Opinion ID: 4572464
Heading Depth: 2
Heading Rank: 1

Heading: The plain meaning of RESPA

Text: When interpreting a statute, we start with its text. Lamie v. U.S. Tr., 540 U.S. 526, 534 (2004). And we give that text its “ordinary, contemporary, common meaning” and must “enforce it according to its terms.” Crespo v. Holder, 631 F.3d 130, 133 (4th Cir. 2011) (quoting North Carolina ex rel. Cooper v. Tenn. Valley Auth., 515 F.3d 344, 357 5 At the motion-to-dismiss stage, we “accept[] all well-pleaded allegations in the plaintiff’s complaint as true and draw[] all reasonable factual inferences from those facts in the plaintiff’s favor.” Edwards v. City of Goldsboro, 178 F.3d 231, 244 (4th Cir. 1999). The plaintiff’s case may proceed so long as these “facts state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Although “extrinsic evidence should not be considered at the 12(b)(6) stage,” this rule is not without exception. Am. Chiropractic Ass’n v. Trigon Healthcare, Inc., 367 F.3d 212, 234 (4th Cir. 2004). A court may consider a document attached to a motion to dismiss if that document “was integral to and explicitly relied on in the complaint” and if its authenticity is not challenged. Id. (quoting Phillips v. LCI Int’l Inc., 190 F.3d 609, 618 (4th Cir. 1999)). Thus, we do not think it was error for the district court to have considered the NYCB-Freedom asset purchase agreement without converting the defendant’s submission to a motion for summary judgment. See Harrell, 2018 WL 4178317, at  n.2. Similarly, we think it permissible to consider the terms of Harrell’s loan. 8 (4th Cir. 2008); Lamie, 540 U.S. at 534). We do not ask how NYCB and Freedom agreed by contract to allocate servicing responsibilities between themselves—our inquiry is on what the statute requires. Here, our analysis centers on three subsections of 12 U.S.C. § 2605. First, § 2605(g) establishes the obligation for a servicer to make payments from the escrow account for taxes. Second, § 2605(i)(2) defines the term “servicer.” And last, § 2605(i)(3) supplements § 2605(i)(2) by defining “servicing.” For the sake of clarity, we refer to these provisions respectively as “subsection (g),” “subsection (i)(2),” and “subsection (i)(3).” We consider each provision in turn. Subsection (g) creates the obligation for “the servicer” to make payments from an escrow account: If the terms of any federally related mortgage loan require the borrower to make payments to the servicer of the loan for deposit into an escrow account for the purpose of assuring payment of taxes, insurance premiums, and other charges with respect to the property, the servicer shall make payments from the escrow account for such taxes, insurance premiums, and other charges in a timely manner as such payments become due. To begin, we note the two factors that trigger a servicer’s obligation to make payments under subsection (g). First, this subsection governs only “federally related mortgage loan[s].” And here, Harrell’s loan so qualifies. 6 Second, a servicer’s obligation to make 6 See J.A. 7; Appellant Br. 10–11. See generally 12 U.S.C. § 2602(1) (defining “federally related mortgage loan”); Arielle L. Katzman, A Round Peg for a Square Hole: The Mismatch Between Subprime Borrowers and Federal Mortgage Remedies, 31 CARDOZO L. REV. 497, 507 n.64 (2009) (asserting that the term “encompasses virtually every residential real estate transaction closing in the United States”). 9 payments is triggered only when the “terms” of the loan “require the borrower to make [tax] payments . . . into an escrow account.” Again, the terms of Harrell’s loan so require. See J.A. 2, 53–54. Accordingly, Harrell’s servicer “shall make [tax] payments from the escrow account” as they “become due.” The servicer must follow this statutory mandate, see Holland v. Pardee Coal Co., 269 F.3d 424, 431 (4th Cir. 2001) (“shall” is mandatory), or Harrell, as the borrower, may seek actual damages, statutory damages, costs, and attorneys’ fees. See § 2605(f). Consider the way subsection (g) employs the word “servicer.” On its face, subsection (g) connects “the servicer’s” responsibility to effect a payment to the date that payment “becomes due”—that is, the date at which payment is required, see Due, 4 Oxford English Dictionary 1105 (2d ed. 1989) (the “day on which any payment . . . become[s] immediately payable”). 7 The obligation for the servicer to make payment is triggered by the “terms of . . . [the] loan” and the date at which a payment “becomes due,” not the date that a payment is received for escrow. § 2605(g); see Gwaltney of Smithfield, Ltd. v. Chesapeake Bay Found., Inc., 484 U.S. 49, 57 (1987) (“Congress could have phrased its requirement in language that looked to the past . . . , but it did not choose this readily available option.”). Indeed, subsection (g) does not mention when (or whether) a payment is received into escrow from a borrower. 8 The natural reading of this subsection thus 7 The CFPB has further specified that “timely manner” means “on or before the deadline to avoid a penalty.” 12 C.F.R. § 1024.17(k)(1). 8 Thus, as the CFPB explains, RESPA and its implementing regulations do not require tracing between borrower payments into escrow and the obligation for servicers to (Continued) 10 contemplates that whoever “the servicer” is when a payment becomes due shall make that payment. Because Harrell’s payment was due November 15, 2017, our task is to identify— based on the allegations in his complaint—who RESPA considers “the servicer” on that date. To answer that question, we turn to RESPA’s definition of “servicer.” See Stenberg v. Carhart, 530 U.S. 914, 942 (2000) (“When a statute includes an explicit definition, we must follow that definition.”). Subsection (i)(2) defines “servicer” as “the person responsible for servicing of a loan.” 9 Thus, combined with subsection (g), it follows that the person “responsible for servicing” the mortgage at the time a payment is due must make that payment. The term “servicing” itself is further defined in subsection (i)(3) as: [R]eceiving any scheduled periodic payments from a borrower pursuant to the terms of any loan, including amounts for escrow accounts . . . , and making the payments of principal and interest and such other payments with respect to the amounts received from the borrower as may be required pursuant to the terms of the loan. Turning back to Harrell’s complaint given these provisions, we conclude that Harrell plausibly alleged that Freedom was responsible for servicing his mortgage on November 15, 2017. Harrell alleges that “NYCB transferred [his] mortgage . . . , including the servicing of [his] loan, to Freedom” before November 15, 2017. J.A. 3. With this transfer, Harrell says, Freedom became “responsible both for receiving [his] payments make payments out. Amicus Br., CFPB, at 18. In fact, servicers may have to make timely payments for taxes even when an escrow balance is deficient. See 12 C.F.R. § 1024.17(k). 9 Note that throughout RESPA, the term “person” includes both natural persons and artificial entities. 12 U.S.C. § 2602(5). 11 designated for subsequent tax payments and for actually making those tax payments.” J.A. 7. Indeed, the NYCB-Freedom Purchase Agreement shows that, as of November 1, 2017, Freedom acquired “all right, title and interest of [NYCB] . . . as Servicer under the Servicing Agreements” and “the related Servicing obligations as specified in each Servicing Agreement.” J.A. 94, 97. Accordingly, Freedom agreed to “assume, pay, perform and discharge the obligation to service the Serviced Loans [] on and after” that date. J.A. 100. Thus, the complaint properly alleges that Freedom was “responsible for servicing the loan” on November 15, 2017, and as the supposed servicer on that date, obligated to make the tax payment. The broader statutory structure reinforces this allocation of responsibility. See Merit Mgmt. Grp., LP v. FTI Consulting, Inc., 138 S. Ct. 883, 894 (2018) (looking to statutory structure). Not limited to escrow accounts, § 2605 broadly governs the “assignment, sale, or transfer of loan servicing.” § 2605(a). And it imposes certain requirements in servicing transactions to inform the mortgagee of the identity of his mortgage servicer. § 2605(b)– (c). The focal point of these obligations is the “effective date of transfer,” or “the date on which the mortgage payment . . . is first due to the transferee servicer of a mortgage loan pursuant to the assignment, sale, or transfer of the servicing of the mortgage loan.” 12 U.S.C. § 2605(i)(1); 12 C.F.R. § 1024.2(b) (same). Before this date, RESPA contemplates that servicing obligations thus rest with the transferor servicer. But after this date, servicing obligations rest with the transferee servicer. And so, § 2605(b)(1) and (c)(1) require both the transferor and the transferee to send notices to the borrower to inform him of any 12 “assignment, sale, or transfer” of servicing responsibilities. See also Amicus Br., CFPB, at 13–14 (describing the “Hello-” and “Goodbye-” letter requirements). Because Harrell’s mortgage payments became due to Freedom on November 1, 2017, that was the “effective date of transfer” of his loan under RESPA. RESPA thus contemplates that before this date, NYCB (the transferor) was the servicer. And from this date and forward, Freedom (the transferee) would be the servicer. So we believe the statutory notice provisions confirm to our interpretation of subsections (g), (i)(2), and (i)(3), and they confirm that Freedom was plausibly “the servicer” on the date Harrell’s payment was due. For all these reasons, RESPA places the obligation to pay taxes with the entity responsible for servicing a loan when that tax payment is due.