The United States District Court for the Northern District of California recently held that borrowers had adequately alleged that their servicer violated the Real Estate Settlement Procedures Act (“RESPA”) but nonetheless that they were not entitled to a temporary restraining order enjoining the sale of their property. See Sparks-Magdaluyo v. New Penn Financial, LLC, 2018 WL 3537188 (N.D. Cal. July 23, 2018). In the case, the borrowers obtained a loan secured by their home. In 2015, they sent a qualified written request to the defendant servicer seeking a validation of the amount owed on the debt but the servicer allegedly never responded, in violation of RESPA. 12 U.S.C. § 2605. The borrowers then brought this action and subsequently moved for a temporary restraining order enjoining a scheduled August 1, 2018 trustee’s sale of the property.
The Court held that the borrowers had adequately alleged a RESPA violation but still denied the request for a restraining order. The Court first held that the 2015 letter constituted a proper qualified written request from the borrowers under RESPA because it “included their names and account number; identified the information sought, i.e., an account history of all scheduled periodic payments or a payment history; and sought information relating to servicing of the Loan, i.e., ‘scheduled periodic payments from a borrower pursuant to the terms of [the] loan.’” Thus, the servicer was required to respond to the request and a failure to do so would have violated RESPA. Nonetheless, the Court found that the borrowers failed to assert that they were in any way damaged by this alleged RESPA violation. “To the extent Plaintiffs claim damages based on the foreclosure proceedings, under California law, a borrower may not seek to quiet title without first paying the outstanding debt on the property. . . . as Plaintiffs have not alleged they have paid the outstanding debt on the Property, or alleged they can do so, they have failed to establish they are likely to succeed on the merits.”