. Coleman, 455 U.S. 363, 372 (1982)).
25

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 26 of 74 PageID #: 4429
The precise contours of Count II of the FAC are not entirely clear; the FAC appears to bifurcate Count II, alleging “a racially discriminatory impact on African-American homeowners in New York City or on predominantly African-American neighborhoods in New York City.” FAC ¶ 399 (emphasis added). Plaintiffs’ briefing, though, clarifies that the thrust of Count II is that the NSP creates or maintains racial segregation in violation of a legal duty not to. The point heading that introduces the discussion of Count II in plaintiffs’ brief claims: “HUD VIOLATED ITS STATUTORY DUTY TO AFFIRMATIVELY FURTHER FAIR HOUSING BY FAILING TO CONSIDER THE IMPACT OF THE NOTE SALE PROGRAM ON RACIAL SEGREGATION.” Pls.’ Mem. at 14 (emphasis added). The duty plaintiffs say § 3608(e)(5) imposes on HUD is the duty “to assess whether its actions advance racially open housing or further segregation and to respond appropriately.” Id. at 14–15. Thus, it is clear from plaintiffs’ own construction of Count II that it is meant to allege that HUD failed to consider its affirmative obligation to further fair housing when it adopted a note sale program that creates or maintains segregation.8
I note at the outset that Count II does not explicitly allege an injury. Rather, Count II alleges that HUD has a duty to affirmatively further the Fair Housing Act’s policies, FAC ¶ 397, and, in particular, to consider whether HUD’s policies and actions are creating or maintaining segregation, FAC ¶ 398. Count II further alleges that HUD failed to fulfill this duty when it implemented the NSP. FAC ¶ 399. It also alleges that, owing to this alleged breach of HUD’s duty, “[p]laintiffs have a claim for relief . . . because of the Federal Defendants’ abuse of discretion and otherwise acting contrary to law in creating, authorizing, permitting and supporting the [NSP], including identifying the specific loans to sell out of the FHA Mortgage
8 Count II of the FAC stands in contrast to plaintiffs’ third claim which, as discussed below, alleges that the NSP has had a racially disparate impact.
26

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 27 of 74 PageID #: 4430
Program.” FAC ¶ 401. Nowhere in this language or elsewhere in Count II itself is a particular injury to plaintiffs alleged.
Reading the FAC as a whole, though, and construing it as discussed above in light of plaintiffs’ briefing, it appears that the injury plaintiffs seek to claim in Count II is that HUD’s implementation of the NSP gave rise to or perpetuated segregation in their communities. Injuries of this type are cognizable under the Fair Housing Act. “Supreme Court cases make plain that a plaintiff sufficiently establishes standing to bring suit under the FHA by alleging that a defendant’s acts impinge on the plaintiff’s right to live in an integrated community.” Fair Hous. in Huntington, 316 F.3d at 362 (collecting cases); see also Havens Realty Corp., 455 U.S. at 377 (finding standing sufficient to survive motion to dismiss where individual plaintiffs generally alleged loss of “social, professional, business and economic, political and aesthetic benefits of interracial associations that arise from living in integrated communities free from discriminatory housing practices”). Accordingly, plaintiffs have stated injuries-in-fact sufficient to establish their standing to bring Count II. This conclusion applies to plaintiff Trotman as well; the fact that she is no longer in default and is no longer facing foreclosure does not preclude her from alleging that HUD’s implementation of the NSP has impaired her ability to live in an integrated community.
As for Count III, the FAC claims that the NSP has a disparate impact on AfricanAmerican homeowners in New York City, such as plaintiffs, by making homeownership less available to them and by threatening the stability of their neighborhoods. FAC ¶¶ 408–410. Count III seeks declaratory and injunctive relief. FAC ¶ 413. Because each plaintiff owns a home allegedly affected in this way, plaintiffs have also pleaded injuries-in-fact sufficient to support standing to bring Count III. This conclusion also extends to plaintiff Trotman, who
27

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 28 of 74 PageID #: 4431
alleges that the NSP may adversely affect the stability of the community in which she lives. Trotman has stated an injury that suffices for standing purposes, at least to the extent she alleges that the stability of her community is threatened by note sales conducted pursuant to the NSP that strip her neighbors of their FHA benefits.
2. Traceability While traceability is an indispensable element of standing, it is viewed generously at the pleading stage. See Rothstein, 708 F.3d at 92 (“‘[P]articularly at the pleading stage, the “fairly traceable” standard is not equivalent to a requirement of tort causation’ and . . . ‘for purposes of satisfying Article III’s causation requirement, we are concerned with something less than the concept of proximate cause.’” (quoting Connecticut v. Am. Elec. Power Co., 582 F.3d 309, 346 (2d Cir. 2009), rev’d on other grounds, 564 U.S. 410 (2011))). HUD asserts that there are breaks in the causal chain connecting the NSP and plaintiffs’ injuries that are attributable both to plaintiffs themselves and plaintiffs’ original mortgage servicers. See Defs.’ Mem. at 15 (“Plaintiffs’ own failure to make their mortgage payments and the independent determinations of Plaintiffs’ original mortgage servicers that no further loss mitigation options were available and the loans should be submitted for sale through DASP sever any purported link between the Federal Defendants’ operation of DASP and Plaintiffs’ alleged injury.”). Plaintiffs counter that “the injuries that give rise to Plaintiffs’ claims against HUD— the loss of the FHA Benefits, the higher out-of-pocket costs of inferior loan modifications, the unequal treatment by the government, the denial of the benefits of integrated living, and the harm to African Americans’ ability to accumulate wealth through sustainable homeownership—do not arise from Plaintiffs being in default or from servicers submitting a claim to HUD.” Pls.’ Mem. at 7.
28

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 29 of 74 PageID #: 4432
HUD’s contention that plaintiffs’ failure to remain current on their mortgage payments breaks the chain of causation plainly lacks merit. In support of its position, HUD relies on NRDC v. FDA, which holds that “an injury is self-inflicted so as to defeat the causation necessary to establish standing . . . ‘only if . . . the injury is so completely due to the plaintiff’s own fault as to break the causal chain.’” 710 F.3d at 85 (quoting St. Pierre v. Dyer, 208 F.3d 394, 402 (2d Cir. 2000)). Yet, the Second Circuit in NRDC v. FDA itself found that a veterinary technician’s exposure to an FDA-regulated soap ingredient was not self-inflicted so as to defeat standing to complain that the FDA did not take further action to restrict sale of soaps containing the ingredient, even though the technician used the soap repeatedly and declined to take action beyond raising her concerns about the soap with her employer for fear of being perceived as a problematic employee. Id. at 76–77, 85.
The injuries complained of here are similarly not self-inflicted. To be sure, defaulting on a mortgage results in certain self-inflicted injuries, vulnerability to foreclosure proceedings and harm to one’s credit rating among them. The injuries giving rise to plaintiffs’ claims here, though, go beyond these, and are alleged to be uniquely caused by HUD’s operation of the NSP. In other words, plaintiffs do not claim that HUD breached a contract or violated due process or the FHA simply because they suffered consequences by virtue of their defaults; rather, plaintiffs’ claims are based upon the particular consequences of having their notes and mortgages sold to a lender without FHA insurance and not subject to the requirements and limitations that apply to FHA-insured lenders. Plantiffs’ FHA claims are also based on the impact of the NSP upon the predominantly African-American communities where they reside. See, e.g., FAC ¶ 95 (“[I]n designing and implementing the Note Sale Program, HUD has not reviewed the impact of its changes to the Note Sale Program on African-American homeowners in New York City or on
29

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 30 of 74 PageID #: 4433
predominantly African-American neighborhoods in New York City.”); see also Tr. at 44:22–25 (“HUD designed the program in such a way that if the servicer merely said hey, we did everything we could, HUD decided to accept that representation at face value and to just proceed.”).
Nor is HUD’s assertion that the original mortgage servicers’ actions broke the chain of causation persuasive. Indeed, “a plaintiff need not allege that ‘the defendant’s actions [were] the very last step in the chain of causation’ to demonstrate that the defendant’s actions cause the claimed injury. It suffices that the defendant’s actions had a ‘determinative or coercive effect upon the action of someone else’ who directly caused the injury.” Carver, 621 F.3d at 226 (alterations in original) (internal citations omitted) (quoting Bennett v. Spear, 520 U.S. 154, 169 (1997)). “Thus, causation turns on the degree to which the defendant’s actions constrained or influenced the decision of the final actor in the chain of causation.” Id. (comparing Bennett, 621 F.3d at 169 with Simon, 426 U.S. at 28, 42–43). Here, HUD certainly “influenced the decisions” of the original mortgagees by offering them the option to obtain an early insurance payout by selling their notes. And even assuming that the Caliber defendants—having purchased the notes and accompanying mortgages following the original mortgagees’ decision to relinquish the mortgages back to HUD—are the “final actor” as purchasers of the sold mortgages, HUD certainly “influenced the decision” of the Caliber defendants as well by offering these mortgages for sale without the FHA homeowner protections that would make them less desirable in the eyes of a potential buyer.
As noted above, “[f]or standing purposes, petitioners need not prove a cause-and-effect relationship with absolute certainty; substantial likelihood of the alleged causality meets the test. This is true even in cases where the injury hinges on the reactions of the third parties . . . to the
30

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 31 of 74 PageID #: 4434
agency’s conduct.” NRDC v. NHTSA, 894 F.3d at 104 (quoting Competitive Enter. Inst., 901 F.2d at 113). Accordingly, plaintiffs’ allegations surpass the low bar applicable to traceability at the pleading stage.9
3. Redressability I now turn to the third and final element of standing: redressability. “In determining whether an injury is redressable, [courts] examine whether each aspect of the relief requested . . . would redress [plaintiff’s] asserted injury.” Allco Fin. Ltd. v. Klee, 805 F.3d 89, 93–94 (2d Cir. 2015) (citing Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 105–09 (1998)), as amended Dec. 1, 2015. I therefore consider, in turn, each type of relief plaintiffs seek. Declaratory relief. Plaintiffs seek declaratory relief with respect to Counts I, II, and III. FAC ¶¶ 395, 403, 413. In particular, the declaratory relief sought is “[a] judgment declaring that Defendants have committed the violations of law alleged in this action.” FAC Prayer for Relief. Plaintiffs base their entitlement to declaratory relief on the availability of such relief where it has “implications for practical enforcement upon the parties.” Pls.’ Mem. at 9 (quoting S. Jackson & Son, Inc. v. Coffee, Sugar & Cocoa Exch. Inc., 24 F.3d 427, 431 (2d Cir. 1994)). With respect to Count I—plaintiffs’ due process cause of action—the injury plaintiffs assert is that they were not afforded notice and an opportunity to be heard before being stripped of certain benefits they were entitled to as homeowners with FHA mortgages. Plaintiffs claim in their opposition memorandum that “a declaration that HUD’s conduct was unlawful could result in past Note Sales being invalidated.” Pls.’ Mem. at 10. However, plaintiffs nowhere in the
9 I have not addressed traceability in a claim-by-claim fashion, as I have above with respect to injury-in-fact and below with respect to redressability, because it is not necessary to do so. The above reasoning applies to the injuries asserted as arising from both Counts I and IV—the loss of FHA benefits—and the injuries asserted as arising from Counts II and III—the impingement of plaintiffs’ rights to have HUD adopt policies that support minority homeownership and stable, integrated communities. Plaintiffs’ theory of traceability with respect to all of these injuries is the same—that HUD, by influencing the original mortgagees’ decisions to sell plaintiffs’ notes pursuant to the NSP, caused the injuries that resulted from those sales.
31

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 32 of 74 PageID #: 4435
FAC seek invalidation of the past sales of their respective notes and mortgages. See generally FAC Prayer for Relief. Nor do plaintiffs explain how a declaration that certain conduct was unlawful would have the effect of nullifying and undoing the sale of their notes and mortgages. Rather, in addition to a declaration that the prior note sales violated the law, plaintiffs seek monetary damages under their breach of contract claims and prospective injunctive relief that does not entail an unwinding of the prior sale of their mortgages and notes. In these circumstances, the retrospective declaration plaintiffs seek would do nothing to redress their asserted due process injuries—the loss of certain FHA mortgage benefits without notice and an opportunity to be heard.
The injuries asserted under Counts II and III are an impairment of plaintiffs’ rights to enjoy the benefits of residing in an integrated, stable community and of homeownership. However, “[a] judgment declaring that [HUD has] committed the violations of law alleged in this action” would not redress these claimed injuries any more than it would redress the alleged deprivation of plaintiffs’ FHA mortgage benefits without due process of law. HUD contends that, because plaintiffs are seeking redress for past rather than future harms, a declaratory judgment is not available. Defs.’ Mem. at 18–19. Here, plaintiffs seek a judgment declaring that past actions by HUD violated the Fair Housing Act. The retrospective declaratory relief plaintiffs seek, though, would not redress the alleged violation of their rights to live in integrated communities or enjoy the benefits of homeownership. Because the declaratory judgment plaintiffs seek would not redress the injuries they attribute to HUD’s violations of their due process rights or the Fair Housing Act, plaintiffs lack standing to seek such relief.
Injunction. Plaintiffs seek “[a]n order enjoining Federal Defendants from continuing to harm Plaintiffs and members of the Class by conducting future Note Sales,” and they further
32

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 33 of 74 PageID #: 4436
seek “[a]n order enjoining and directing Federal Defendants . . . to . . . [r]eview the racial impact of prior Note Sales on African-American homeowners and communities in New York City[,] . . . ensure that [any future note sales that are permitted] are in accordance with the Fair Housing Act[,] and . . . ensure that homeowners whose mortgages are contemplated to be sold in [any future note sales that are permitted] are provided sufficient notice and an opportunity to be heard.” FAC Prayer for Relief. As with the declaratory relief they seek, plaintiffs seek this injunctive relief in connection with the alleged breaches of their due process rights, FAC ¶ 395, and the Fair Housing Act, FAC ¶¶ 403, 413.
The injunctive relief plaintiffs seek would no more remedy the injuries they attribute to a breach of their due process rights than would the declaratory judgment discussed above. For instance, directing HUD to review the racial impact of prior note sales would do nothing to remedy plaintiffs’ loss of the benefits that flow from an FHA mortgage. Even assuming HUD undertook such a review and determined that the prior note sales had an adverse impact on African-American homeowners and communities, that would not change the fact that plaintiffs’ notes and mortgages were sold and are now owned and serviced by private entities without FHA insurance that are not obligated to provide FHA benefits. The remainder of the injunctive relief plaintiffs seek—orders requiring HUD to ensure that future permissible note sales comply with the Fair Housing Act and to provide homeowners with notice and an opportunity to be heard before their notes and mortgages are sold—is prospective in nature, rather than retrospective. This is an odd match for the retrospective harms plaintiffs attribute to the alleged violations of their due process rights. Plaintiffs do not seek a judgment declaring the sale of their notes and resulting loss of benefits null and void, and the injunctive relief plaintiffs do seek would not, if granted, redress the allegedly wrongful stripping of their FHA mortgage benefits from them
33

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 34 of 74 PageID #: 4437
without notice and an opportunity to be heard.10 Because this injury would not be redressed by any of the relief plaintiffs seek, declaratory or injunctive, plaintiffs lack standing to assert the due process claim alleged in Count I of the FAC.
Nor is one of the injuries asserted under Count III—plaintiffs’ increased risk of default— redressable by the injunctive relief requested. Count III may be understood as alleging, at least in part, that plaintiffs themselves—or at a minimum plaintiffs Washington, Blackett, and Mason—were subjected to a greater likelihood that their notes would be sold, and their FHA benefits lost, because of their race or because they own homes in communities that are largely African-American. However, as with plaintiffs’ due process claim, the requested injunction will not restore plaintiffs’ FHA benefits or otherwise redress any injury plaintiffs claim they sustained by virtue of the sale of their notes pursuant to the NSP. Accordingly, to the extent that plaintiffs Washington, Blackett, and Mason contend that they were directly affected by the alleged disparate impact of the NSP when their notes were sold, they lack standing to assert the claim asserted in Count III.
However, the injunctive relief plaintiffs seek would at least arguably redress the other injuries they allege in Counts II and III. As noted above, plaintiffs’ contention is that they suffer ongoing injury as a result of the past note sales because the NSP impairs the stability of their neighborhoods and promotes segregation. An injunction mandating that HUD review the racial impact of prior note sales and ensure that any future note sales be conducted in compliance with the law would, plaintiffs allege, promote integration and restore stability to predominantly
10 Plaintiffs do seek to amend their prayer for relief in their separate motion to amend the FAC, adding a prayer that this Court nullify the subject note sales. Proposed Second Am. Compl. (“Proposed SAC”) Prayer for Relief ¶ iv, Dkt. 67-1. However, that motion is understood by the Court and the parties alike to be for the singular purpose of adding a ninth cause of action, which generally alleges that HUD failed to engage in notice-and-comment rulemaking, which they were allegedly bound to do when establishing the NSP. Because the motion to amend is made for that singular purpose, it would be improper to construe the prayer for relief, so amended, to apply to the claims asserted in the FAC.
34

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 35 of 74 PageID #: 4438
African-American neighborhoods, including the ones where they reside. These harms, as alleged by plaintiffs, are ongoing and made worse by each subsequent note sale. Accordingly, were future note sales conducted in a way that does not promote increased racial segregation or neighborhood instability, those injuries might be ameliorated. Counts II and III, therefore, allege injuries that are redressable by means of injunctive relief, at least to the extent that those counts claim that HUD’s implementation of the NSP promotes segregation and destabilizes neighborhoods.
HUD contends that the Court cannot redress even these injuries through the injunctive relief sought for two reasons: first, enjoining future note sales will not benefit plaintiffs whose notes were already sold and, second, judicial review of agency action in this arena is statutorily precluded. Defs.’ Mem. at 19–21. Both of these contentions miss the mark.
First, it is true that plaintiffs’ notes have already been sold, and that the injunctive relief sought would do nothing to unwind those sales. It is for this reason that Count III does not assert an injury redressable with injunctive relief, at least to the extent it claims that the NSP has increased the likelihood that plaintiffs will lose their homes because it subjects them to more onerous loan terms. However, as discussed above, the gravamen of Counts II and III goes beyond that. Plaintiffs assert in these counts that they are being injured by the continued operation of the NSP in toto, because the sale of other homeowners’ notes and mortgages pursuant to a program that is unfair to African-American mortgagors impairs the stability of plaintiffs’ communities and maintains or perpetuates their segregated character.
HUD’s argument that 12 U.S.C. 1715u(d) precludes review in this action is no more persuasive. On its face, the effect of subsection (d) is limited to the section in which it appears. See 12 U.S.C. § 1715u(d) (“No decision by the Secretary to exercise or forego exercising any
35

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 36 of 74 PageID #: 4439
authority under this section shall be subject to judicial review.” (emphasis added)). The substantive portions of § 1715u address loss mitigation, payments of partial claims, and assignments and modifications of mortgage loans. The First Amended Complaint does not allege, though, that HUD administers the NSP pursuant to § 1715u, instead invoking the National Housing Act of 1934 § 204, 12 U.S.C. § 1710. FAC ¶ 107 (“In 1999, Congress amended Section 204 of the NHA to permit HUD to pay claims on defaulted mortgages prior to a foreclosure auction. It is through these 1999 amendments that HUD administers the Note Sale Program . . . .”). Moreover, the relief that plaintiffs seek does not ask the Court to “require HUD to operate a mandatory loss mitigation program” under § 1715u(a), a result not permitted by § 1715u(d). See Ferrell v. U.S. Dep’t of Hous. & Urban Dev., 2002 WL 1998310, at *3 (N.D. Ill. Aug. 28, 2002). Plaintiffs claim instead that HUD, having already independently decided to operate the NSP, must now do so lawfully. In any event, with respect to standing, “[w]hat matters is that a plaintiff must clearly allege facts sufficient to constitute an injury in fact, but those allegations ‘need not be capable of sustaining a valid cause of action.’” Dubuisson, 887 F.3d at 573 (quoting Denney v. Deutsche Bank AG, 443 F.3d 253, 264 (2d Cir. 2006)).
Monetary damages. With respect to their breach of contract claim, plaintiffs seek money damages—not to exceed $10,000 per plaintiff—and reasonable attorney’s fees and costs. FAC ¶¶ 421–422. There can be no question that a monetary award in the amount of plaintiffs’ actual damages would provide plaintiffs with redress. Indeed, other than with respect to plaintiff Trotman, HUD does not appear to challenge plaintiffs’ standing to pursue their breach of contract claims or the redressability, through an award of monetary damages, of the injuries they allegedly sustained as a result of HUD’s breach. Because her note and mortgage were never sold, Trotman of course did not incur damages from any alleged breach.
36

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 37 of 74 PageID #: 4440
For the reasons described above, I conclude that plaintiffs Washington, Blackett, and Mason have standing to pursue Count IV, as well as Counts II and III to the extent they allege threats to neighborhood stability and the promotion of segregation. These plaintiffs, though, lack standing to pursue Count I, or to pursue Count III to the extent it alleges that their ability to remain homeowners has been impaired. I further conclude that plaintiff Trotman has standing to pursue Count II and Count III to the extent it alleges threatened neighborhood stability or the promotion of segregation, but that she lacks standing to pursue Counts I and IV, as well as Count III to the extent it alleges an impaired ability to remain a homeowner.
B. Mootness During the oral argument held on March 6, 2018, plaintiffs’ counsel represented to the Court that (1) foreclosure proceedings were never commenced against plaintiff Washington, Tr. at 109:10–13, (2) foreclosure proceedings against plaintiffs Mason and Trotman were discontinued, Tr. at 109:13–16, 110:3–7, and (3) foreclosure proceedings were commenced but, as of March 6, 2018, had not proceeded against plaintiff Blackett, causing his counsel to report that he was “not in active foreclosure proceedings at this time.” Tr. at 109:21–25. Plaintiffs’ counsel also represented that plaintiffs Mason and Trotman had received loan modifications since filing this action, Tr. at 109:13–16, 110:3–7, and that plaintiff Trotman in particular was, as of March 6, 2018, current on her mortgage payments and no longer in default, Tr. at 110:12–22. In a letter following the oral argument, HUD asserted that these factual developments mooted all four plaintiffs’ claims. In particular, HUD argues that the claims of plaintiffs Mason and Trotman are moot in light of the discontinuance of foreclosure proceedings against them and the subsequent “HAMP or HAMP-like” loan modifications they have received. Defs.’ Mar. 13 Letter at 2. While plaintiffs’ counsel did not represent that either Washington or Blackett have
37

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 38 of 74 PageID #: 4441
received loan modifications, HUD argues that the absence of active foreclosure proceedings against these plaintiffs moots their claims as well, because their claims “are based primarily on their concern that they would lose their respective homes in foreclosure proceedings after the sale of their defaulted mortgage loans in the Note Sale Program.” Id.
Plaintiffs submitted a response arguing, among other things, that the FAC alleges that plaintiffs “are worse off for having their notes sold out of the FHA Mortgage Program,” any lack of active foreclosure proceedings notwithstanding. Pls.’ Mar. 19 Letter at 1. They particularly cite the loss of FHA benefits sustained by plaintiffs Washington, Blackett, and Mason and the inferior modifications, higher out-of-pocket costs, and greater risk of foreclosure in the future— particularly when the interest-only periods provided by their modifications come to an end— faced by plaintiffs Washington and Blackett. Id. at 2.
“A case becomes moot—and therefore no longer a ‘Case’ or ‘Controversy’ for purposes of Article III—‘when the issues presented are no longer “live” or the parties lack a legally cognizable interest in the outcome.’” Already, LLC v. Nike, Inc., 568 U.S. 85, 91 (2013) (citing Murphy v. Hunt, 455 U.S. 478, 481 (1982) (per curiam)). “No matter how vehemently the parties continue to dispute the lawfulness of the conduct that precipitated the lawsuit, the case is moot if the dispute ‘is no longer embedded in any actual controversy about the plaintiffs’ particular legal rights.’” Id. (citing Alvarez v. Smith, 558 U.S. 87, 93 (2009)). “[S]tanding doctrine evaluates a litigant’s personal stake as of the outset of litigation.” Klein ex rel. Qlik Techs. Inc. v. Qlik Techs., Inc., 906 F.3d 215, 221 (2d Cir. 2018) (alteration in original) (citation omitted). However, “[m]ootness doctrine determines what to do ‘[i]f an intervening circumstance deprives the plaintiff of a personal stake in the outcome of the lawsuit, at any point
38

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 39 of 74 PageID #: 4442
during litigation’ after its initiation.” Id. (quoting Genesis Healthcare Corp. v. Symczyk, 569 U.S. 66, 72 (2013)).
The factual developments that plaintiffs’ counsel acknowledged at the motion hearing do not “deprive[] the plaintiff[s] of . . . personal stake[s] in the outcome of the lawsuit.” Although allegations in the FAC concerning pending or imminent foreclosure proceedings provided girth to the claims of all four plaintiffs, being subject to foreclosure proceedings is not the only harm plaintiffs claim to have suffered as a result of the NSP. As plaintiffs point out, for example, the unavailability of more favorable loan modifications available to FHA mortgagors is not completely remedied, in the case of Washington, Blackett, and Mason by less favorable modifications that may have been offered by the Caliber defendants, even if plaintiffs accepted those modifications. Moreover, as a result of the sales of their notes and mortgages, plaintiffs Washington, Blackett, and Mason no longer hold assumable mortgages. Plaintiffs’ breach of contract claim seeks compensation for losses like these, and the absence of foreclosure proceedings does nothing to moot that claim. Plaintiffs’ Fair Housing Act claims are likewise based upon harms separate and apart from any pending foreclosure proceedings; as discussed above, these counts include claims concerning threats to neighborhood stability and the promotion of segregation. For example, plaintiffs allege that “HUD’s Note Sale Program has caused and continues to cause direct injury to African-American homeowners and predominantly African-American neighborhoods in New York City by increasing the likelihood of AfricanAmerican homeowners losing their homes to foreclosure and threatening neighborhood stability.” FAC ¶ 412.
For all these reasons, plaintiffs’ claims are not rendered moot by events subsequent to the filing of their complaint.
39

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 40 of 74 PageID #: 4443
I now turn to the merits of those claims I conclude are justiciable. II. HUD’s Motion to Dismiss for Failure to State a Claim
In addition to challenging the justiciability of plaintiffs’ claims, HUD moves to dismiss each of them under Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim. I now consider whether those causes of action I have determined to be justiciable sufficiently state a claim upon which relief may be granted.
A. Count II: Segregated Communities Under the Fair Housing Act 1. Legal Standard
Plaintiffs’ second cause of action is brought pursuant to a provision of the Fair Housing Act that requires the Secretary of HUD to “administer the programs and activities relating to housing and urban development in a manner affirmatively to further the policies” of the Act. 42 U.S.C. § 3608(e)(5). Plaintiffs allege that HUD failed to consider that its housing policies, and the NSP in particular, would “maintain racial segregation.” FAC ¶ 398.
Plaintiffs’ second cause of action invokes the Administrative Procedure Act (the “APA”) as well as the Fair Housing Act, and in particular a section of the APA that provides that “[a] person suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action within the meaning of a relevant statute, is entitled to judicial review thereof.” 5 U.S.C. § 702. A court conducting such a review is empowered and directed, inter alia, to “compel agency action unlawfully withheld or unreasonably delayed,” id. § 706(1), and to “hold unlawful and set aside” agency action that it finds to be “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law,” id. § 706(2). A claim challenging agency inaction under § 706(1) “can proceed only where a plaintiff asserts that an agency failed to take a discrete agency action that it is required to take.” Norton v. S. Utah Wilderness All. (SUWA),
40

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 41 of 74 PageID #: 4444
542 U.S. 55, 64 (2004). As for claims asserted under § 706(2), although “arbitrary and capricious” is a “narrow” standard of review, the Supreme Court has held that an agency has a duty to examine “the relevant data” and to articulate “a satisfactory explanation” for its action, “including a rational connection between the facts found and the choice made.” Dep’t of Commerce v. New York, 139 S. Ct. 2551, 2569 (2019) (quoting Motor Vehicle Mfrs. Ass’n of the U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)).
2. Application Plaintiffs allege that HUD identified notes for sale through the NSP “without knowing whether their decisions would have a racially discriminatory impact” on African-American homeowners and predominantly African-American neighborhoods in New York City. FAC ¶ 399. Plaintiffs claim that this constitutes a violation of the Fair Housing Act, 42 U.S.C. § 3608(e)(5), and that they may assert a claim for relief for this violation under the Administrative Procedure Act, 42 U.S.C. §§ 702, 706. FAC ¶¶ 400–401. Whether brought as a challenge to agency inaction under § 706(1) or as a challenge to arbitrary and capricious agency action not taken in accordance with law under § 706(2),11 the FAC simply lacks the factual content to support the claim Count II asserts. Count II rests upon the contention that HUD, after failing to conduct an analysis of the impact the NSP would have on segregation in New York City, adopted the NSP, which created or maintained segregation in New York City. But the FAC contains no allegations plausibly asserting that the NSP has affected the racial makeup of plaintiffs’ neighborhoods. See Iqbal, 556 U.S. at 679 (“While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations.”).
11 Plaintiffs make clear in their briefing that their claim seeks to challenge agency action pursuant to § 706(2). Pls.’ Mem. at 16.
41

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 42 of 74 PageID #: 4445
Plaintiffs appear to be claiming that the NSP disproportionately impacted neighborhoods that were heavily African-American prior to the NSP’s implementation. See FAC ¶¶ 86–93 (detailing the practice of “redlining” in the decades following FHA’s creation in 1934, which resulted in racial segregation that persists up to the present day);12 FAC ¶ 178 (alleging that “HUD’s Note Sales conducted between 2012 and 2014 have disproportionately included mortgages in African-American communities” and providing a map illustrating this allegation); FAC ¶ 180 (asserting that “[m]ore than 61% of all New York City mortgages sold in the Note Sales from 2012 to 2014 were for homes located in predomina[nt]ly African-American neighborhoods”); FAC ¶ 182 (noting that the six neighborhoods in New York City with the most notes sold had black populations of 86.9%, 85.4%, 88.9%, 64.9%, 85.5%, and 92.2%, respectively). The FAC alleges that, as a result of the greater number of notes sold in these predominantly African-American neighborhoods, “these African-American homeowners and the neighborhoods in which they reside, are more susceptible to foreclosure, and the resultant blight, in five years,” FAC ¶ 186, and “will become less stable as a result of the disproportionate number of their FHA mortgages being sold,” FAC ¶ 187.
Plaintiffs’ second claim fails because plaintiffs do not plausibly allege that the NSP has had or will have any impact on the racial composition of their communities and neighborhoods. Plaintiffs do allege that homes secured by notes sold pursuant to the NSP are more likely to be foreclosed upon than those whose owners maintain their FHA benefits. FAC ¶ 186. But they do not allege facts that suggest that these foreclosures will impact the racial composition of the communities where plaintiffs reside. For example, plaintiffs do not allege that foreclosed homes are more likely to be purchased by individuals of a particular race, or that the degree of
12 The practice of “redlining” is presented as context for the racial wealth gap that remains today, rather than as a basis for HUD’s liability in this case.
42

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 43 of 74 PageID #: 4446
integration or segregation of plaintiffs’ communities has changed since the NSP was implemented or because of it. Simply put, plaintiffs allege no facts from which it might plausibly be inferred that the NSP is causing or maintaining segregation.
For these reasons, I respectfully recommend that Count II be dismissed. Because I recommend dismissal for the reasons set forth above, I do not reach the other arguments in support of dismissal urged by HUD.
B. Count III: Disparate Impact Under the Fair Housing Act 1. Legal Standard
Plaintiffs bring their third cause of action pursuant to the Fair Housing Act, 42 U.S.C. § 3604. Section 3604(a) makes it unlawful, as pertinent here, “[t]o . . . make unavailable or deny[] a dwelling to any person because of race, color, religion, sex, familial status, or national origin.” Section 3604(b) similarly makes it unlawful, as pertinent here, “[t]o discriminate against any person in the terms, conditions, or privileges of sale . . . of a dwelling, or in the provision of services . . . in connection therewith, because of race, color, religion, sex, familial status, or national origin.”
Plaintiffs’ § 3604 claim alleges that the NSP disparately impacts African-Americans who purchased their homes with FHA mortgages. FAC ¶ 408. A disparate impact claim “challenges practices that have a disproportionately adverse effect on minorities and are otherwise unjustified by a legitimate rationale.” Tex. Dep’t of Hous. & Cmty. Affairs v. Inclusive Communities Project, Inc. (ICP), 135 S. Ct. 2507, 2513 (2015). The Supreme Court has clearly established that disparate impact claims are cognizable under the Fair Housing Act. Id. at 2525.
Although the Second Circuit had previously applied a more traditional burden-shifting test to disparate impact claims, in 2016 it adopted a slightly different test drawn from a 2013
43

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 44 of 74 PageID #: 4447
HUD regulation. MHANY Mgmt., Inc. v. County of Nassau, 819 F.3d 581, 617 (2d Cir. 2016). Under this newer test, initially “the plaintiff . . . has the burden of proving that a challenged practice caused or predictably will cause a discriminatory effect.” 24 C.F.R. § 100.500(c)(1). Once this burden is met, “the . . . defendant has the burden of proving that the challenged practice is necessary to achieve one or more substantial, legitimate, nondiscriminatory interests of the . . . defendant.” Id. § 100.500(c)(2). Finally, if the defendant meets this burden, “the . . . plaintiff may still prevail upon proving that the substantial, legitimate, nondiscriminatory interests supporting the challenged practice could be served by another practice that has a less discriminatory effect.” Id. § 100.500(c)(3).
While it recognized in ICP that disparate impact claims could be brought under the Fair Housing Act, the Supreme Court, in dicta, at the same time strongly cautioned lower courts addressing such claims: “[D]isparate-impact liability has always been properly limited in key respects to avoid serious constitutional questions that might arise under the [Fair Housing Act], for instance, if such liability were imposed based solely on a showing of a statistical disparity.” ICP, 135 S. Ct. at 2522. Accordingly, the Court held that plaintiffs asserting disparate impact must satisfy a “robust causality requirement” and noted that “[a] plaintiff who fails to allege facts at the pleading stage or produce statistical evidence demonstrating a causal connection cannot make out a prima facie case of disparate impact.” Id. at 2523. The ICP Court went on to point out that “[g]overnmental . . . policies are not contrary to the disparate-impact requirement unless they are ‘artificial, arbitrary, and unnecessary barriers’” to housing, and stressed that “[c]ourts should avoid interpreting disparate-impact liability to be so expansive as to inject racial considerations into every housing decision.” Id. at 2524 (quoting Griggs v. Duke Power Co., 401 U.S. 424, 431 (1971)). Nevertheless, noting that the requirements for establishing a prima
44

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 45 of 74 PageID #: 4448
facie case set an evidentiary standard and not a pleading requirement, at least one court has subsequently concluded that “ICP did not alter the plausibility standard for pleading, which requires only the plaintiff plead allegations that plausibly give rise to an inference that the challenged policy causes a disparate impact.” Winfield, 2016 WL 6208564, at *6 (citing Vega v. Hempstead Union Free Sch. Dist., 801 F.3d 72, 87 (2d Cir. 2015) and Iqbal, 556 U.S. at 678). Thus, “at the pleading stage, [p]laintiffs are merely required to plausibly plead disparate impact; they are not required to prove causation or disparate impact through statistical evidence at the pleading stage.” Id.
2. Application The FAC asserts that “by auctioning FHA mortgages to private investors that refuse to offer HAMP or HAMP-like mortgage modifications, and that only offer more expensive and unsustainable modification products, HUD violates sections 3604(a) and 3604(b) of the Fair Housing Act by making housing unavailable to African-American homeowners, imposing less favorable terms, conditions and privileges of sale, and providing discriminatory services in connection with the sale of a dwelling.” FAC ¶ 410. The FAC accuses HUD of veering from its § 3604 obligations by “fail[ing] to employ practices . . . with a less discriminatory effect, including ensuring that the FHA homeowners receive the benefits to which they are entitled and working with the homeowner before selling the loans through the Note Sale Program.” FAC ¶ 411. Furthermore, the FAC asserts that it is HUD’s responsibility also to “ensur[e] that every homeowner with an FHA mortgage who qualifies for a HAMP modification be provided with an affordable HAMP modification.” FAC ¶ 411. Plaintiffs’ contention that HUD’s administration of the NSP disparately impacts African Americans is based on certain statistical data included in the FAC. Plaintiffs allege that, while
45

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 46 of 74 PageID #: 4449
African Americans comprised 36% of New York City homeowners who obtained an FHA mortgage during 2012 through 2014, 61% of New York City mortgages sold pursuant to the NSP during this time were secured by homes in predominantly African-American neighborhoods. FAC ¶¶ 179–180. Plaintiffs also assert that, in the six New York City neighborhoods with the largest number of mortgages sold through the NSP, African Americans comprise between 64.9% and 92.2% of the population. FAC ¶ 182. Based upon this data, plaintiffs allege that the sale of mortgages as part of the NSP “makes housing unavailable to African-American homeowners in New York City in violation of section 3604(a).” FAC ¶ 409. The mortgage sales make housing unavailable, plaintiffs contend, because “[o]ver a third of all the mortgages sold through the Note Sale Program result in foreclosure post-sale and only 7% of mortgages sold through the Note Sale Program have resulted in a home-saving solution, such as a modification.” FAC ¶ 409.
HUD challenges the data upon which plaintiffs base their disparate impact claim as incongruent: “Plaintiffs compare the percentage of homes sold through [the NSP] that were located in African-American neighborhoods with the percentage of FHA borrowers who are African-American and allege that the resulting statistic demonstrates a disparity based on race. . . . [T]o allege a disparity based on race . . . , Plaintiffs need to show that, among borrowers holding [sale]-eligible loans, the loans sold through [the NSP] were disproportionately held by African-American borrowers (compared with non-African-American borrowers).” Defs.’ Mem. at 34.
The incongruity HUD points out is troubling. Certainly, a direct comparison of the percentage of African American homeowners who have defaulted on FHA mortgages with the percentage of those whose notes and mortgages were sold under the NSP would provide a far more compelling indication of whether African Americans have been disparately impacted by
46

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 47 of 74 PageID #: 4450
the NSP. Plaintiffs, moreover, do not explain why they elected to compare the race of individuals who hold FHA mortgage loans with the racial makeup of the neighborhoods where homes secured by mortgage loans that are ultimately sold under the NSP are located. To this point, it is particularly concerning that the FAC defines “predominantly African-American neighborhoods” as those comprised of as little as 50.1% individuals who identify as AfricanAmerican or black. FAC ¶ 180 n.6. By this definition, it is certainly possible that some, perhaps even many, of the homeowners in those neighborhoods whose notes have been sold under the NSP are not African-Americans.
Although there are substantial weaknesses in plaintiffs’ statistical showing, they must be considered in light of the current procedural posture of this case. It is not plaintiffs’ burden at the Rule 12 stage to establish their prima facie case. Rather, it is plaintiffs’ burden to plead facts, including statistical data, that make their prima facie showing plausible. The weaknesses in the FAC’s statistical comparisons go more to probability than plausibility. See Iqbal, 556 U.S. at 678 (clarifying that “[t]he plausibility standard is not akin to a ‘probability requirement,’ but it asks [only] for more than a sheer possibility that a defendant has acted unlawfully”). Several courts considering allegedly flawed statistical comparisons have similarly concluded that weaknesses in underlying data do not necessarily warrant dismissal. See, e.g., Nat’l Fair Hous. All. v. Fed. Nat’l Mortg. Assoc., 294 F. Supp. 3d 940, 948 (N.D. Cal. 2018) (“[S]pecific contentions about alleged deficiencies in methodology go to the weight of the evidence and are not dispositive of the determination whether Plaintiffs have adequately pled discrimination at this [motion to dismiss] procedural stage.”); Brown v. City of New York, 2017 WL 1102677, at *6 (E.D.N.Y. Mar. 23, 2017) (“[S]tatistics that may ultimately prove insufficient can nevertheless support a plausible inference of disparate impact on a motion to dismiss.”); Adkins v. Morgan
47

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 48 of 74 PageID #: 4451
Stanley, 2013 WL 3835198, at *10 (S.D.N.Y. July 25, 2013) (“Plaintiffs’ statistical allegations need not definitely establish causation at [the pleading] stage. Rather, Plaintiffs’ allegations . . . are sufficient to give notice to [defendant] of a plausible claim of disparate impact. Whether those statistics may prove insufficient at a later date is not now a question before this court.”); Jenkins v. N.Y.C. Transit Auth., 646 F. Supp. 2d 464, 469 (S.D.N.Y. 2009) (“It would be inappropriate to require a plaintiff to produce statistics to support her disparate impact claim before plaintiff has had the benefit of discovery.”).
Here, while there is a disconcerting apples-and-oranges aspect to the data presented by plaintiffs, the discrepancy suggested by the data is stark: 36% of FHA mortgagors vs. 61% of notes and mortgages sold pursuant to the NSP. Furthermore, there are other facts alleged in the FAC that buttress the inference plaintiffs seek to draw from the limited statistical data they provide. For instance, the FAC alleges that while the disparity between these two figures for African-Americans is 26 percentage points, it is far less (or even inverse) for other racial groups. See FAC ¶ 181 (showing that, from 2012 to 2014, 27% of FHA borrowers in New York City were white, while only 15.5% of notes sold were secured by homes in predominantly white neighborhoods; that 19% of FHA borrowers were Hispanic, while only 19.9% of notes sold were secured by homes in predominantly Hispanic neighborhoods; and that 9% of FHA borrowers were Asian, while only 3.5% of notes sold were secured by homes in predominantly Asian neighborhoods). Additionally, although it is possible under the FAC’s definition of “predominantly African-American” that African-Americans in a community barely constitute a majority, that does not appear to be the case in the six neighborhoods that represent the most notes sold during the relevant time period. See FAC ¶ 182 (identifying “(i) Springfield Gardens with a black population of 86.9%; (ii) Canarsie with a black population of 85.4%; (iii) St. Albans
48

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 49 of 74 PageID #: 4452
with a black population of 88.9%; (iv) Jamaica with a black population of 64.9%; (v) Rosedale with a black population of 85.5%; and (vi) Laurelton with a black population of 92.2%”).
The statistical data advanced in the FAC makes a very thin showing of disparate impact. Nevertheless, the allegations in the FAC appear to be sufficient, if just barely, to “nudge[] [plaintiffs’ disparate impact] claims across the line from conceivable to plausible.” Twombly, 550 U.S. at 570.
For the reasons discussed below, though, I nevertheless recommend that Count III be dismissed. As discussed in Section I.A.3 above, plaintiffs’ third claim has two distinct aspects. First, it appears that plaintiffs are contending that the disparate impact of the NSP results in higher foreclosure rates that in turn increase instability in the largely African-American communities where plaintiffs reside, causing them injury. Second, plaintiffs’ third cause of action may be understood as alleging that plaintiffs Washington, Blackett, and Mason were subjected to a greater likelihood that their notes would be sold, and their FHA benefits lost, because of their race or the racial makeup of their communities. I concluded in Section I.A.3 that plaintiffs lack standing to assert this latter claim because the relief they seek—declaratory and injunctive relief—would not redress this latter aspect of the injury claimed in Count III.
As for the former aspect—that the NSP has had a disparate impact by destabilizing predominantly African-American neighborhoods—although I have determined above that plaintiffs have standing to assert this aspect of their third claim, I now conclude that they fail to allege sufficient facts showing that the NSP causes this aspect of the injuries for which Count III seeks relief. First, plaintiffs fail to allege that the number of foreclosures in their communities has in fact been affected by the NSP; no data about actual foreclosures in plaintiffs’ neighborhoods is provided in the FAC. Even if the facts alleged did give rise to a plausible
49

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 50 of 74 PageID #: 4453
inference that mortgages on homes in plaintiffs’ communities secured by notes sold through the NSP are more likely to be foreclosed upon, plaintiffs have failed to allege facts showing that any increase in foreclosures has caused the blight or instability in their neighborhoods that is the gravamen of this aspect of their claim. Plaintiffs have not alleged, for example, that foreclosed homes in their communities remain vacant and unsold for long periods of time, or that retail food markets or drug stores have left their neighborhoods because so many homes are unoccupied that the customer base has declined. Without such allegations, plaintiffs’ contention that a greater number of note sales in their largely African-American neighborhoods results in instability in those neighborhoods is merely conclusory and insufficient to defeat a motion to dismiss. See Iqbal, 556 U.S. at 678. I therefore respectfully recommend that HUD’s motion to dismiss Count III be granted.
C. Count IV: Breach of Implied-in-Fact Contract 1. Legal Standard
Plaintiffs’ fourth cause of action is for breach of an implied-in-fact contract with HUD. FAC ¶¶ 415–422. Plaintiffs’ claim for breach is governed by federal common law. See EEOC v. Fed. Express Corp., 268 F. Supp. 2d 192, 204 (E.D.N.Y. 2003) (“[C]ontracts with the federal government are governed by federal common law, which incorporates ‘the core principles of the common law of contract[s] that are in force in most states.’” (internal citation omitted) (quoting United States v. Nat’l Steel Corp., 75 F.3d 1146, 1150 (7th Cir. 1996))). Under federal common law, “[a]n implied-in-fact contract is one ‘founded upon a meeting of the minds, which, although not embodied in an express contract, is inferred, as a fact, from conduct of the parties showing, in the light of the surrounding circumstances, their tacit understanding.’” City of Cincinnati v. United States, 153 F.3d 1375, 1377 (Fed. Cir. 1998) (quoting Balt. & Ohio R.R. Co. v. United
50

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 51 of 74 PageID #: 4454
States, 261 U.S. 592, 597 (1923)). “An implied-in-fact contract with the Government requires proof of (1) mutuality of intent, (2) consideration, (3) an unambiguous offer and acceptance, and (4) ‘actual authority’ on the part of the Government’s representative to bind the Government in contract.” Turping v. United States, 913 F.3d 1060, 1065 (Fed. Cir. 2019) (citation omitted).
2. Application Plaintiffs’ contention that HUD has implied contractual obligations to them rests on plaintiffs’ payments of the UFMIP and monthly MIP. The FAC alleges that these payments, coupled with plaintiffs’ initial choice to obtain an FHA mortgage, demonstrate plaintiffs’ intent to contract with HUD, FAC ¶ 416, that these payments were made as consideration for the benefits of the FHA mortgage program, FAC ¶ 415, and that “[o]ffer and acceptance is unambiguous through Plaintiffs’ tendering of [these payments] and Federal Defendants’ acceptance of [them],” FAC ¶ 418. The FAC finds evidence of HUD’s intent to contract with plaintiffs in the regulations, Handbook, mortgagee letters, and other HUD-published guidance with respect to the UFMIP and monthly MIP, the incorporation of these payments in closing and monthly mortgage statements, and the determination of eligibility for FHA benefits. FAC ¶ 417. As for the fourth element—actual authority to bind the government—the FAC alleges that the authority of the Secretary of HUD and the FHA Commissioner is manifested in their pronouncement of the regulations, Handbook provisions, mortgagee letters, and guidelines implementing the FHA mortgage program. FAC ¶ 419. Plaintiffs further contend in their motion papers that “all relevant parties have, as a matter of fact, treated the mortgage insurance premiums paid by Plaintiffs as payments to HUD in consideration for the FHA Benefits.” Pls.’ Mem. at 28. “In short,” plaintiffs argue, “the [F]AC alleges that, notwithstanding Congressional intent or regulatory text, HUD’s conduct objectively
51

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 52 of 74 PageID #: 4455
manifests its expectation that borrowers will pay FHA mortgage insurance premiums to HUD.” Id. at 29. The “[m]ost important” indicia of this allegedly mutual understanding, in plaintiffs’ view, is that “the standard form FHA mortgage contract prepared by HUD and used by all FHA lenders treats the mortgage insurance premium as the borrower’s responsibility.” Id. at 29. Plaintiffs point to the allegation in the FAC that “[p]aragraph 3 of FHA’s form mortgage contract requires the loan owner to apply payment to MIP first from the homeowner’s monthly payment on the account.” FAC ¶ 38. This, plaintiffs urge, “confirms HUD’s understanding that the premiums will as a matter of course be paid out of borrowers’ money to HUD.” Pls.’ Mem. at 29.
The thrust of HUD’s argument is that no implied-in-fact contract existed for them to breach. HUD argues, first, that United States v. Neustadt, 366 U.S. 696 (1961), holds that no legal relationship exists between HUD and FHA mortgagors like plaintiffs. Defs.’ Mem. at 25. Second, HUD asserts that the FHA benefits, which plaintiffs claim to be consideration due to them for their UFMIP and monthly MIP payments, are actually intended to benefit the government, as the provider of mortgage insurance, rather than plaintiffs. Id. at 25–26. Finally, HUD argues that the text of the National Housing Act, its implementing regulations, and Supreme Court precedent undercut plaintiffs’ assertion that an implied-in-fact contract was formed. Id. at 26.
Plaintiffs argue that whether there is an implied-in-fact contract is a question of fact that cannot be resolved on a motion to dismiss. Pls.’ Mem. at 29–30. However, their assertion that, because mortgagees pay insurance premiums to HUD with funds received from homeowner borrowers, an implied contractual relationship arises between homeowners and HUD, is a legal conclusion. It is well-established that “the tenet that a court must accept as true all of the
52

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 53 of 74 PageID #: 4456
allegations contained in a complaint is inapplicable to legal conclusions.” Iqbal, 556 U.S. at 678. Here, a review of the pertinent statutes, regulations and case law belies plaintiffs’ contention that homeowners are legally responsible for paying insurance premiums to HUD.
I note at the outset that HUD’s contention that Neustadt controls is, at a minimum, overstated. The question presented in Neustadt was “whether the United States may be held liable, under the Federal Tort Claims Act . . . to a purchaser of residential property who has been furnished a statement reporting the results of an inaccurate FHA inspection and appraisal, and who, in reliance thereon, has been induced by the seller to pay a purchase price in excess of the property’s fair market value.” 366 U.S. at 697–98. After examining the legislative history of the National Housing Act, the Court found “that the primary and predominant objective of the appraisal system was the ‘protection of the Government and its insurance funds’; that the mortgage insurance program was not designed to insure anything other than the repayment of loans made by lender-mortgagees; and that ‘there is no legal relationship between the FHA and the individual mortgagor.’” Id. at 709 (quoting H.R. Conf. Rep. No. 2271, 83d Cong., 2d Sess., pp. 66–67). Because Neustadt was decided in the context of a claim brought under the Federal Tort Claims Act, whether it applies to a claim of breach of an implied-in-fact contract is unclear. See Vaughn v. Consumer Home Mortg., Inc., 293 F. Supp. 2d 206, 213 (E.D.N.Y. 2003) (finding Neustadt inapposite where plaintiffs’ claim arose out of the Administrative Procedure Act rather than the Federal Tort Claims Act); Bailey v. Romney, 359 F. Supp. 596, 600 (D.D.C. 1972) (holding that “Neustadt held simply that there was no remedy under the Tort Claims Act for the complaint involved in that case” and finding it inapplicable to the Section 235 Existing Home Program provisions of the National Housing Act). Neustadt, moreover, involved the accuracy of an appraisal and inspection; these events typically occur before a mortgage and note are
53

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 54 of 74 PageID #: 4457
executed, and accordingly before a homeowner would be called upon to pay any of the mortgage insurance premiums that plaintiffs assert give rise to an implied-in-fact contract.
Although Neustadt may not be controlling, the relevant statutes, regulations and case law demonstrate that plaintiffs’ contentions regarding premium payments are insufficient to impose any contractual obligation on HUD. The section of the National Housing Act that authorizes HUD to insure mortgage loans provides that insurance premium charges “shall be payable by the mortgagee.” 12 U.S.C. § 1709(c)(1); see also 12 U.S.C. § 1710(a)(7) (referring to circumstances under which “[t]he obligation of the mortgagee to pay the premium charges for insurance shall cease”). Indeed, the FAC acknowledges as much. FAC ¶ 38. Accordingly, the explicit language of the statute provides no basis for inferring that homeowners with FHA mortgages have any obligation to pay premiums to HUD.
The regulations governing the MIP further support this conclusion in that they explicitly state that the MIP must be paid by the mortgagee. See 24 C.F.R. § 203.259 (providing that “[t]he payment of any MIP . . . shall be made to the Commissioner by the mortgagee”); id. § 203.251(k) (defining MIP as “the mortgage insurance premium paid by the mortgagee to the Commissioner in consideration of the contract of insurance” (emphasis added)). With respect to plaintiffs’ contention that mortgagees merely pass on insurance payments they receive from homeowners, it is particularly noteworthy that these same regulations nowhere indicate that the mortgagee’s obligation to pay premiums ceases upon a mortgagor’s default. See 24 C.F.R. §§ 203.259–203.288. To the contrary, the governing statute articulates circumstances under which a mortgagee’s obligation to pay premiums terminates, and a homebuyer’s default is not among them. 12 U.S.C. § 1710(a)(7). The regulations likewise appear to provide that the
54

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 55 of 74 PageID #: 4458
mortgagee’s responsibility to pay insurance premiums to HUD terminates only upon the termination of the contract of insurance itself. 24 C.F.R. § 203.321.
It is also clear from the regulations that a mortgagor’s default does not, by operation of law, terminate the contract of insurance. For instance, the regulations provide that “[i]f after default and prior to the completion of foreclosure proceedings the mortgagor shall cure the default, the insurance shall continue as if a default had not occurred, provided the mortgagor pays to the mortgagee such expenses as the mortgagee has incurred in connection with the foreclosure proceedings and the mortgagee gives written notice of reinstatement to the Commissioner.” 24 C.F.R. § 203.333. By providing that insurance will “continue” rather than be “restored” or “reinstituted,” the regulations clearly contemplate that a mortgagor’s default does not itself impact the contract of insurance. This underscores the notion that the obligation to pay MIP rests with the mortgagee, not the homebuyer, regardless of whether the homebuyermortgagor remits funds to the mortgagee that the mortgagee in turn uses to satisfy that obligation. It is accordingly clear that the contract of insurance is between HUD and the mortgagee and does not give rise to an implied contract between HUD and the mortgagor.
Nor is there any logical basis for concluding that a lender’s use of funds remitted by a borrower to pay a fee gives rise to an implied contract between the payee and the borrower. An analogy in the context of purchasing a home makes the point. Typically, when a homebuyer pays for settlement services at a closing, the lender’s attorney is essentially paid with funds derived from closing costs paid by the homebuyer.13 It is self-evident, however, that this
13 Under the Real Estate Settlement Procedures Act (“RESPA”), the Director of the Consumer Financial Protection Bureau is directed to develop “a booklet to help consumers applying for federally related mortgage loans to understand the nature and costs of real estate settlement services,” and to “distribute such booklets to all lenders that make federally related mortgage loans.” 12 U.S.C. § 2604(a). The booklet must include “a good faith estimate of the amount or range of charges for specific settlement services the borrower is likely to incur in connection with the settlement as prescribed by the Bureau.” Id. § 2604(c). “Settlement services” is a term of art, which, under RESPA, includes “services rendered by an attorney.” Id. § 2602(3).
55

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 56 of 74 PageID #: 4459
circumstance does not create an attorney-client relationship between the lender’s attorney and the homebuyer or otherwise place them in contractual privity. So too here, even on the facts as alleged in the FAC, there is no logical basis to conclude that the language of the standard form FHA mortgage contract puts HUD and the homebuyer in privity with one another.
The applicable case law, though sparse, is consistent with this reading of the statute and regulations. While as discussed above Neustadt may not be controlling authority, the Supreme Court did in that case review the legislative history of the National Housing Act, and described that legislative history as “repeatedly emphasiz[ing] . . . that there is no legal relationship between the FHA and the individual mortgagor.” 366 U.S. at 709 (internal quotation marks omitted).
Moreover, although plaintiffs rely on Cason v. United States, 381 F. Supp. 1362 (W.D. Mo. 1974), aff’d sub nom. Summers v. United States, 510 F.2d 123 (8th Cir. 1975), their reliance is misplaced; upon close reading, it becomes clear that Cason supports HUD’s position, not the argument made by plaintiffs. In fact, the portion of the opinion relied upon by plaintiffs is not the reasoning of the Cason court, but rather a quotation by the court from the Cason plaintiffs’ briefing. The argument made by plaintiffs in Cason went as follows: “The mortgagor takes on the purchase of the home as the down payment is lowered by having the FHA insure the mortgage. The mortgagor as part of his monthly payment pays an FHA insuring premium. Surely the exchange of consideration between the mortgagor-purchaser and the FHA e[s]tablishes an expressed contract as well as an implied contract which falls within the purview of the Tucker Act.” 381 F. Supp. at 1366 (quoting from Cason Plaintiffs’ Suggestions on Defendants’ Motion to Dismiss). The court in Cason responded to this argument by stating that “[t]he invalidity of plaintiffs’ premises fatally flaws their contract theories” primarily because
56

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 57 of 74 PageID #: 4460
“the mortgagor does not pay the insurance premium; it is paid by the mortgagee.” Id. at 1367. In so holding, the court relied upon the statutory and regulatory framework in its then-current form, id. at 1367 n.35, just as HUD does here in support of its motion to dismiss. Cf. United States v. Chelsea Towers, Inc., 295 F. Supp. 1242, 1247 (D.N.J. 1967) (noting, albeit in a different context, that “[n]either the [National Housing] Act, nor the FHA regulations implementing it . . . created any legal relationship between the Government, or the FHA, and the individual mortgagors”).
While Cason, a decision by an out-of-circuit district court, is not binding authority, the court’s reasoning in that case is persuasive. Nor do plaintiffs point to any contrary authority supporting their contention that, because the homebuyer, at least if not in default, is typically the source of the funds used by the lender to pay the MIP to HUD, a mutual intent to contract is formed between that homebuyer and HUD.
For these reasons, I respectfully recommend that HUD’s motion to dismiss Count IV be granted.
III. Plaintiffs’ Motion to Amend By separate motion, Dkt. 66, plaintiffs seek leave to file a second amended complaint,
Decl. of Douglas Lieb Ex. A (“Proposed SAC”), Dkt. 67-1, that would alter the FAC by adding a cause of action (“Proposed Count IX”) under the APA. The APA requires agencies to follow certain procedures, including publishing proposed rules in the Federal Register and providing interested persons an opportunity to comment on them. See 5 U.S.C. § 553. The procedures required by § 553 apply to substantive and legislative rules, but not to “interpretive rules, general statements of policy, or rules of agency organization, procedure, or practice.” 5 U.S.C.
57

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 58 of 74 PageID #: 4461
§ 553(b)(A). Substantive or legislative rules are “those that ‘create new law, rights, or duties, in what amounts to a legislative act.’” Sweet v. Sheahan, 235 F.3d 80, 91 (2d Cir. 2000).
Proposed Count IX alleges that HUD unlawfully failed to engage in notice-and-comment rulemaking before implementing the NSP. HUD opposes plaintiffs’ motion in large part by arguing that Proposed Count IX is time-barred. For the reasons described below, I respectfully recommend that plaintiffs’ motion to amend be denied.
A. Relevant Facts The following facts, relevant solely to plaintiffs’ motion to amend and therefore not presented above, are drawn from the Proposed SAC and assumed to be true. See Quintanilla v. Suffolk Paving Corp., 2012 WL 4086805, at *6 (E.D.N.Y. Sep. 17, 2012) (“[O]n a motion to amend, the Court must accept the facts in the proposed amended complaint as true.” (citing Aetna Cas. & Sur. Co. v. Aniero Concrete Co., 404 F.3d 566, 604 (2d Cir. 2005))). The parties dispute the legal significance of the events that gave rise to the NSP, but agree in general terms that several key statutory developments and publications in the Federal Register frame the Court’s analysis. Compare Pls.’ Rule 15 Mem. at 1–3 (describing events preceding the NSP as it existed in 2014), with Defs.’ Rule 15 Mem. at 1–4 (same). HUD is authorized to conduct “such programs of research, studies, testing, and demonstration relating to the mission and programs of the Department as [the Secretary] determines to be necessary and appropriate.” 12 U.S.C. § 1701z-1. In 1999, Congress amended the National Housing Act to permit HUD to pay claims to mortgagees on defaulted FHA-insured mortgages prior to foreclosure and sale, in return for assignment of the mortgage, and it is pursuant to this authority that HUD conducted the note sales plaintiffs challenge in this lawsuit. Proposed SAC ¶ 107; 12 U.S.C. § 1710.
58

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 59 of 74 PageID #: 4462
According to an audit issued by HUD’s inspector general in 2017, HUD established a “demonstration program” pursuant to which it conducted four note sales between 2002 and 2005. Inspector General’s Audit, 2017-KC-0006, Proposed SAC Ex. A (“Audit”) at 3, Docket Entry 67-1.14 One year after the last sale under the demonstration program, HUD published a notice of proposed rulemaking that solicited comment on an Accelerated Claim and Asset Disposition Program (“ACD Program”), which plaintiffs describe as a precursor to the NSP. Proposed SAC ¶ 198; Accelerated Claim and Asset Disposition (ACD) Program; Advance Notice of Proposed Rulemaking (“ANPRM”), 71 Fed. Reg. 32392 (June 5, 2006). The ANPRM contains language that unambiguously demonstrates its preliminary character, in that it seeks comments “before HUD issues a proposed rule to codify the requirements for the ACD program. When codified, the ACD program will become a permanent part of HUD’s single family mortgage insurance programs.” ANPRM at 32392. No proposed rule was ever issued, however, and no period for public comment was established. Proposed SAC ¶ 198. Moreover, in a public notice published in 2007, HUD announced that it had withdrawn the ANPRM. See Unified Agenda, 72 Fed. Reg. 22694 (Apr. 30, 2007). Nonetheless, and without any further notice-and-comment rulemaking, HUD implemented the NSP on September 22, 2010. Proposed SAC ¶ 100.
In its 2017 Audit, HUD’s Inspector General makes reference to the demonstration program held between 2002 and 2005, and points out that, “[a]fter a nearly 5-year pause, HUD continued the note sales program referring to it as the Single Family Loan Sales program.” Audit at 3. Later, the Audit adds that in 2012, “the name of the program was changed to the Distressed Asset Stabilization Program (DASP).” Id. The Audit reports that HUD sold 108,616 loans representing more than $18 billion in unpaid principal between 2010 and 2016. Id.
14 The Audit is attached as an exhibit to the Proposed SAC and therefore properly considered in deciding plaintiffs’ motion for leave to amend.
59

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 60 of 74 PageID #: 4463
The Audit’s purpose was “to determine whether HUD conducted rulemaking for its single-family note sales program.” Id. at 4. The Audit concluded that HUD had not done so, and that “[w]e believe DASP is a substantive rule, which would be subject to . . . Administrative Procedure Act rulemaking requirements.” Id. at 5. The Audit observes that “[a]s a result of HUD’s not conducting rulemaking . . . participants were not given the opportunity to provide comments for a more than $18 billion program.” Id. at 6. The Inspector General recommends in the Audit that HUD “complete the rulemaking process and develop formal guidance for administering the program.” Id. at 7.
Plaintiffs seek to bring Proposed Count IX pursuant to APA § 553, predicated on HUD’s failure to engage in notice-and-comment rulemaking before implementing the NSP. See Proposed SAC ¶¶ 478–485. Specifically, plaintiffs contend that the NSP amounts to a substantive rule for which the notice-and-comment rulemaking procedure was required, and that the agency’s failure in that regard renders unlawful all of the note sales HUD has conducted. Id. ¶ 481. Plaintiffs contend in the alternative that even if not all aspects of the NSP are unlawful, at least the version of the program that began in 2012—DASP, through which plaintiffs’ loans were sold—is unlawful. Id. ¶ 482. The additional relief plaintiffs seek for the first time in the Proposed SAC (and presumably in connection with Proposed Count IX) is “[a]n order nullifying, vacating, and setting aside the sale by Federal Defendants of Plaintiffs’ and Class members’ mortgage notes.” Id. at 89.
B. Legal Standards Governing Motions for Leave to Amend Rule 15(a)(2) of the Federal Rules of Civil Procedure provides that leave to amend should be given “freely . . . when justice so requires.” Nevertheless, leave should not be granted “in instances of futility, undue delay, bad faith or dilatory motive, repeated failure to cure
60

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 61 of 74 PageID #: 4464
deficiencies by amendments previously allowed, or undue prejudice to the nonmoving party.” Burch v. Pioneer Credit Recovery, Inc., 551 F.3d 122, 126 (2d Cir. 2008) (per curiam).
HUD challenges plaintiffs’ proposed amendment primarily on grounds of futility and bears the burden of establishing that amendment would be futile. See Arnold v. Research Found. for State Univ. of N.Y., 216 F. Supp. 3d 275, 283 (E.D.N.Y. 2016). “Amendment is futile where the ‘proposed amended complaint would be subject to immediate dismissal.’” Coal. for a Level Playing Field, L.L.C. v. Autozone, Inc., 813 F. Supp. 2d 557, 565 (S.D.N.Y. 2011) (quoting Jones v. N.Y. State Div. of Military & Naval Affairs, 166 F.3d 45, 55 (2d Cir. 1999)). “[T]he legal standard for futility is identical to the standard for dismissing a claim pursuant to Rule 12(b)(6), [and] a court evaluating a motion to amend a pleading must [therefore] take the allegations of the complaint as true and draw all reasonable inferences in favor of the plaintiff.” Steele v. Paypal, Inc., 2006 WL 3612852, at *1 (E.D.N.Y. Dec. 11, 2006) (internal quotation marks and citation omitted). Ultimately, “[t]he decision to grant or deny a motion to amend lies within the sound discretion of the district court.” UMG Recordings, Inc. v. Lindor, 2006 WL 3335048, at *1 (E.D.N.Y. Nov. 9, 2006) (citing Foman v. Davis, 371 U.S. 178, 182 (1962)).
C. Standing HUD first challenges plaintiffs’ motion to amend as futile on the ground that plaintiffs lack standing to assert Proposed Count IX. As noted above, Proposed Count IX alleges that HUD failed to publish rules for the NSP and allow public comment about those rules as required by 5 U.S.C. § 553. Whether plaintiffs have standing to pursue Proposed Count IX is determined by the same standard applicable to plaintiffs’ other claims and discussed at length earlier in this Report. To recap briefly, to have standing, a plaintiff must have “(1) suffered an injury in fact, (2) that is
61

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 62 of 74 PageID #: 4465
fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.” John, 858 F.3d at 736 (internal quotation marks omitted) (quoting Spokeo, 154 S. Ct. at 1547). With respect to Proposed Count IX in particular, “an alleged procedural violation can by itself manifest concrete injury where Congress conferred the procedural right to protect a plaintiff’s concrete interests and where the procedural violation presents a ‘risk of real harm’ to that concrete interest.” Strubel v. Comenity Bank, 842 F.3d 181, 190 (2d Cir. 2016) (quoting Spokeo, 154 S. Ct. at 1549). Moreover, “[f]or standing purposes, petitioners need not prove a cause-and-effect relationship with absolute certainty; substantial likelihood of the alleged causality meets the test. This is true even in cases where the injury hinges on the reactions of the third parties . . . to the agency’s conduct.” NRDC v. NHTSA, 894 F.3d at 104 (quoting Competitive Enter., 901 F.2d at 113); see also Sierra Club v. EPA, 699 F.3d 530, 533 (D.C. Cir. 2012) (finding a concrete and redressable injury where EPA’s failure to engage in notice-and-comment rulemaking resulted in club being unable to present its case for more stringent standards directly to the agency).
Proposed Count IX alleges that plaintiffs are among those whose mortgage notes were sold “without observance of procedure required by law.” Proposed SAC ¶¶ 481–482. The injuries sustained by plaintiffs when their notes were sold and their FHA benefits lost are discussed in detail above in this Report. Accordingly, plaintiffs’ Proposed Count IX asserts an injury sufficient for purposes of standing.
Plaintiffs’ asserted injury under Proposed Count IX is also fairly traceable to HUD, which allegedly implemented a note sale program without completing the rule-making process required by law. Had HUD provided notice and sought comments, it might have been persuaded
62

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 63 of 74 PageID #: 4466
to alter the NSP to provide, for example, that homeowners would retain some or all of their FHA benefits even after their notes and mortgages were sold.
Finally, plaintiffs’ injuries are redressable through the relief they seek: to have the sales of their notes unwound. Proposed SAC Prayer for Relief ¶ iv. If the Court were to grant this relief, plaintiffs’ notes would be returned to the FHA mortgage insurance program and plaintiffs’ benefits under the program would be restored. Plaintiffs’ alleged injury—exposure to more onerous loan terms and a heightened risk of foreclosure—would as a result be redressed.
For these reasons, I conclude that plaintiffs have standing to assert Proposed Count IX. D. Timeliness HUD next asserts that amending would be futile because Proposed Count IX is untimely. It is undisputed that the applicable statute of limitations is six years. See Pls.’ Rule 15 Mem. at 12; Defs.’ Rule 15 Mem. at 7; see also 28 U.S.C. § 2401(a) (barring “every civil action commenced against the United States . . . unless the complaint is filed within six years after the right of action first accrues”); Manners v. U.S. Gov’t Sec’y of Def., 242 Fed. App’x 723, 725 (2d Cir. 2007) (summary order) (pointing out that actions under the APA are subject to the limitations period set out in § 2401). The parties’ disagreement centers on when plaintiffs’ Proposed Count IX accrued. Where a plaintiff brings a challenge under the APA to the manner in which a regulation was promulgated, “the cause of action accrues when the final regulation is published in the Federal Register.” Air India v. Brien, 261 F. Supp. 2d 134, 138 (E.D.N.Y. 2003), motion for relief from judgment granted on other grounds, 239 F.R.D. 306 (E.D.N.Y. 2006), rev’d sub nom. United Airlines Inc. v. Brien, 588 F.3d 158 (2d Cir. 2009); see also Sai Kwan Wong v. Doar, 571 F.3d 247, 263 (2d Cir. 2009) (collecting cases). Where a final regulation has not been published,
63

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 64 of 74 PageID #: 4467
agency action may still be considered sufficiently final for review under the APA. See, e.g., Franklin v. Massachusetts, 505 U.S. 788, 797 (1992) (holding that “[t]he core question is whether the agency has completed its decisionmaking process, and whether the result of that process is one that will directly affect the parties”); Sai Kwan Wong, 571 F.3d at 263 (“Under the APA, the statute of limitations begins to run at the time the challenged agency action becomes final.” (citations omitted)); Preminger v. Sec’y of Veterans Affairs, 517 F.3d 1299, 1307 (Fed. Cir. 2008) (same).
The Supreme Court has held that there are essentially two conditions that must be met for an agency action to be considered final under the APA. “First, the action must mark the consummation of the agency's decisionmaking process—it must not be of a merely tentative or interlocutory nature. And second, the action must be one by which rights or obligations have been determined, or from which legal consequences will flow.” U.S. Army Corps of Eng’rs v. Hawkes Co., 136 S. Ct. 1807, 1813 (2016) (quoting Bennett, 520 U.S. at 177–78 (1997)); see also Salazar v. King, 822 F.3d 61, 82 (2d Cir. 2016) (same). Moreover, “if an agency has issued a ‘definitive statement of its position, determining the rights and obligations of the parties,’ the agency’s action is final notwithstanding ‘[t]he possibility of further proceedings in the agency’ on related issues, so long as ‘judicial review at the time [would not] disrupt the administrative process.’” Sharkey v. Quarantillo, 541 F.3d 75, 89 (2d Cir. 2008) (alterations in original) (quoting Bell v. New Jersey, 461 U.S. 773, 779–80 (1983)).
1. Independent Timeliness of Proposed Count IX Plaintiffs assert that Proposed Count IX accrued in 2014 when plaintiffs’ notes were sold and they sustained cognizable injuries as a result. Pls.’ Rule 15 Mem. at 15–17. HUD counters
64

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 65 of 74 PageID #: 4468
that the cause of action accrued in 2002, upon commencement of its demonstration program. Defs.’ Rule 15 Mem. at 9–10.
Although the case law on accrual is not entirely clear, courts have tended to hold that while a substantive or as-applied challenge may accrue when the plaintiff is injured, a procedural challenge accrues when the challenged rule or policy is put in place. In Wind River Mineral Corp. v. United States, the court held that a claim “challeng[ing] a mere procedural violation in the adoption of a regulation or other agency action,” or one that is “a policy-based facial challenge to the government’s decision,” must be brought within six years of the decision. 946 F.2d 710, 715 (9th Cir. 1991). The Wind River court explained:
The grounds for such challenges will usually be apparent to any interested citizen within a six-year period following promulgation of the decision; one does not need to have a preexisting mining claim in an affected territory in order to . . . discover procedural errors in the adoption of a policy. The government's interest in finality outweighs a late-comer's desire to protest the agency's action as a matter of . . . procedure. Id. In contrast, the court noted that a claim that “contests the substance of an agency decision as exceeding constitutional or statutory authority,” may be brought “later than six years following the decision by filing a complaint for review of the adverse application of the decision to the particular challenger.” Id.; see also Parkdale Int’l, Ltd. v. United States, 508 F. Supp. 2d 1338, 1347 (Ct. Int’l Trade 2007) (noting that “[a] claim raising procedural objections accrues at the time that the rule goes into effect because the relevant harm has already been inflicted: an interested party has lost the opportunity to alter the agency’s decision through full participation in the regulatory process”). Plaintiffs here do not challenge HUD’s constitutional or statutory authority to implement the NSP, nor does Proposed Count IX assert a claim about the manner in which the NSP was applied to plaintiffs. Rather, plaintiffs allege a procedural violation in the adoption of the NSP;
65

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 66 of 74 PageID #: 4469
in Count IX, plaintiffs assert that “all of the note sales conducted by Federal Defendants as part of the Note Sale Program, including the sale of Plaintiffs’ mortgage notes, are agency actions conducted without observance of procedure required by law.” Proposed SAC ¶ 481. Accordingly, plaintiffs’ claim accrued when HUD finally decided to conduct note sales as part of the NSP.
The Proposed SAC alleges that HUD published a 2006 notice of proposed rulemaking that contemplated what plaintiffs themselves characterize as a “precursor” to the NSP. Proposed SAC ¶ 198. After failing to take public comments on the precursor program or promulgate a final rule, the Proposed SAC alleges that HUD “created” the NSP in 2010, which began with the first note sale on September 22, 2010, again without seeking public comment or promulgating a final rule. Id. ¶¶ 100, 198–199. The September 2010 note sale meets the first prong of the Supreme Court’s test for finality; as alleged in the Proposed SAC, and as a matter of common sense, that note sale marked the consummation of HUD’s plan to restore its insurance fund to solvency through the sale of distressed notes. The second prong is met as well, because the note sale created rights and obligations that had legal consequences: here, most significantly, the stripping of FHA benefits from those homeowners whose notes were sold.
In short, the agency action that is the target of Proposed Count IX is the implementation of the NSP without having conducted notice-and-comment rulemaking beforehand. Id. ¶ 481. Accordingly, based on plaintiffs’ allegations, the final agency action that started the limitations clock was HUD’s sale of notes pursuant to the NSP on September 22, 2010, and that is when, I conclude, the claim asserted in Proposed Count IX accrued.
I note that this is not a case where plaintiffs could not have known that HUD failed to provide notice and an opportunity for comments before implementing the NSP, and there is
66

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 67 of 74 PageID #: 4470
accordingly no equitable basis upon which to find Proposed Count IX timely. Plaintiffs’ letter motion seeking a premotion conference in anticipation of moving to amend indicates that HUD’s Office of the Inspector General published the Audit on July 14, 2017, and that “[a]s a result of the July Audit Report, Plaintiffs now seek to amend the FAC.” Letter of Elizabeth M. Lynch dated Sep. 20, 2017, at 1, Dkt. 62. Plaintiffs, though, filed their initial complaint on July 15, 2016 (less than six years after September 22, 2010), and knew or at least could have known at that time that HUD had implemented the NSP without undertaking notice-and-comment rulemaking. The Audit, it seems, merely triggered the idea for a claim based on the APA’s rulemaking requirements, and that is of course not sufficient to start a new limitations period. Plaintiffs had access to the relevant facts when they filed their original complaint and when they filed the FAC on August 12, 2016 (also less than six years after September 22, 2010).
Plaintiffs’ Proposed Count IX pleads in the alternative that DASP—what plaintiffs themselves describe as a “subset of the Note Sale Program that began in 2012”—itself constitutes a substantive rule that required its own notice-and-comment rulemaking. Proposed SAC ¶ 482. But the implementation of DASP did not amount to a new rule or policy. Plaintiffs identify nothing “tentative or interlocutory” about the creation of the NSP in 2010. See Hawkes Co., 136 S. Ct. at 1813. Nor do plaintiffs identify any substantial new “rights or obligations” created by DASP in 2012 that were not already a feature of the NSP in September of 2010. Id. The sole distinction alleged in the Proposed SAC between the Single Family Loan Sale program (“SFLS”)15 and DASP is that DASP “included two types of sales, a national sale and a Neighborhood Stabilization Outcome (“NSO-DASP”) sale, which required purchasers to achieve certain outcomes for a portion of the mortgages they purchased.” Proposed SAC ¶ 103. While
15 According to plaintiffs, HUD referred to the NSP as the “Single Family Loan Sale” program, or SFLS, from 2010 to 2011. SAC ¶ 101.
67

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 68 of 74 PageID #: 4471
the Proposed SAC discusses NSO-DASP sales at some length, it acknowledges that mortgages encumbering properties in New York City were never sold through NSO-DASP sales. Id. ¶¶ 141–148. The Audit, moreover, states that HUD conducted the SFLS program in 2010, and that “the name of the program was changed” to DASP in 2012. Audit at 3. Accordingly, the implementation of DASP was not a new final agency action requiring its own notice-andcomment rulemaking.
Accordingly, for statute of limitations purposes, the implementation of the NSP on September 22, 2010 is when plaintiffs’ cause of action for a failure to engage in rulemaking accrued. Because plaintiffs’ motion for leave to file the Proposed SAC was not brought within six years of that date, the Proposed SAC is not independently timely.
2. Relation Back Under Rule 15(c) Plaintiffs argue in the alternative that the Proposed SAC is timely because it relates back to the FAC, which was filed within six years of September 22, 2010. Pls.’ Rule 12 Mem. at 17. An amendment relates back when, as pertinent here, “the amendment asserts a claim or defense that arose out of the conduct, transaction, or occurrence set out—or attempted to be set out—in the original pleading.” Fed. R. Civ. P. 15(c)(1)(B). Rule 15(c)(1)(B) “relaxes, but does not obliterate, the statute of limitations; hence relation back depends on the existence of a common ‘core of operative facts’ uniting the original and newly asserted claims.” Mayle v. Felix, 545 U.S. 644, 659 (2005).16 “For a newly-added claim to relate back under Rule 15(c)(1)(B), ‘the basic claim must have arisen out of the conduct set forth in the original pleading.’” ASARCO LLC v. Goodwin, 756 F.3d 191, 202 (2d Cir. 2014)
16 Although Mayle discusses what was then denominated Rule 15(c)(2), it was referring to a previous version of Rule 15 in which (c)(2) was identical in every material respect to what is now Rule 15(c)(1)(B). See Fed. R. Civ. P. 15(c)(2) (2005); Mayle, 545 U.S. at 655 (quoting then Rule 15(c)(2)).
68

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 69 of 74 PageID #: 4472
(quoting Slayton v. Am. Express Co., 460 F.3d 215, 228 (2d Cir. 2006)). “[T]he central inquiry is whether adequate notice of the matters raised in the amended pleading has been given to the opposing party within the statute of limitations by the general fact situation alleged in the original pleading.” Id. (alteration in original) (quoting Slayton, 460 F.3d at 228). Accordingly, “even where an amended complaint tracks the legal theory of the first complaint, claims that are based on an entirely distinct set of factual allegations will not relate back.” Lehman XS Trust v. Greenpoint Mortg. Funding, Inc., 916 F.3d 116, 128 (2d Cir. 2019) (quoting Slayton, 460 F.3d at 228).
In Mayle, the Supreme Court considered when a claim arises out of the “conduct, transaction, or occurrence” set out in the original pleading in the context of a habeas corpus petition. Felix, the petitioner in Mayle, filed a timely petition claiming that the admission of videotaped testimony from a witness at his trial violated his confrontation clause rights. Mayle, 545 U.S. at 648. Felix then filed an out-of-time petition claiming that his post-arrest statements were coerced and that their admission at trial violated his right against self-incrimination. Id. at 649. The Supreme Court held that Felix’s second petition did not relate back because it asserted “a new ground for relief supported by facts that differ[ed] in both time and type from those the original pleading set forth.” Id. at 650. Relation back, the Court determined, “depends on the existence of a common ‘core of operative facts’ uniting the original and newly asserted claims.” Id. at 659. Felix’s second petition did not meet this test; it challenged “an extrajudicial event, i.e., an out-of-court police interrogation,” whereas his original petition challenged events that took place entirely during the course of his trial. Id. at 661.
As in Mayle, plaintiffs’ Proposed Count IX arises from facts other than those raised by claims in the FAC. Proposed Count IX concerns the failure of HUD to engage in notice-and-
69

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 70 of 74 PageID #: 4473
comment rulemaking before implementing the NSP in 2010; the claims in the FAC concern note
sales conducted as part of the NSP once the program was underway.
Sierra Club v. Penfold, 857 F.2d 1307 (9th Cir. 1988), a Ninth Circuit decision cited
approvingly by the Supreme Court in Mayle, is instructive.17 There, the Ninth Circuit addressed
circumstances analogous to those presented here. The district court had ruled that a procedural
challenge to rulemaking was barred by the six-year statute of limitations, though at the same time
it permitted a timely claim challenging the application of the same regulations to go forward.
Mayle, 857 F.2d at 1310–11. On appeal, plaintiff argued inter alia that its procedural challenge
related back to its originally pleaded as-applied challenge. Id. at 1315. The Ninth Circuit
disagreed, distinguishing a case in which it “allow[ed] a claim for interference with employment
relations to relate back to a former claim for slander.” Id. (citing Santana v. Holiday Inns, Inc.,
686 F.2d 736, 739 (9th Cir. 1982)). In reasoning equally applicable to plaintiffs’ Proposed
Count IX, the court explained:
Santana does not control here. This is because Sierra Club’s amendment goes beyond alleging a different theory of recovery. It alleges a new claim for relief. The original challenge based on [the Bureau of Land Management]’s [(“BLM”)] “policy and practice” requires evidence showing how BLM conducts Notice mine review. The new claim alleging invalidity of the Notice regulations requires evidence of the procedures used in adopting the regulations. The original claim was premised on a theory of unlawful application of the five-acre rule. The new procedural challenge Sierra Club attempted to add is based upon a theory of invalidity of the regulations as adopted. In short, the procedural challenge does not arise out of the same conduct or transaction. It arises out of BLM’s conduct in adopting the regulations rather than BLM’s “policy and practice” in Notice mine review. Because of this, BLM did not have notice of the substance of what was sought to be added by the amendment. Rule 15(c) does not and should not allow an amended complaint to relate back where the conduct, transaction or occurrence alleged is different. Otherwise, claimants such as Sierra Club could challenge regulations at a much later time, e.g., when administered by the federal agency, rather than when adopted.
17 Mayle criticized the Ninth Circuit’s “capacious” definition of “conduct, transaction, or occurrence” in the habeas context. The Supreme Court, however, relied upon the Ninth Circuit’s holding in Penfold, a non-habeas civil case, in adopting a narrower construction in the habeas context. 545 U.S. at 659.
70

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 71 of 74 PageID #: 4474
Id. at 1316. So too here, the facts that support Proposed Count IX are not the same “core of operative
facts” that support Counts I through IV against HUD. While Counts I through IV concern the impact of activities conducted pursuant to a program that was up and running, Proposed Count IX concerns the failure to follow certain procedures before the program was put in place. This is clear from the absence of any allegation in the FAC that HUD failed to seek public comment before implementing the NSP, other than a fleeting statement in a footnote concerning a completely different agency action.18 Indeed, the only references to the Administrative Procedure Act at all in the FAC are in that footnote and as a basis for this Court’s jurisdiction with respect to Count II. FAC ¶¶ 14, 55 n.2, 401–402.19
Accordingly, Proposed Count IX does not relate back to the FAC and is therefore timebarred. An amendment adding Proposed Count IX would therefore be futile.
3. Failure to Join Indispensable Parties Even if Proposed Count IX were timely, its assertion would be futile for a second, independent reason. Plaintiffs’ Proposed Count IX seeks to set aside the sales of plaintiffs’ notes and mortgages. When a plaintiff seeks to set aside a contract, though, all parties to the contract must be joined. See Kulawy v. United States, 917 F.2d 729, 736 (2d Cir. 1990) (“No procedural principle is more deeply imbedded in the common law than that, in an action to set aside . . . a contract, all parties who may be affected by the determination of the action are indispensable.”
18 In that footnote, the Proposed SAC claims that HUD, in or around June 2015, removed language about preforeclosure assistance from its form FHA note and mortgage contract without notice and comment. FAC ¶ 55 n.2. However, the FAC did not assert a cause of action for this failure, nor is Proposed Count IX premised on this alleged failure to seek public comment. 19 Proposed Count IX is expressly brought under 5 U.S.C. § 553, Proposed SAC ¶¶ 479, 482, which specifically concerns agency rulemaking procedure. Section 553 is nowhere mentioned, with respect to Count II or otherwise, in the FAC.
71

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 72 of 74 PageID #: 4475
(quoting Crouse-Hinds Co. v. InterNorth, Inc., 634 F.2d 690, 701 (2d Cir. 1980)); Sunset Homeowners Ass’n, Inc. v. DiFrancesco, 2019 WL 2808284, at *5 (W.D.N.Y. July 3, 2019).
Generally, when a party who is indispensable has not been joined, and a plaintiff fails to advance compelling reasons for the nonjoinder, dismissal is proper. See Viacom Int’l, Inc. v. Kearney, 212 F.3d 721, 725 (2d Cir. 2000), overruled on other grounds as recognized in Merrill Lynch & Co. Inc. v. Allegheny Energy, Inc., 550 F.3d 171, 178–79 (2d Cir. 2007); Roldan v. Second Dev. Servs., Inc., 2018 WL 1701938, at *4 (E.D.N.Y. Mar. 30, 2018). In the alternative, and where feasible, the court may join the indispensable party. Roldan, 2018 WL 1701938, at *4.
Plaintiffs have neither joined their original FHA-insured lenders—the mortgagees who sold their notes and mortgages pursuant to the NSP—nor explained why it would not be feasible to do so. Moreover, as discussed above, plaintiffs have advised the Court that they are in the process of finalizing a settlement agreement with the Caliber defendants, the parties who acquired those notes and mortgages. Letter of Benjamin R. Nagin dated Apr. 22, 2019. Any amendment seeking to undo the sales of plaintiffs’ notes and mortgages that does not include the original mortgagees or the parties that purchased those notes and mortgages would be subject to dismissal for failure to join required parties. Plaintiffs’ Proposed SAC, at least as proposed and not further amended to join these parties, is accordingly futile on this basis as well.
For all the reasons stated above, I respectfully recommend that plaintiffs’ motion to amend the First Amended Complaint be denied.
CONCLUSION For the reasons stated in this Report and Recommendation, I respectfully recommend that HUD’s motion to dismiss the First Amended Complaint be granted, and that plaintiff’s motion
72

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 73 of 74 PageID #: 4476
for leave to amend the First Amended Complaint be denied. In so doing, I make the following findings:
(a) that all plaintiffs lack standing to pursue Count I of the First Amended Complaint; (b) that all plaintiffs have standing to pursue Count II of the First Amended Complaint; (c) that all plaintiffs have standing to pursue Count III of the First Amended Complaint
to the extent they allege threats to neighborhood stability and the promotion of segregation, but lack standing to pursue Count III to the extent they allege an impairment of their ability to remain homeowers; (d) that plaintiffs Washington, Blackett, and Mason have standing to pursue Count IV of the First Amended Complaint; (e) that plaintiff Trotman lacks standing to pursue Count IV of the First Amended Complaint; (f) that Count II fails to state a claim upon which relief can be granted; (g) that Count III fails to state a claim upon which relief can be granted; (h) that Count IV fails to state a claim upon which relief can be granted; (i) that all plaintiffs have standing to pursue Proposed Count IX of the Proposed Second Amended Complaint; and (j) that amending the First Amended Complaint to include Proposed Count IX would be futile. Any objections to the recommendations made in this Report must be made within fourteen days after the filing of this Report and Recommendation and, in any event, on or before August 12, 2019. See 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b)(2). Failure to file timely objections may waive the right to appeal the District Court’s order. See Small v. Sec’y of Health
73

Case 1:16-cv-03948-ENV-SMG Document 106 Filed 07/29/19 Page 74 of 74 PageID #: 4477 & Human Servs., 892 F.2d 15, 16 (2d Cir. 1989) (discussing waiver under the former ten-day limit). /s/ STEVEN M. GOLD United States Magistrate Judge Brooklyn, New York July 29, 2019
U:\#Clerk Files\Decisions 2018-2019\Washington v. HUD 16-cv-3948 Motion to Dismiss R&R.docx
74

 
 Case 1:16-cv-03948-ENV-SMG Document 113 Filed 11/15/19 Page 1 of 3 PageID #: 4486

Case 1:16-cv-03948-ENV-SMG Document 113 Filed 11/15/19 Page 2 of 3 PageID #: 4487

Case 1:16-cv-03948-ENV-SMG Document 113 Filed 11/15/19 Page 3 of 3 PageID #: 4488

 
 Case 1:16-cv-03948-ENV-SMG Document 114 Filed 11/15/19 Page 1 of 3 PageID #: 4492

Case 1:16-cv-03948-ENV-SMG Document 114 Filed 11/15/19 Page 2 of 3 PageID #: 4493

Case 1:16-cv-03948-ENV-SMG Document 114 Filed 11/15/19 Page 3 of 3 PageID #: 4494

 
 Case 1:16-cv-03948-ENV-SMG Document 115 Filed 11/15/19 Page 1 of 3 PageID #: 4498

Case 1:16-cv-03948-ENV-SMG Document 115 Filed 11/15/19 Page 2 of 3 PageID #: 4499

Case 1:16-cv-03948-ENV-SMG Document 115 Filed 11/15/19 Page 3 of 3 PageID #: 4500

 
 U.S. District Court Eastern District of New York (Brooklyn) CIVIL DOCKET FOR CASE #: 1:16-cv-03948-ENV-SMG

Washington v. Caliber Home Loans, Inc. et al Assigned to: Judge Eric N. Vitaliano Referred to: Magistrate Judge Steven M. Gold Cause: 15:1692 Fair Debt Collection Act

Date Filed: 07/15/2016 Date Terminated: 11/20/2019 Jury Demand: Plaintiff Nature of Suit: 480 Consumer Credit Jurisdiction: Federal Question

Plaintiff
Joseph Washington TERMINATED: 11/18/2019

represented by Carolyn Elizabeth Coffey Mobilization for Justice, Inc. 100 William Street 6th floor New York, NY 10038 212-417-3701 Fax: 212-417-3891 Email: ccoffey@mfjlegal.org ATTORNEY TO BE NOTICED

Christopher Fasano Mobilization for Justice, Inc. 100 William Street 6th floor New York, NY 10038 212-417-3719 Fax: 212-417-3890 Email: cfasano@mfjlegal.org ATTORNEY TO BE NOTICED

Diane Lee Houk Emery Celli Brinckerhoff & Abady LLP 600 Fifth Avenue 10th Floor New York, NY 10020 212-763-5000 Fax: 212-763-5001 Email: dhouk@ecbalaw.com ATTORNEY TO BE NOTICED

Douglas Edward Lieb Emery Celli Brinckerhoff & Abady

Plaintiff
St. Clair Blackett TERMINATED: 11/18/2019

LLP 600 Fifth Avenue 10th Floor New York, NY 10020 212-763-5000 Fax: 212-763-5001 Email: dlieb@ecbalaw.com ATTORNEY TO BE NOTICED
Linda Jun Mobilization for Justice, Inc. 100 William Street 6th floor New York, NY 10038 (212)417-3703 Fax: (212)417-3891 Email: ljun@mfjlegal.org TERMINATED: 04/03/2019 ATTORNEY TO BE NOTICED
Matthew D. Brinckerhoff Emery Celli Brinckerhoff & Abady PC 600 Fifth Avenue 10th floor New York, NY 10020 212-763-5000 Fax: 212-763-5001 Email: mbrinckerhoff@ecbalaw.com ATTORNEY TO BE NOTICED
Elizabeth Mary Lynch Office of the New York Attorney General 28 Liberty Street New York, NY 10005 212-416-6314 Email: ElizabethM.Lynch@ag.ny.gov TERMINATED: 04/03/2019 ATTORNEY TO BE NOTICED
represented by Christopher Fasano (See above for address)

Plaintiff Melissa Trotman TERMINATED: 09/30/2019
Plaintiff Lucille Mason TERMINATED: 11/18/2019

ATTORNEY TO BE NOTICED
Diane Lee Houk (See above for address) ATTORNEY TO BE NOTICED
Douglas Edward Lieb (See above for address) ATTORNEY TO BE NOTICED
Elizabeth Mary Lynch (See above for address) TERMINATED: 04/03/2019 ATTORNEY TO BE NOTICED
represented by Christopher Fasano (See above for address) ATTORNEY TO BE NOTICED
Diane Lee Houk (See above for address) ATTORNEY TO BE NOTICED
Douglas Edward Lieb (See above for address) ATTORNEY TO BE NOTICED
Elizabeth Mary Lynch (See above for address) TERMINATED: 04/03/2019 ATTORNEY TO BE NOTICED
represented by Christopher Fasano (See above for address) ATTORNEY TO BE NOTICED
Diane Lee Houk (See above for address) ATTORNEY TO BE NOTICED
Douglas Edward Lieb (See above for address) ATTORNEY TO BE NOTICED

V. Defendant Caliber Home Loans, Inc. TERMINATED: 11/18/2019
Defendant U.S. Bank Trust, N.A. As Trustee for LSF9 Bank Master Participation Trust TERMINATED: 11/18/2019

Elizabeth Mary Lynch (See above for address) TERMINATED: 04/03/2019 ATTORNEY TO BE NOTICED
represented by Benjamin R. Nagin Sidley Austin LLP 787 7th Avenue New York, NY 10019 (212) 839-5911 Fax: (212) 839-5599 Email: bnagin@sidley.com LEAD ATTORNEY ATTORNEY TO BE NOTICED
Angela Zambrano Sidley Austin LLP 2021 Mckinney Ave, Suite 2000 Dallas, TX 75201 214-981-3405 Fax: 214-983-3400 Email: azambrano@sidley.com PRO HAC VICE ATTORNEY TO BE NOTICED
Melissa Colon-Bosolet Sidley Austin LLP 787 Seventh Avenue Ny, NY 10019 212-839-5543 Fax: 212-835-5100 Email: mcolon-bosolet@sidley.com ATTORNEY TO BE NOTICED
represented by Benjamin R. Nagin (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED
Angela Zambrano

Defendant U.S. Department of Housing and Urban Development TERMINATED: 09/30/2019
Defendant Ben Carson In his offical capacity as Secretary

(See above for address) PRO HAC VICE ATTORNEY TO BE NOTICED
Melissa Colon-Bosolet (See above for address) ATTORNEY TO BE NOTICED
represented by Elliot M. Schachner United States Attorneys Office Eastern District of New York 271 Cadman Plaza East Brooklyn, NY 11201-1820 (718)254-6053 Fax: (718)254-6081 Email: Elliot.Schachner@usdoj.gov ATTORNEY TO BE NOTICED
Kelly Horan Florio United States Attorneys Office Civil Division Eastern District of New York 271 Cadman Plaza East, 7th Floor Brooklyn, NY 11201 718-254-6007 Fax: 718-254-6081 Email: Kelly.Horan@usdoj.gov ATTORNEY TO BE NOTICED
Tamra Moore United States Department of Justice Civil Division Federal Programs Branch 20 Massachusetts Avenue Nw Washington, DC 20530 202-305-8628 Fax: 202-305-8517 Email: tamra.moore@usdoj.gov ATTORNEY TO BE NOTICED
represented by Elliot M. Schachner (See above for address) ATTORNEY TO BE NOTICED

of HUD TERMINATED: 09/30/2019
Defendant Brian Montgomery In his offical capacity as Commissioner of the Federal Housing Administration TERMINATED: 09/30/2019

Kelly Horan Florio (See above for address) ATTORNEY TO BE NOTICED
Tamra Moore (See above for address) ATTORNEY TO BE NOTICED
represented by Elliot M. Schachner (See above for address) ATTORNEY TO BE NOTICED
Kelly Horan Florio (See above for address) ATTORNEY TO BE NOTICED
Tamra Moore (See above for address) ATTORNEY TO BE NOTICED

Date Filed 07/15/2016
07/15/2016 07/18/2016 07/18/2016

# Docket Text
1 COMPLAINT against All Defendants filing fee $ 400, receipt number 0207-8762196 Was the Disclosure Statement on Civil Cover Sheet completed -NO,, filed by Joseph Washington. (Attachments: # 1 Civil Cover Sheet, # 2 Proposed Summons, # 3 Proposed Summons) (Lynch, Elizabeth) (Attachment 1 replaced on 7/18/2016) (Davis, Kimberly). (Entered: 07/15/2016)
NOTICE - the Clerk's Office cannot assign this case without a completed Civil Cover Sheet. Counsel is directed to forward a completed Civil Cover Sheet, answering all questions in NY-E Division of Business Rule 50.1(d)(2) section on the second page using the event Proposed Summons/Civil Cover Sheet. (Davis, Kimberly) (Entered: 07/15/2016)
Case Assigned to Judge Carol Bagley Amon and Magistrate Judge Steven M. Gold. Please download and review the Individual Practices of the assigned Judges, located on our website. Attorneys are responsible for providing courtesy copies to judges where their Individual Practices require such. (Davis, Kimberly) (Entered: 07/18/2016)
2 In accordance with Rule 73 of the Federal Rules of Civil Procedure and Local Rule 73.1, the parties are notified that if all parties consent a United

States magistrate judge of this court is available to conduct all proceedings in this civil action including a (jury or nonjury) trial and to order the entry of a final judgment. Attached to the Notice is a blank copy of the consent form that should be filled out, signed and filed electronically only if all parties wish to consent. The form may also be accessed at the following link: http://www.uscourts.gov/uscourts/FormsAndFees/Forms/AO085.pdf . You may withhold your consent without adverse substantive consequences. Do NOT return or file the consent unless all parties have signed the consent. (Davis, Kimberly) (Entered: 07/18/2016)

07/18/2016

3 This attorney case opening filing has been checked for quality control. See the attachment for corrections that were made, if any. (Davis, Kimberly) (Entered: 07/18/2016)

07/18/2016

4 Summons Issued as to Caliber Home Loans, Inc., U.S. Bank Trust, N.A., As Trustee for LSF9 Master Participation Trust. (Attachments: # 1 Summons) (Davis, Kimberly) (Entered: 07/18/2016)

07/20/2016

5 SCHEDULING ORDER: An Initial Conference is set for 11/15/2016 at 11:30 AM in Courtroom 13D South before Magistrate Judge Steven M. Gold. Counsel are directed to refer to and comply with the attached order. Ordered by Magistrate Judge Steven M. Gold on 7/20/2016. (Attachments: # 1 CHAMBERS INDIVIDUAL RULES) (Richardson, Jacqueline) (Entered: 07/20/2016)

07/29/2016

6 NOTICE of Appearance by Christopher Fasano on behalf of Joseph Washington (aty to be noticed) (Fasano, Christopher) (Entered: 07/29/2016)

08/10/2016

7 NOTICE of Appearance by Matthew D. Brinckerhoff on behalf of Joseph Washington (aty to be noticed) (Brinckerhoff, Matthew) (Entered: 08/10/2016)

08/10/2016 8 NOTICE of Appearance by Diane Lee Houk on behalf of Joseph Washington (aty to be noticed) (Houk, Diane) (Entered: 08/10/2016)

08/11/2016 9 NOTICE of Appearance by Linda Jun on behalf of Joseph Washington (aty to be noticed) (Jun, Linda) (Entered: 08/11/2016)

08/12/2016 10 NOTICE of Appearance by Carolyn Elizabeth Coffey on behalf of Joseph Washington (aty to be noticed) (Coffey, Carolyn) (Entered: 08/12/2016)

08/12/2016

11 AMENDED COMPLAINT against Caliber Home Loans, Inc., U.S. Bank Trust, N.A., As Trustee for LSF9 Master Participation Trust, U.S. Department of Housing and Urban Development, Julian Castro, Edward

Golding, filed by Joseph Washington, St. Clair Blackett, Melissa Trotman, Lucille Mason. (Lynch, Elizabeth) (Entered: 08/12/2016)

08/12/2016

12 Proposed Summons. Re 11 Amended Complaint, by St. Clair Blackett, Lucille Mason, Melissa Trotman, Joseph Washington (Lynch, Elizabeth) (Entered: 08/12/2016)

08/12/2016

13 Proposed Summons. Re 11 Amended Complaint, by St. Clair Blackett, Lucille Mason, Melissa Trotman, Joseph Washington (Lynch, Elizabeth) (Entered: 08/12/2016)

08/12/2016 14 Proposed Summons. by St. Clair Blackett, Lucille Mason, Melissa Trotman, Joseph Washington (Lynch, Elizabeth) (Entered: 08/12/2016)

08/12/2016 15 Proposed Summons. by St. Clair Blackett, Lucille Mason, Melissa Trotman, Joseph Washington (Lynch, Elizabeth) (Entered: 08/12/2016)

08/12/2016

16 Proposed Summons. Re 11 Amended Complaint, by St. Clair Blackett, Lucille Mason, Melissa Trotman, Joseph Washington (Lynch, Elizabeth) (Entered: 08/12/2016)

08/16/2016

17 Proposed Summons. Re 11 Amended Complaint, by St. Clair Blackett, Lucille Mason, Melissa Trotman, Joseph Washington (Lynch, Elizabeth) (Entered: 08/16/2016)

08/17/2016

18 Summons Issued as to Caliber Home Loans, Inc., Julian Castro, Edward Golding, U.S. Bank Trust, N.A., As Trustee for LSF9 Master Participation Trust, U.S. Department of Housing and Urban Development. (Attachments: # 1 Summons- Castro, # 2 Summons Golding, # 3 Summons- Caliber, # 4 Summons - US Bank) (Fernandez, Erica) (Entered: 08/17/2016)

08/30/2016

19 SUMMONS Returned Executed by Lucille Mason, Joseph Washington, Melissa Trotman, St. Clair Blackett. Caliber Home Loans, Inc. served on 8/23/2016, answer due 9/13/2016. (Houk, Diane) (Entered: 08/30/2016)

09/12/2016

20 Letter MOTION for Extension of Time to File Answer re 11 Amended Complaint, by Caliber Home Loans, Inc., U.S. Bank Trust, N.A., As Trustee for LSF9 Master Participation Trust. (Attachments: # 1 Stipulation and Proposed Order) (Nagin, Benjamin) Modified on 9/13/2016 to correct referenced document (Piper, Francine). (Entered: 09/12/2016)

09/13/2016

ORDER: 20 Motion for Extension of Time to Answer Amended Complaint is GRANTED. Caliber Home Loans, Inc. and U.S. Bank Trust, N.A., As Trustee for LSF9 Master Participation Trust answers are due

10/28/2016. So Ordered by Magistrate Judge Steven M. Gold on 9/13/2016. (Gillespie, Saudia) (Entered: 09/13/2016)

10/17/2016

21 MOTION for Leave to Appear Pro Hac Vice of Angela C. Zambrano Filing fee $ 150, receipt number 0207-8996700. by Caliber Home Loans, Inc., U.S. Bank Trust, N.A., As Trustee for LSF9 Master Participation Trust. (Attachments: # 1 Affidavit, # 2 Exhibit New York Certificate of Good Standing, # 3 Exhibit Texas State Bar Certificate of Good Standing) (Zambrano, Angela) (Entered: 10/17/2016)

10/19/2016

ORDER: 21 Motion for Leave to Appear Pro Hac Vice is GRANTED. Attorney Angela Zambrano shall register for ECF, registration is available online at the NYEDs homepage. Once registered, the attorney shall file a notice of appearance and ensure that she receives electronic notification of activity in this case. Also, the attorney shall ensure that the $150 admission fee be submitted to the Clerks Office. Ordered by Magistrate Judge Steven M. Gold on 10/19/2016. (Gillespie, Saudia) (Entered: 10/19/2016)

10/20/2016

22 NOTICE of Appearance by Kelly Horan Florio on behalf of Julian Castro, Edward Golding, U.S. Department of Housing and Urban Development (aty to be noticed) (Florio, Kelly) (Entered: 10/20/2016)

10/20/2016

23 NOTICE by Julian Castro, Edward Golding, U.S. Department of Housing and Urban Development re 22 Notice of Appearance Notice of Appearance for Tamra T. Moore (Florio, Kelly) (Entered: 10/20/2016)

10/20/2016

24 First MOTION for Extension of Time to File Response/Reply respectfully requesting an extension of time to answer, move, or otherwise respond to the Amended Complaint and corresponding adjournment of the November 15, 2016 status conference by Julian Castro, Edward Golding, U.S. Department of Housing and Urban Development. (Florio, Kelly) (Entered: 10/20/2016)

10/21/2016

25 ORDER granting 24 Motion for Extension of Time to File Response/Reply; Application granted. Magistrate Gold will provide date for reschedule conference. Ordered by Judge Carol Bagley Amon on 10/21/2016. (Fernandez, Erica) (Entered: 10/21/2016)

10/21/2016

26 Letter MOTION for Extension of Time to File Response/Reply as to 11 Amended Complaint, until December 8, 2016 by Caliber Home Loans, Inc., U.S. Bank Trust, N.A., As Trustee for LSF9 Master Participation Trust. (Nagin, Benjamin) Modified type of motion on 10/24/2016 (Gillespie, Saudia). (Entered: 10/21/2016)

10/24/2016

SCHEDULING ORDER: The initial conference previously scheduled for November 15, 2016 is adjourned to December 20, 2016 at 11:30 a.m. in

Courtroom 13D South before the undersigned. Ordered by Magistrate Judge Steven M. Gold on 10/24/2016. (Gillespie, Saudia) (Entered: 10/24/2016)

10/24/2016

ORDER: 26 Motion for Extension of Time to Answer Amended Complaint is GRANTED. Caliber Home Loans, Inc. answer due 12/8/2016; U.S. Bank Trust, N.A., As Trustee for LSF9 Master Participation Trust answer due 12/8/2016. Ordered by Magistrate Judge Steven M. Gold on 10/24/2016. (Gillespie, Saudia) (Entered: 10/24/2016)

10/24/2016

27 SUMMONS Returned Executed by Lucille Mason, Joseph Washington, Melissa Trotman, St. Clair Blackett. U.S. Department of Housing and Urban Development served on 8/19/2016, answer due 9/9/2016. (Houk, Diane) (Entered: 10/24/2016)

10/28/2016

28 NOTICE of Appearance by Elliot M. Schachner on behalf of Julian Castro, Edward Golding, U.S. Department of Housing and Urban Development (aty to be noticed) (Schachner, Elliot) (Entered: 10/28/2016)

11/01/2016

29 NOTICE of Appearance by Tamra Moore on behalf of Julian Castro, Edward Golding, U.S. Department of Housing and Urban Development (aty to be noticed) (Moore, Tamra) (Entered: 11/01/2016)

12/08/2016

30 Letter MOTION for pre motion conference by Julian Castro, Edward Golding, U.S. Department of Housing and Urban Development. (Moore, Tamra) (Entered: 12/08/2016)

12/08/2016

31 Corporate Disclosure Statement by Caliber Home Loans, Inc., U.S. Bank Trust, N.A., As Trustee for LSF9 Master Participation Trust identifying Corporate Parent LSF6 Service Operations, LLC, Corporate Parent LSF6 Mid-Servicer Holdings, LLC for Caliber Home Loans, Inc.; Corporate Parent U.S. Bank National Association, Corporate Parent U.S. Bancorp, Other Affiliate LSF9 Master Participation Trust for U.S. Bank Trust, N.A., As Trustee for LSF9 Master Participation Trust. (Nagin, Benjamin) (Entered: 12/08/2016)

12/08/2016

32 Letter MOTION for pre motion conference with respect to their anticipated motion to dismiss the Amended Complaint by Caliber Home Loans, Inc., U.S. Bank Trust, N.A., As Trustee for LSF9 Master Participation Trust. (Nagin, Benjamin) (Entered: 12/08/2016)

12/09/2016

ORDER REASSIGNING CASE. Case reassigned to Judge Eric N. Vitaliano for all further proceedings. Judge Carol Bagley Amon no longer assigned to case Please download and review the Individual Practices of the assigned Judges, located on our website. Attorneys are responsible for providing courtesy copies to judges where their Individual Practices

require such.. Ordered by Chief Judge Dora Lizette Irizarry on 12/9/2016. (Davis, Kimberly) (Entered: 12/09/2016)

12/09/2016

33 Letter MOTION to Stay re Scheduling Order, Adjournment of Initial Conference, and Stay Discovery by Julian Castro, Edward Golding, U.S. Department of Housing and Urban Development. (Moore, Tamra) (Entered: 12/09/2016)

12/12/2016 34 Letter to Oppose Letter Request to Adjourn by Joseph Washington (Houk, Diane) (Entered: 12/12/2016)

12/12/2016

35 Letter MOTION to Adjourn Conference and to Join the Federal Defendants', Letter MOTION to Stay Discovery and Adjourn Initial Conference (Dkt. 33) by Caliber Home Loans, Inc., U.S. Bank Trust, N.A., As Trustee for LSF9 Master Participation Trust. (Attachments: # 1 Exhibit A - Caliber Defendants' Pre-Motion Letter (Dkt. 32), # 2 Exhibit B - Federal Defendants' Pre-Motion Letter (Dkt. 30)) (Nagin, Benjamin) (Entered: 12/12/2016)

12/13/2016

ORDER: 35 Motion to Adjourn Conference is hereby DENIED. The initial conference previously scheduled for DECEMBER 20, 2016 AT 11:30 AM will proceed as scheduled. Counsel shall be prepared to discuss at the conference 33 motion to stay. Ordered by Magistrate Judge Steven M. Gold on 12/13/2016. (Gillespie, Saudia) (Entered: 12/13/2016)

12/13/2016 36 NOTICE of Appearance by Douglas Edward Lieb on behalf of All Plaintiffs (aty to be noticed) (Lieb, Douglas) (Entered: 12/13/2016)

12/15/2016 37 RESPONSE in Opposition re 30 Letter MOTION for pre motion conference filed by All Plaintiffs. (Houk, Diane) (Entered: 12/15/2016)

12/15/2016

38 RESPONSE in Opposition re 32 Letter MOTION for pre motion conference with respect to their anticipated motion to dismiss the Amended Complaint filed by All Plaintiffs. (Houk, Diane) (Entered: 12/15/2016)

12/20/2016

ORDER granting in part and denying in part 33 Motion to Stay; granting in part and denying in part 35 Motion to Stay as indicated during the proceeding held today. Ordered by Magistrate Judge Steven M. Gold on 12/20/2016. (Gold, Steven) (Entered: 12/20/2016)

12/20/2016

39 Minute Entry: Initial Conference Hearing held on 12/20/2016 before Magistrate Judge Steven M. Gold. Lynch, Houk, Lieb, Fasano, Jun and Brinkerhoff for plaintiffs; Moore and Schachner for HUD, Castro and Golding; Nagin and Colon for Caliber and US Bank Trust as Trustee. Rule 26(a)(1) disclosures will be served by January 27, 2017. The parties will attempt to agree upon limited document discovery and ESI protocols

as discussed during today's conference. Counsel for defendants represent that a litigation hold is in place. THE COURT WILL HOLD A STATUS CONFERENCE AT 4:00 PM ON FEBRUARY 27, 2017. Counsel shall submit letters identifying any areas of dispute that they seek to raise at that conference by letter filed no later than February 21, 2017. (Gillespie, Saudia) (Entered: 12/21/2016)

01/31/2017

ORDER. Having reviewed the parties' submissions regarding 30 the federal defendants' motion for a pre motion conference, the Court finds that no pre motion conference is necessary, but the federal defendants may proceed with their motion to dismiss. The parties shall file a joint proposed motion schedule by 2/14/2017. Ordered by Judge Eric N. Vitaliano on 1/31/2017.(Fielding, Peter) (Entered: 01/31/2017)

01/31/2017

ORDER. Having reviewed the parties' submissions regarding 32 the Caliber defendants' motion for a pre motion conference, the Court finds that no pre motion conference is necessary, but the Caliber defendants may proceed with their motion to dismiss. The parties shall file a joint proposed motion schedule by 2/14/2017. Ordered by Judge Eric N. Vitaliano on 1/31/2017.(Fielding, Peter) (Entered: 01/31/2017)

02/14/2017

40 Letter With Proposed MTD Briefing Schedule by St. Clair Blackett, Lucille Mason, Melissa Trotman, Joseph Washington (Lynch, Elizabeth) (Entered: 02/14/2017)

02/15/2017

SCHEDULING ORDER. Defendants shall serve on plaintiffs their motions to dismiss no later than April 19, 2017. Plaintiffs shall serve on defendants their oppositions no later than May 18, 2017, and defendants shall serve on plaintiffs their replies and electronically file all motion papers no later than June 2, 2017. The parties are reminded to comply with all of the Court's individual rules, including Rule III.D (the "Bundling Rule"). Ordered by Judge Eric N. Vitaliano on 2/15/2017. (Fielding, Peter) (Entered: 02/15/2017)

02/21/2017

41 Letter re: Discovery Status by St. Clair Blackett, Lucille Mason, Melissa Trotman, Joseph Washington (Attachments: # 1 Exhibit A) (Houk, Diane) (Entered: 02/21/2017)

02/24/2017

42 Letter response to Plaintiffs' Letter re Discovery Status by Julian Castro, Edward Golding, U.S. Department of Housing and Urban Development (Moore, Tamra) (Entered: 02/24/2017)

02/24/2017

43 Letter to The Honorable Steven M. Gold in response to Plaintiffs' February 21, 2017 letter by Caliber Home Loans, Inc., U.S. Bank Trust, N.A. (Nagin, Benjamin) (Entered: 02/24/2017)

02/27/2017

44 Minute Entry: Status Conference held on 2/27/2017 before Magistrate Judge Steven M. Gold. Lynch, Houk, Fasano, and Jun for plaintiffs; Moore and Schachner for HUD, Nagin and Whitman for Caliber and US Bank Trust as Trustee. Plaintiffs' application to compel disclosure by HUD of an administrative record is denied for reasons stated on the record. (Tape #4:02-4:22.) (Gillespie, Saudia) (Entered: 02/28/2017)

03/07/2017

45 NOTICE of Appearance by Melissa Colon-Bosolet on behalf of Caliber Home Loans, Inc., U.S. Bank Trust, N.A. (aty to be noticed) (ColonBosolet, Melissa) (Entered: 03/07/2017)

04/07/2017

46 Letter MOTION for Leave to File Excess Pages for the Federal Defendants' memorandum in support of their Motion to Dismiss by Julian Castro, Edward Golding, U.S. Department of Housing and Urban Development. (Moore, Tamra) (Entered: 04/07/2017)

04/07/2017

47 Letter MOTION for Leave to File Excess Pages for the Federal Defendants' memorandum in support of their motion to dismiss by Julian Castro, Edward Golding, U.S. Department of Housing and Urban Development. (Moore, Tamra) (Entered: 04/07/2017)

04/07/2017

ORDER terminating 46 Motion for Leave to File Excess Pages. Based on the representations in footnote 1 of the Federal Defendants' 47 second motion for leave to file excess pages, their 46 first motion for leave to file excess pages is terminated because it was filed in error. Ordered by Judge Eric N. Vitaliano on 4/7/2017. (Fielding, Peter) (Entered: 04/07/2017)

04/07/2017

ORDER granting 47 Motion for Leave to File Excess Pages. The Federal Defendants' memorandum in support of their motion to dismiss and the Plaintiffs' memorandum in opposition to that motion shall be no longer than 35 double-spaced pages. These memoranda must otherwise conform with the Court's individual rules, including Rule III.C. Ordered by Judge Eric N. Vitaliano on 4/7/2017. (Fielding, Peter) (Entered: 04/07/2017)

04/17/2017

48 Letter MOTION for Extension of Time to File Serve the Federal Defendants' Motion to Dismiss on Plaintiffs by Julian Castro, Edward Golding, U.S. Department of Housing and Urban Development. (Moore, Tamra) (Entered: 04/17/2017)

04/17/2017

49 RESPONSE in Opposition re 48 Letter MOTION for Extension of Time to File Serve the Federal Defendants' Motion to Dismiss on Plaintiffs filed by St. Clair Blackett, Lucille Mason, Melissa Trotman. (Attachments: # 1 Exhibit A) (Lieb, Douglas) (Entered: 04/17/2017)

04/17/2017

ORDER granting, with modifications, 48 Motion for Extension of Time to File. Defendants shall serve on plaintiffs their motions to dismiss no later than May 3, 2017. Plaintiffs shall serve on defendants their

oppositions no later than June 23, 2017, and defendants shall serve on plaintiffs their replies, if any, and electronically file all motion papers no later than July 7, 2017. The parties are reminded to comply with all of the Court's individual rules, including Rule III.D (the "Bundling Rule"). Ordered by Judge Eric N. Vitaliano on 4/17/2017. (Fielding, Peter) (Entered: 04/17/2017)

04/24/2017 50 NOTICE of "Motion to Appear and Join Class Action As Pltff," filed by Eduardo Vallejo. (Galeano, Sonia) (Entered: 04/25/2017)

05/05/2017

51 Letter in Response to Pro Se Motion to Join (Dkt #50) by St. Clair Blackett, Lucille Mason, Melissa Trotman, Joseph Washington (Lieb, Douglas) (Entered: 05/05/2017)

06/29/2017

52 Letter MOTION for Extension of Time to File Response/Reply Brief in Support of their Motion to Dismiss the Amended Complaint, MOTION for Leave to File Excess Pages for Caliber Defendants' Consolidated Reply by Caliber Home Loans, Inc., U.S. Bank Trust, N.A.. (Nagin, Benjamin) (Entered: 06/29/2017)

06/29/2017

53 Letter MOTION for Extension of Time to File Response/Reply in Support of the Federal Defendants' Motion to Dismiss the Amended Complaint, Letter MOTION for Leave to File Excess Pages for Reply Brief by Julian Castro, Edward Golding, U.S. Department of Housing and Urban Development. (Moore, Tamra) (Entered: 06/29/2017)

06/29/2017

54 RESPONSE to Motion re 52 Letter MOTION for Extension of Time to File Response/Reply Brief in Support of their Motion to Dismiss the Amended Complaint MOTION for Leave to File Excess Pages for Caliber Defendants' Consolidated Reply, 53 Letter MOTION for Extension of Time to File Response/Reply in Support of the Federal Defendants' Motion to Dismiss the Amended ComplaintLetter MOTION for Leave to File Excess Pages for Reply Brief filed by St. Clair Blackett, Lucille Mason, Melissa Trotman, Joseph Washington. (Attachments: # 1 Exhibit A) (Lieb, Douglas) (Entered: 06/29/2017)

06/29/2017

ORDER granting in part and denying in part 52 Motion for Extension of Time to File Response/Reply; granting in part and denying in part 52 Motion for Leave to File Excess Pages; granting in part and denying in part 53 Motion for Extension of Time to File Response/Reply; granting in part and denying in part 53 Motion for Leave to File Excess Pages. The Court's April 17, 2017, Order is modified to permit defendants to serve on plaintiffs their replies and electronically file all motion papers no later than July 12, 2017. These replies shall be no longer than 13 doublespaced pages and must otherwise conform with the Court's individual rules, including Rule III.C.

Going forward, the parties are encouraged to avoid raising related disputes in a piecemeal fashion when there is no barrier to their simultaneous resolution. Ordered by Judge Eric N. Vitaliano on 6/29/2017. (Fielding, Peter) (Entered: 06/29/2017)

06/29/2017 55 NOTICE of Change of Name and Address by Elizabeth Mary Lynch (Lynch, Elizabeth) (Entered: 06/29/2017)

07/12/2017

56 MOTION to Dismiss for Lack of Jurisdiction , Motion to Dismiss for Failure to State a Claim by Julian Castro, Edward Golding, U.S. Department of Housing and Urban Development. (Attachments: # 1 Declaration John W. Lucey, # 2 Exhibit A, # 3 Exhibit B, # 4 Exhibit C, # 5 Memorandum in Support of the Federal Defendants' Motion to Dismiss) (Moore, Tamra) (Entered: 07/12/2017)

07/12/2017

57 MEMORANDUM in Opposition re 56 MOTION to Dismiss for Lack of Jurisdiction Motion to Dismiss for Failure to State a Claim filed on behalf of Plaintiffs filed by Julian Castro, Edward Golding, U.S. Department of Housing and Urban Development. (Moore, Tamra) (Entered: 07/12/2017)

07/12/2017

58 REPLY in Support re 56 MOTION to Dismiss for Lack of Jurisdiction Motion to Dismiss for Failure to State a Claim filed by Julian Castro, Edward Golding, U.S. Department of Housing and Urban Development. (Moore, Tamra) (Entered: 07/12/2017)

07/12/2017

59 Fully Briefed MOTION to Dismiss the First Amended Class Action by Caliber Home Loans, Inc., U.S. Bank Trust, N.A.. (Attachments: # 1 Caliber Defendants' Memorandum of Law in Support of their Motion to Dismiss, # 2 Plaintiffs' Memorandum of Law in Opposition to Motion to Dismiss, # 3 Caliber Defendants' Reply Memorandum of Law in Support of their Motion to Dismiss, # 4 Cover Letter to Plaintiffs re Motion to Dismiss, # 5 Cover Letter to Federal Defendants re Caliber Defendants' Motion to Dismiss, # 6 Cover Letter to Plaintiffs re Reply Brief in Support of Caliber Defendants' Motion to Dismiss, # 7 Cover Letter to Federal Defendants re Reply Brief in Support of Caliber Defendants' Motion to Dismiss) (Nagin, Benjamin) (Entered: 07/12/2017)

07/20/2017

60 Letter Requesting Oral Argument by St. Clair Blackett, Lucille Mason, Melissa Trotman, Joseph Washington (Lynch, Elizabeth) (Entered: 07/20/2017)

07/24/2017

61 STIPULATION and JOINT [Proposed] Confidentiality and Protective Order by Caliber Home Loans, Inc., U.S. Bank Trust, N.A. (Nagin, Benjamin) (Entered: 07/24/2017)

07/25/2017

ORDER: Stipulation filed as docket entry 61 is hereby approved and entered as an Order of the Court. Ordered by Magistrate Judge Steven M. Gold on 7/25/2017. (Gillespie, Saudia) (Entered: 07/25/2017)

09/20/2017

62 Letter For Pre Motion Conference for Leave to Amend Complaint by St. Clair Blackett, Lucille Mason, Melissa Trotman, Joseph Washington (Lynch, Elizabeth) (Entered: 09/20/2017)

09/27/2017

63 Letter in Response to Plaintiffs' Request for a Pre-Motion Conference in Anticipation of Plaintiffs' Motion for Leave to Amend the First Amended Complaint by Julian Castro, Edward Golding, U.S. Department of Housing and Urban Development (Moore, Tamra) (Entered: 09/27/2017)

10/05/2017

ORDER REFERRING MOTION. Defendants 56 MOTION to Dismiss and defendants 59 MOTION to Dismiss is respectfully referred to Magistrate Judge Steven M. Gold. Ordered by Judge Eric N. Vitaliano on 10/5/2017. (Fernandez, Ashley) (Entered: 10/05/2017)

10/05/2017

ORDER REFERRING MOTION. Plaintiffs' 62 MOTION for a Pre Motion Conference for Leave to Amend Complaint is respectfully referred to Magistrate Judge Steven M. Gold. Ordered by Judge Eric N. Vitaliano on 10/5/2017. (Fernandez, Ashley) (Entered: 10/05/2017)

10/06/2017

SCHEDULING ORDER: An in-person pre motion conference hearing is scheduled for November 15, 2017 at 2:30 PM in Courtroom 13D South before the undersigned. Counsel for all parties must attend. Counsel for plaintiff is directed to immediately confirm this conference date and time with defendant's counsel. Adjournment requests will not be considered unless made in accordance with this Court's Individual Rules.Ordered by Magistrate Judge Steven M. Gold on 10/6/2017. (Gillespie, Saudia) (Entered: 10/06/2017)

10/16/2017

64 MOTION to Adjourn Conference by St. Clair Blackett, Lucille Mason, Melissa Trotman, Joseph Washington. (Lynch, Elizabeth) (Entered: 10/16/2017)

10/19/2017

ORDER: Granting 64 Motion to Adjourn Conference. The Pre Motion Conference previously scheduled for November 15, 2017 is adjourned to November 30, 2017 at 2:30 p.m. in Courtroom 13D South before the undersigned. Ordered by Magistrate Judge Steven M. Gold on 10/19/2017. (Gillespie, Saudia) (Entered: 10/19/2017)

11/30/2017

65 Minute Entry: Pre Motion Conference held on 11/30/2017 before Magistrate Judge Steven M. Gold. Lieb et al. for plaintiff, Moore and Schachner for HUD, Nagin and Colon for Caliber and US Bank Trust. Premotion conference held. Plaintiff will file his motion for leave to amend by December 8. Opposition is due January 8, 2018, and any reply

is due January 17, 2018. If defendants contend that the proposed pleading is defective in a way that might be cured by further amendment, counsel are urged to discuss their concern as soon as it arises and afford plaintiff an opportunity to revise his proposed amended pleading before opposition to the motion is filed. THE COURT WILL HEAR ARGUMENT ON ALL PENDING MOTIONS AT 2:00 PM ON MARCH 6, 2018. (FTR Log #2:43-3:13.) (Gillespie, Saudia) (Entered: 12/01/2017)

12/08/2017

66 MOTION to Amend/Correct/Supplement 11 Amended Complaint, by St. Clair Blackett, Lucille Mason, Melissa Trotman, Joseph Washington. (Lieb, Douglas) (Entered: 12/08/2017)

12/08/2017

67 AFFIDAVIT/DECLARATION in Support re 66 MOTION to Amend/Correct/Supplement 11 Amended Complaint, filed by St. Clair Blackett, Lucille Mason, Melissa Trotman, Joseph Washington. (Attachments: # 1 Exhibit A - Plaintiffs' Proposed Second Amended Complaint, # 2 Exhibit B - Copy of Email Sent to Tamra D. Moore, 8.11.17) (Lieb, Douglas) (Entered: 12/08/2017)

12/08/2017

68 MEMORANDUM in Support re 66 MOTION to Amend/Correct/Supplement 11 Amended Complaint, filed by St. Clair Blackett, Lucille Mason, Melissa Trotman, Joseph Washington. (Lieb, Douglas) (Entered: 12/08/2017)

01/04/2018

69 Letter MOTION for Extension of Time to File Response/Reply as to 66 MOTION to Amend/Correct/Supplement 11 Amended Complaint, by Julian Castro, Edward Golding, U.S. Department of Housing and Urban Development. (Moore, Tamra) (Entered: 01/04/2018)

01/19/2018

70 RESPONSE in Opposition re 66 MOTION to Amend/Correct/Supplement 11 Amended Complaint, filed by Julian Castro, Edward Golding, U.S. Department of Housing and Urban Development. (Moore, Tamra) (Entered: 01/19/2018)

01/22/2018

ORDER REFERRING MOTION. Plaintiffs' 66 MOTION to Amend/Correct/Supplement 11 Amended Complaint is respectfully referred to Steven M. Gold. Ordered by Judge Eric N. Vitaliano on 1/22/2018. (Fernandez, Ashley) (Entered: 01/22/2018)

02/02/2018

71 REPLY in Support re 66 MOTION to Amend/Correct/Supplement 11 Amended Complaint, filed by St. Clair Blackett, Lucille Mason, Melissa Trotman, Joseph Washington. (Lieb, Douglas) (Entered: 02/02/2018)

03/06/2018

72 Minute Entry: Motion Hearing held on 3/6/2018 before Magistrate Judge Steven M. Gold. Lieb and Jun for plaintiffs; Moore and Schachner for HUD, Castro and Golding; Nagin and Colon-Bosolet for Caliber and US

Bank Trust as Trustee. Oral argument held. Decision reserved. Counsel for Caliber and plaintiffs shall confer with respect to the fact issues discussed today regarding modifications for which plaintiffs Washington and Blackett may be eligible and submit a proposal for addressing those issues by March 16, 2018.(FTR Log #1:58-3:51; 4:17-5:41.) (Gillespie, Saudia) (Entered: 03/07/2018)

03/08/2018

73 TRANSCRIPT of Proceedings held on March 6, 2018, before Judge Gold. Court Transcriber: TypeWrite Word Processing Service, Telephone number 518-581-8973. Email address: transcripts@typewp.com. Transcript may be viewed at the court public terminal or purchased through the Court Transcriber before the deadline for Release of Transcript Restriction. After that date it may be obtained through PACER.File redaction request using event "Redaction Request Transcript" located under "Other Filings - Other Documents". Redaction Request due 3/29/2018. Redacted Transcript Deadline set for 4/9/2018. Release of Transcript Restriction set for 6/6/2018. (Rocco, Christine) (Main Document 73 replaced on 3/8/2018) (Rocco, Christine). (Entered: 03/08/2018)

03/13/2018

74 Letter responding to certain factual developments as a result of March 6, 2018 hearing by Julian Castro, Edward Golding, U.S. Department of Housing and Urban Development (Moore, Tamra) (Entered: 03/13/2018)

03/16/2018

75 Letter in response to March 7, 2018 minute order [Doc. 72] directing counsel for the Caliber Defendants and Plaintiffs to confer and submit a joint proposal by Caliber Home Loans, Inc., U.S. Bank Trust, N.A. (Nagin, Benjamin) (Entered: 03/16/2018)

03/19/2018

76 Letter Response to Dkt #74 by St. Clair Blackett, Lucille Mason, Melissa Trotman, Joseph Washington (Brinckerhoff, Matthew) (Entered: 03/19/2018)

03/23/2018

77 Letter regarding proposed briefing schedule to address fact issues raised by Court in March 6, 2018 hearing by Caliber Home Loans, Inc., U.S. Bank Trust, N.A. (Attachments: # 1 Exhibit A - Washington March 6 2018 Hearing Transcript Excerpt) (Nagin, Benjamin) (Entered: 03/23/2018)

03/26/2018

ORDER: The schedule proposed 77 by the Caliber defendants is adopted. Counsel for the Caliber defendants represent that they require the two additional weeks to which plaintiffs' object. The request is reasonable and will not prejudice plaintiffs. Ordered by Magistrate Judge Steven M. Gold on 3/26/2018. (Gillespie, Saudia) (Entered: 03/26/2018)

05/01/2018

ORDER. Defendants' motion for partial summary judgment, referred to in defendants' proposed briefing schedule 77 , is respectfully referred to

Magistrate Judge Steven M. Gold. Ordered by Judge Eric N. Vitaliano on 5/1/2018. (Fernandez, Ashley) (Entered: 05/01/2018)

05/01/2018

78 Letter MOTION for Leave to File the Caliber Defendants' Motion for Partial Summary under Seal by Caliber Home Loans, Inc., U.S. Bank Trust, N.A.. (Nagin, Benjamin) (Entered: 05/01/2018)

05/01/2018

ORDER granting 78 Motion for Leave to File Under Seal. When Caliber defendants publically file their redacted submissions they shall also submit a letter explaining, in general terms, the nature of the information redacted and the reasons it should not be made public. Ordered by Magistrate Judge Steven M. Gold on 5/1/2018. (Metzger, Daniel) (Entered: 05/01/2018)

05/01/2018

79 MOTION for Partial Summary Judgment Dismissing Plaintiffs' RESPA Claim by Caliber Home Loans, Inc., U.S. Bank Trust, N.A.. (Attachments: # 1 Memorandum in Support of Motion for Partial Summary Judgment Dismissing Plaintiffs' RESPA Claim, # 2 Rule 56.1 Statement of Material Facts as to Which There is No Genuine Issue to be Tried, # 3 Declaration of Dawn Etchison, # 4 Exhibit 1, # 5 Exhibit 2, # 6 Exhibit 3, # 7 Exhibit 4, # 8 Exhibit 5, # 9 Exhibit 6, # 10 Exhibit 7, # 11 Exhibit 8, # 12 Exhibit 9, # 13 Exhibit 10, # 14 Exhibit 11, # 15 Exhibit 12, # 16 Exhibit 13, # 17 Exhibit 14, # 18 Exhibit 15, # 19 Exhibit 16, # 20 Exhibit 17, # 21 Exhibit 18, # 22 Exhibit 19, # 23 Exhibit 20, # 24 Exhibit 21, # 25 Exhibit 22, # 26 Exhibit 23, # 27 Exhibit 24, # 28 Exhibit 25, # 29 Exhibit 26, # 30 Exhibit 27, # 31 Exhibit 28, # 32 Exhibit 29, # 33 Exhibit 30, # 34 Exhibit 31, # 35 Exhibit 32, # 36 Exhibit 33, # 37 Exhibit 34, # 38 Exhibit 35, # 39 Exhibit 36, # 40 Exhibit 37, # 41 Exhibit 38, # 42 Exhibit 39) (Nagin, Benjamin) (Entered: 05/01/2018)

05/08/2018

80 Letter explaining, in general terms, the nature of the information redacted from the Caliber Defendants' Motion for Partial Summary Judgment Dismissing Plaintiffs' RESPA Claim [Dkt. No. 79] and the reasons it should not be made public by Caliber Home Loans, Inc., U.S. Bank Trust, N.A. (Nagin, Benjamin) (Entered: 05/08/2018)

05/08/2018

81 MOTION for Partial Summary Judgment Dismissing Plaintiffs' RESPA Claim by Caliber Home Loans, Inc., U.S. Bank Trust, N.A.. (Attachments: # 1 Memorandum in Support of Motion for Partial Summary Judgment Dismissing Plaintiffs' RESPA Claim (Redacted), # 2 Rule 56.1 Statement of Material Facts as to Which There is No Genuine Issue to be Tried (Redacted), # 3 Declaration of Dawn Etchison (Redacted), # 4 Exhibit 1 (Filed Under Seal), # 5 Exhibit 2 (Filed Under Seal), # 6 Exhibit 3 (Filed Under Seal), # 7 Exhibit 4 (Filed Under Seal), # 8 Exhibit 5 (Filed Under Seal), # 9 Exhibit 6 (Redacted), # 10 Exhibit 7

(Redacted), # 11 Exhibit 8 (Redacted), # 12 Exhibit 9 (Filed Under Seal), # 13 Exhibit 10 (Redacted), # 14 Exhibit 11 (Redacted), # 15 Exhibit 12 (Redacted), # 16 Exhibit 13 (Redacted), # 17 Exhibit 14 (Redacted), # 18 Exhibit 15 (Redacted), # 19 Exhibit 16 (Redacted), # 20 Exhibit 17 (Redacted), # 21 Exhibit 18 (Redacted), # 22 Exhibit 19 (Redacted), # 23 Exhibit 20 (Redacted), # 24 Exhibit 21 (Redacted), # 25 Exhibit 22 (Redacted), # 26 Exhibit 23 (Redacted), # 27 Exhibit 24 (Redacted), # 28 Exhibit 25 (Redacted), # 29 Exhibit 26 (Filed Under Seal), # 30 Exhibit 27 (Redacted), # 31 Exhibit 28 (Redacted), # 32 Exhibit 29 (Filed Under Seal), # 33 Exhibit 30 (Redacted), # 34 Exhibit 31 (Redacted), # 35 Exhibit 32 (Redacted), # 36 Exhibit 33 (Redacted), # 37 Exhibit 34 (Redacted), # 38 Exhibit 35 (Redacted), # 39 Exhibit 36 (Redacted), # 40 Exhibit 37 (Filed Under Seal), # 41 Exhibit 38 (Redacted), # 42 Exhibit 39 (Redacted)) (Nagin, Benjamin) (Entered: 05/08/2018)

05/09/2018

ORDER REFERRING MOTION: The Motion for Partial Summary Judgment, 79 , 81 , is respectfully referred to Magistrate Judge Steven M. Gold. Ordered by Judge Eric N. Vitaliano on 5/9/2018. (Fernandez, Ashley) (Entered: 05/09/2018)

05/09/2018

82 Letter in Response to the Court's Request following March 6, 2018 Hearing by Caliber Home Loans, Inc., U.S. Bank Trust, N.A. (Attachments: # 1 Single Family Loan Sale 2014-2 Conveyance, Assignment and Assumption Agreement, # 2 Joseph Washington's Mortgage Contract, # 3 St. Clair Blackett's Mortgage Contract, # 4 Lucille Mason's Mortgage Contract) (Nagin, Benjamin) (Entered: 05/09/2018)

05/11/2018

83 Letter MOTION for Discovery and to Defer Caliber Defendants' Motion for Partial Summary Judgment (ECF # 79) [Redacted version will be publicly filed after consultation with Caliber's counsel] by St. Clair Blackett, Lucille Mason, Melissa Trotman, Joseph Washington. (Attachments: # 1 Exhibit A: Rule 30(b)(6) Notice of Deposition, # 2 Exhibit B) (Houk, Diane) (Entered: 05/11/2018)

05/15/2018

84 Letter in Response to Plaintiffs' May 11, 2018 Letter Motion (Dkt. No. 83) [Filed Under Seal] by Caliber Home Loans, Inc., U.S. Bank Trust, N.A. (Nagin, Benjamin) (Entered: 05/15/2018)

05/16/2018

85 First MOTION for Extension of Time to File Response/Reply as to 81 MOTION for Partial Summary Judgment Dismissing Plaintiffs' RESPA Claim by St. Clair Blackett, Lucille Mason, Melissa Trotman, Joseph Washington. (Lynch, Elizabeth) (Entered: 05/16/2018)

05/18/2018

SCHEDULING ORDER: re 83 plaintiffs' Letter Motion for Discovery, and 84 Response filed by U.S. Bank Trust, N.A., Caliber Home Loans, Inc.

A telephone conference will be held at 10:00 a.m. on Thursday, May 24, 2018 before the undersigned. Counsel for plaintiffs are directed to arrange the call and, when all participating parties are on the line, to call chambers at 718-613-2560. Counsel shall be prepared to discuss the pending Motion for Discovery and Response identified above. Accordingly, HUD's counsel is welcome to participate in the call, but is not required to do so. During the call the Court will also address 85 , the parties' pending Motion for Extension of Time.

Adjournment requests will not be considered unless made in accordance with Rule 1.D of this Court's Individual Practices. Ordered by Magistrate Judge Steven M. Gold on 5/18/2018. (Metzger, Daniel) (Entered: 05/18/2018)

05/18/2018

86 Letter re the Federal Defendants' Participation in May 24, 2018 Telephonic Conference re Plaintiffs' Letter Motion re Discovery by Julian Castro, Edward Golding, U.S. Department of Housing and Urban Development (Moore, Tamra) (Entered: 05/18/2018)

05/24/2018

ORDER granting 83 Motion for Discovery; granting 85 Motion for Extension of Time to File Response/Reply for the reasons and to the extent indicated on the record of the telephone conference held today. Ordered by Magistrate Judge Steven M. Gold on 5/24/2018. (Gold, Steven) (Entered: 05/24/2018)

05/24/2018

ORDER terminating 69 Motion for Extension of Time to File Response/Reply. Motion terminated as moot in light of 70 , 71 . Ordered by Magistrate Judge Steven M. Gold on 5/24/2018. (Metzger, Daniel) (Entered: 05/24/2018)

05/24/2018

87 Minute Entry: Telephone Conference held on 5/24/2018 before Magistrate Judge Steven M. Gold. Lynch, Fasano, Coffey and Lee for plaintiffs; Schachner for HUD, Nagin and Colon-Bosolet for Caliber and US Bank Trust as Trustee. Plaintiffs' motion for discovery 83 and extension of time to file 85 granted for the reasons and to the extent indicated on the record. Counsel will confer and submit a letter by June 5, 2018, setting forth a proposed schedule for completing the discovery discussed today and the briefing of Caliber defendants' motion for summary judgment. (FTR Log #10:04-10:18.) (Gillespie, Saudia) (Entered: 05/24/2018)

06/05/2018 88 Letter regarding Proposed Briefing Schedule by Caliber Home Loans, Inc., U.S. Bank Trust, N.A. (Nagin, Benjamin) (Entered: 06/05/2018)

06/05/2018

ORDER: The proposed revised briefing schedule for Caliber defendants' Motion for Partial Summary Judgment 88 is approved and entered as an Order of the Court. Plaintiffs' response to the motion is due August 17, 2018; Caliber defendants' reply is due September 14, 2018.

Ordered by Magistrate Judge Steven M. Gold on 6/5/2018. (Metzger, Daniel) (Entered: 06/05/2018)

08/15/2018

89 Letter MOTION for Leave to Electronically File Document under Seal (Leave to Temporarily File Plaintiffs' Summary Judgment Papers Under Seal) by St. Clair Blackett, Lucille Mason, Melissa Trotman, Joseph Washington. (Lieb, Douglas) (Entered: 08/15/2018)

08/15/2018

ORDER granting 89 Motion for Leave to Electronically File Document under Seal Counsel is directed to file the original document under seal as a separate entry. Instructions on filing sealed documents on ECF are located at www.nyed.uscourts.gov.. Ordered by Magistrate Judge Steven M. Gold on 8/15/2018. (Gold, Steven) (Entered: 08/15/2018)

08/17/2018

90 Cross MOTION for Summary Judgment Partial by St. Clair Blackett, Lucille Mason, Joseph Washington. (Attachments: # 1 Memorandum in Support Plaintiffs' Memorandum of Law in Opposition to Caliber Defendants' Motion for Partial Summary Judgment and in Support of Plaintiffs' Cross-Motion for Partial Summary Judgment as to Liability on Plaintiffs' RESPA Claims, # 2 Declaration Declaration of Elizabeth M. Lynch, # 3 Exhibit 43, # 4 Exhibit 47, # 5 Exhibit 48, # 6 Exhibit 49, # 7 Exhibit 51, # 8 Exhibit 52, # 9 Exhibit 54, # 10 Exhibit 55, # 11 Exhibit 66, # 12 Exhibit 67, # 13 Exhibit 68, # 14 Exhibit 70, # 15 Exhibit 71, # 16 Exhibit 72, # 17 Exhibit 73, # 18 Exhibit 74, # 19 Exhibit 75, # 20 Exhibit 76, # 21 Exhibit 77, # 22 Exhibit 78, # 23 Exhibit 79, # 24 Exhibit 80, # 25 Exhibit 81, # 26 Exhibit 82, # 27 Exhibit 83, # 28 Exhibit 84, # 29 Exhibit 85, # 30 Exhibit 86, # 31 Rule 56.1 Statement Plaintiffs' Response and Counter-Statement of Undisputed Material Facts Pursuant to Local Rule 56.1) (Lynch, Elizabeth) (Entered: 08/17/2018)

08/27/2018

91 Letter MOTION for Extension of Time to File Proposed Redactions by St. Clair Blackett, Lucille Mason, Melissa Trotman, Joseph Washington. (Lieb, Douglas) (Entered: 08/27/2018)

08/27/2018

ORDER: Granting 91 Motion for Extension of Time to File. On or before August 31, 2018, Plaintiffs will file their proposed redactions to their summary judgment papers. Ordered by Magistrate Judge Steven M. Gold on 8/27/2018. (Gillespie, Saudia) (Entered: 08/27/2018)

08/31/2018 92 Letter Regarding Briefing Schedule for Plaintiffs' Cross-Motion for Partial Summary Judgement and Defendants' Reply in Support of their

Motion for Partial Summary Judgement by Caliber Home Loans, Inc., U.S. Bank Trust, N.A. (Nagin, Benjamin) (Entered: 08/31/2018)

08/31/2018

ORDER: Application 92 Letter Regarding Briefing Schedule for Plaintiffs' Cross-Motion for Partial Summary Judgement and Defendants' Reply in Support of their Motion for Partial Summary Judgement is hereby approved. The Caliber defendants will file their oppositions to plaintiffs' cross-motion and reply in support of their summary judgment by October 5, 2018. Plaintiffs will file their reply by October 19, 2018. Plaintiffs will file their proposed redactions to their summary judgment papers September 14, 2018. Ordered by Magistrate Judge Steven M. Gold on 8/31/2018. (Gillespie, Saudia) (Entered: 08/31/2018)

09/12/2018

ORDER REFERRING MOTION: Because defendants' 79 , 81 MOTIONS for Partial Summary Judgment have been so referred, plaintiffs' 90 Cross MOTION for Partial Summary Judgment is also respectfully referred to Magistrate Judge Steven M. Gold. Ordered by Judge Eric N. Vitaliano on 9/12/2018. (Siegel, Max) (Entered: 09/12/2018)

09/14/2018

93 Letter re: Proposed Redactions to Plaintiffs' Summary Judgment Papers by St. Clair Blackett, Lucille Mason, Joseph Washington (Lieb, Douglas) Modified to add motion on 9/17/2018 (Gillespie, Saudia). (Entered: 09/14/2018)

09/14/2018

94 MEMORANDUM in Support re 90 Cross MOTION for Summary Judgment Partial (Corrected Memorandum of Law to Replace ECF #901) filed by St. Clair Blackett, Lucille Mason, Joseph Washington. (Lynch, Elizabeth) (Entered: 09/14/2018)

09/14/2018

95 Cross MOTION for Summary Judgment Partial by St. Clair Blackett, Lucille Mason, Joseph Washington. (Attachments: # 1 Memorandum in Support Plaintiffs' Memorandum of Law in Opposition to Caliber Defendants' Motion for Partial Summary Judgment and in Support of Plaintiffs' Cross-motion for Partial Summary Judgment as to Liability on Plaintiffs' RESPA Claims, # 2 Declaration Declaration of Elizabeth M. Lynch, # 3 Exhibit 43, # 4 Exhibit 47, # 5 Exhibit 48, # 6 Exhibit 49, # 7 Exhibit 51, # 8 Exhibit 52, # 9 Exhibit 54, # 10 Exhibit 55, # 11 Exhibit 66, # 12 Exhibit 67, # 13 Exhibit 68, # 14 Exhibit 70, # 15 Exhibit 71, # 16 Exhibit 72, # 17 Exhibit 73, # 18 Exhibit 74, # 19 Exhibit 75, # 20 Exhibit 76, # 21 Exhibit 77, # 22 Exhibit 78, # 23 Exhibit 79, # 24 Exhibit 80, # 25 Exhibit 81, # 26 Exhibit 82, # 27 Exhibit 83, # 28 Exhibit 84, # 29 Exhibit 85, # 30 Exhibit 86, # 31 Rule 56.1 Statement Plaintiffs' Response and Counter-Statement of Undisputed Material Facts Pursuant to Local Rule 56.1) (Lynch, Elizabeth) (Entered: 09/14/2018)

09/17/2018

ORDER: Granting 93 Proposed Redactions to Plaintiffs' Summary Judgment Papers. Ordered by Magistrate Judge Steven M. Gold on 9/17/2018. (Gillespie, Saudia) (Entered: 09/17/2018)

10/03/2018

96 Letter MOTION for Leave to File Document (Caliber Defendants' Reply in Further Support of their Motion for Partial Summary Judgment Dismissing Plaintiffs' RESPA Claim and Opposition to Plaintiffs' CrossMotion for Partial Summary Judgment on the RESPA Claim) Under Seal by Caliber Home Loans, Inc., U.S. Bank Trust, N.A.. (Nagin, Benjamin) (Entered: 10/03/2018)

10/04/2018

ORDER: Granting 96 Motion for Leave to File. Defendants' reply in further support of their motion for partial summary judgment shall be filed under seal. Ordered by Magistrate Judge Steven M. Gold on 10/4/2018. (Gillespie, Saudia) (Entered: 10/04/2018)

10/04/2018

97 Letter regarding proposed agreed-upon modification to briefing schedule by Caliber Home Loans, Inc., U.S. Bank Trust, N.A. (Nagin, Benjamin) (Entered: 10/04/2018)

10/04/2018

ORDER REFERRING MOTION: Because 90 plaintiffs' cross-motion for summary judgment has been so referred, 95 the redacted version of plaintiffs' cross-motion is also respectfully referred to Magistrate Judge Steven M. Gold. Ordered by Judge Eric N. Vitaliano on 10/4/2018. (Siegel, Max) (Entered: 10/04/2018)

10/05/2018

ORDER: Application 97 Letter regarding proposed agreed-upon modification to briefing schedule is hereby approved. The Caliber defendants will file their opposition to Plaintiffs' cross-motion and reply in support of their own summary judgment motion by October 11, 2018. The parties will file publicly a redacted version of Caliber Defendants' motion papers by October 18, 2018. Plaintiffs will file their reply on their cross-motion by October 29, 2018. Ordered by Magistrate Judge Steven M. Gold on 10/5/2018. (Farmer, John) (Entered: 10/05/2018)

10/18/2018

99 Letter explaining, in general terms, the nature of the information redacted from the Caliber Defendants' Memorandum of Law in Opposition to Plaintiffs' Cross-Motion for Partial Summary Judgment and Reply in Further Support of Their Motion for Partial Summary Judgment Dismissing Plaintiffs' RESPA Claim and the reasons it should not be made public by Caliber Home Loans, Inc., U.S. Bank Trust, N.A. (Nagin, Benjamin) (Entered: 10/18/2018)

10/18/2018

100 MEMORANDUM in Opposition re 95 Cross MOTION for Summary Judgment Partial , REPLY in Support re 81 MOTION for Partial Summary Judgment Dismissing Plaintiffs' RESPA Claim (Redacted) filed by Caliber Home Loans, Inc., U.S. Bank Trust, N.A.. (Attachments:

# 1 Rule 56.1 Statement in Response to Plaintiffs' Counter-Statement of Material Facts Pursuant to Local Rule 56.1 (Redacted), # 2 Declaration of Dawn Etchison in Support of Caliber Defendants' Memorandum of Law in Opposition to Plaintiffs' Cross-Motion For Partial Summary Judgment and Reply in Further Support of Their Motion for Partial Summary Judgment Dismissing Plaintiffs' RESPA Claim, # 3 Exhibit 87 (Redacted), # 4 Exhibit 88 (Filed Under Seal), # 5 Exhibit 89 (Redacted), # 6 Exhibit 90 (Redacted), # 7 Exhibit 91 (Redacted), # 8 Declaration of Benjamin R. Nagin in Support of Caliber Defendants' Memorandum of Law in Opposition to Plaintiffs' Cross-Motion For Partial Summary Judgment and Reply in Further Support of Their Motion for Partial Summary Judgment Dismissing Plaintiffs' RESPA Claim, # 9 Exhibit 1 to Nagin Declaration) (Nagin, Benjamin) (Entered: 10/18/2018)

10/29/2018

101 Letter MOTION for Leave to Electronically File Document under Seal -Reply Brief by St. Clair Blackett, Lucille Mason, Joseph Washington. (Attachments: # 1 Memorandum in Support) (Lieb, Douglas) (Entered: 10/29/2018)

10/30/2018

ORDER: Granting 101 Motion for Leave to Electronically File Document under Seal. Counsel is directed to file the original document under seal as a separate entry. Instructions on filing sealed documents on ECF are located at www.nyed.uscourts.gov. Ordered by Magistrate Judge Steven M. Gold on 10/30/2018. (Gillespie, Saudia) (Entered: 10/30/2018)

10/31/2018 102 REPLY in Support re 95 Cross MOTION for Summary Judgment Partial filed by St. Clair Blackett, Lucille Mason, Joseph Washington. (Lynch, Elizabeth) (Entered: 10/31/2018)

11/02/2018 103 REPLY in Support re 95 Cross MOTION for Summary Judgment Partial (Redacted) filed by St. Clair Blackett, Lucille Mason, Joseph Washington. (Lynch, Elizabeth) (Entered: 11/02/2018)

04/03/2019 104 First MOTION to Withdraw as Attorney by St. Clair Blackett, Lucille Mason, Melissa Trotman, Joseph Washington. (Fasano, Christopher) (Entered: 04/03/2019)

04/03/2019

ORDER: Granting 104 Motion to Withdraw as Attorney. Attorney Linda Jun and Elizabeth Mary Lynch terminated. Ordered by Magistrate Judge Steven M. Gold on 4/3/2019. (Gillespie, Saudia) (Entered: 04/03/2019)

04/22/2019 105 Letter to Magistrate Judge Gold dated April 22, 2019 by Caliber Home Loans, Inc., U.S. Bank Trust, N.A. (Nagin, Benjamin) (Entered: 04/22/2019)

07/29/2019 106 REPORT AND RECOMMENDATIONS re 56 MOTION to Dismiss filed by Edward Golding, U.S. Department of Housing and Urban

Development, Julian Castro, 66 MOTION to Amend/Correct/Supplement 11 Amended Complaint, filed by Melissa Trotman, St. Clair Blackett, Lucille Mason, Joseph Washington.

For the reasons stated in this Report and Recommendation, I respectfully recommend that HUD's motion to dismiss the First Amended Complaint be granted, and that plaintiff's motion for leave to amend the First Amended Complaint be denied. Any objections to the recommendations made in this Report must be made within fourteen days after the filing of this Report and Recommendation and, in any event, on or before August 12, 2019. See 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b)(2). Failure to file timely objections may waive the right to appeal the District Court's order. See Small v. Sec'y of Health & Human Servs., 892 F.2d 15, 16 (2d Cir. 1989) (discussing waiver under the former ten-day limit). Ordered by Magistrate Judge Steven M. Gold on 7/29/2019. (Farmer, John) (Entered: 07/29/2019)

08/02/2019

107 Letter MOTION for Extension of Time to File Response/Reply as to 106 REPORT AND RECOMMENDATIONS re 56 MOTION to Dismiss for Lack of Jurisdiction Motion to Dismiss for Failure to State a Claim filed by Edward Golding, U.S. Department of Housing and Urban Development, Julian Castro, 66 MOTION by St. Clair Blackett, Lucille Mason, Melissa Trotman, Joseph Washington. (Lieb, Douglas) (Entered: 08/02/2019)

08/02/2019

ORDER granting 107 Motion for Extension of Time to File Response/Reply. The Court, on consent, grants the motion for an extension of time. Any objections to Magistrate Judge Gold's Report and Recommendation shall be filed by September 3, 2019. Ordered by Judge Eric N. Vitaliano on 8/2/2019. (Craft, Rachel) (Entered: 08/02/2019)

08/28/2019

108 Letter MOTION for Extension of Time to File OBJECTIONS TO MAGISTRATE JUDGE GOLDS REPORT AND RECOMMENDATION [DKT#106] by St. Clair Blackett, Lucille Mason, Melissa Trotman, Joseph Washington. (Houk, Diane) (Entered: 08/28/2019)

08/28/2019

ORDER granting 108 Motion for Extension of Time to File. The Court, on consent, grants the motion for an extension of time. Any objections to Magistrate Judge Gold's Report and Recommendation shall be filed by September 17, 2019. Ordered by Judge Eric N. Vitaliano on 8/28/2019. (Craft, Rachel) (Entered: 08/28/2019)

09/17/2019 109 NOTICE of Voluntary Dismissal by St. Clair Blackett, Lucille Mason, Melissa Trotman, Joseph Washington (Houk, Diane) (Entered: 09/17/2019)

09/18/2019

SCHEDULING ORDER: A telephone conference will be held at 10:30 a.m. on September 25, 2019 before the undersigned. Counsel for all parties must participate. Counsel for plaintiffs are directed to arrange the call with all parties as well as immediately confirm this conference date and time with defendants' counsel. Adjournment requests will not be considered unless made in accordance with this Court's Individual Rules. Ordered by Magistrate Judge Steven M. Gold on 9/18/2019. (Gillespie, Saudia) (Entered: 09/18/2019)

09/25/2019

110 Minute Entry: Telephone Conference held on 9/25/2019 before Magistrate Judge Steven M. Gold: Fasano and Houuk for plaintiffs, Nagin and Foley for Caliber defendants. Counsel reports that they intend to file a stipulation dismissing all remaining claims, but that they require an additional signature before doing so. Counsel will file the stipulation, or a written status report, by October 23, 2019. (Gillespie, Saudia) (Entered: 09/25/2019)

09/30/2019

111 Order Dismissing Parties: Application Granted. Pursuant to Rule 41(a)(l)(A)(i) of the Federal Rules of Civil Procedure, Plaintiffs hereby dismiss all claims against Defendants United States Department of Housing and Urban Development (HUD), Ben Carson in his official capacity as Secretary of HUD, and Brian Montgomery in his official capacity as Commissioner of the Federal Housing Administration. This notice of dismissal does not include claims against Defendants Caliber Home Loans, Inc. and U.S. Bank Trust, N.A., as Trustee for LSF9 Master Participation Trust. Party U.S. Department of Housing and Urban Development terminated. (Ordered by Judge Eric N. Vitaliano on 9/25/2019) C/M (Galeano, Sonia) (Entered: 09/30/2019)

10/23/2019 112 STATUS REPORT JOINT STATUS REPORT re: DKT#110 by St. Clair Blackett, Lucille Mason, Melissa Trotman, Joseph Washington (Houk, Diane) (Entered: 10/23/2019)

10/23/2019

STATUS REPORT ORDER: Counsel will file a stipulation or a written status report by November 15, 2019. Ordered by Magistrate Judge Steven M. Gold on 10/23/2019. (Gillespie, Saudia) (Entered: 10/23/2019)

11/15/2019

113 Joint MOTION to Dismiss JOSEPH WASHINGTON by St. Clair Blackett, Lucille Mason, Melissa Trotman, Joseph Washington. (Attachments: # 1 Proposed Order EXHIBIT A: ORDER OF DISMISSAL re: JOSEPH WASHINGTON) (Houk, Diane) (Entered: 11/15/2019)

11/15/2019

114 Joint MOTION to Dismiss ST. CLAIR BLACKETT by St. Clair Blackett, Lucille Mason, Melissa Trotman, Joseph Washington. (Attachments: # 1 Proposed Order EXHIBIT A: ORDER OF DISMISSAL re: ST. CLAIR BLACKETT) (Houk, Diane) (Entered: 11/15/2019)

11/15/2019

115 Joint MOTION to Dismiss LUCILLE MASON by St. Clair Blackett, Lucille Mason, Melissa Trotman, Joseph Washington. (Attachments: # 1 Proposed Order EXHIBIT A: ORDER OF DISMISSAL re: LUCILLE MASON) (Houk, Diane) (Entered: 11/15/2019)

11/18/2019

ORDER finding as moot 56 Motion to Dismiss for Lack of Jurisdiction; finding as moot 56 Motion to Dismiss for Failure to State a Claim. Ordered by Judge Eric N. Vitaliano on 11/18/2019. (Craft, Rachel) (Entered: 11/18/2019)

11/18/2019

ORDER finding as moot 59 Motion to Dismiss. Ordered by Judge Eric N. Vitaliano on 11/18/2019. (Craft, Rachel) (Entered: 11/18/2019)

11/18/2019

ORDER finding as moot 66 Motion to Amend/Correct/Supplement. Ordered by Judge Eric N. Vitaliano on 11/18/2019. (Craft, Rachel) (Entered: 11/18/2019)

11/18/2019

ORDER finding as moot 79 Motion for Partial Summary Judgment. Ordered by Judge Eric N. Vitaliano on 11/18/2019. (Craft, Rachel) (Entered: 11/18/2019)

11/18/2019

ORDER finding as moot 81 Motion for Partial Summary Judgment. Ordered by Judge Eric N. Vitaliano on 11/18/2019. (Craft, Rachel) (Entered: 11/18/2019)

11/18/2019

ORDER finding as moot 90 Motion for Summary Judgment. Ordered by Judge Eric N. Vitaliano on 11/18/2019. (Craft, Rachel) (Entered: 11/18/2019)

11/18/2019

ORDER finding as moot 95 Motion for Summary Judgment. Ordered by Judge Eric N. Vitaliano on 11/18/2019. (Craft, Rachel) (Entered: 11/18/2019)

11/18/2019

ORDER finding as moot 106 Report and Recommendations. Ordered by Judge Eric N. Vitaliano on 11/18/2019. (Craft, Rachel) (Entered: 11/18/2019)

11/18/2019

116 ORDER granting 113 Motion to Dismiss. The Clerk of Court is hereby directed to dismiss all claims and demands of Plaintiff Joseph Washington against Defendants Caliber Home Loan, Inc and U.S. Bank Trust as Trustee for LSF9 Bank Master Participation Trust with prejudice. So Ordered by Judge Eric N. Vitaliano on 11/18/2019. (Almonte, Giselle) (Entered: 11/18/2019)

11/18/2019 117 ORDER granting 114 Motion to Dismiss. The Clerk of Court is hereby directed to dismiss all claims and demands of Plaintiff St. Clair Blackett against Defendants Caliber Home Loan, Inc and U.S. Bank Trust as

Trustee for LSF9 Bank Master Participation Trust with prejudice. So Ordered by Judge Eric N. Vitaliano on 11/18/2019. (Almonte, Giselle) (Entered: 11/18/2019)

11/18/2019

118 ORDER granting 115 Motion to Dismiss. The Clerk of Court is hereby directed to dismiss all claims and demands of Plaintiff Lucille Mason against Defendants Caliber Home Loan, Inc and U.S. Bank Trust as Trustee for LSF9 Bank Master Participation Trust with prejudice. So Ordered by Judge Eric N. Vitaliano on 11/18/2019. (Almonte, Giselle) (Entered: 11/18/2019)

11/19/2019

ORDER: The parties are directed to file a stipulation of dismissal for the last remaining plaintiff, Melissa Trotman, no later than November 22, 2019. Ordered by Judge Eric N. Vitaliano on 11/19/2019. (Craft, Rachel) (Entered: 11/19/2019)

11/20/2019 119 Letter by Melissa Trotman (Fasano, Christopher) (Entered: 11/20/2019)

11/20/2019 11/20/2019

ORDER: The Court is in receipt of the letter 119 representing that Plaintiff Melissa Troutman's final remaining claim was dismissed as to the Federal Defendants 111 . There are no remaining claims in this case and the clerk of court is respectfully directed to close the case for administrative purposes. Ordered by Judge Eric N. Vitaliano on 11/20/2019. (Craft, Rachel) (Entered: 11/20/2019)
As per the Order by Judge Eric N. Vitaliano on 11/20/2019 this Civil Case is Terminated. (Almonte, Giselle) (Entered: 11/21/2019)

PACER Service Center Transaction Receipt

PACER Login:
Description:
Billable Pages:

06/01/2020 13:27:58

CRClearinghouse Client Code:

Docket Report

Search Criteria:

1:16-cv-03948-ENVSMG

20

Cost:

2.00