The United States District Court for the District of New Jersey recently dismissed an action brought by a borrower against a loan servicer in which she alleged that the servicer had violated the Real Estate Settlement Procedures Act (“RESPA”) by denying her loan modification application and continuing a foreclosure action against her property. See Bello v. Bayview Loan Servicing, LLC, 2018 WL 4380996 (D.N.J. Sept. 14, 2018). In the case, the borrower defaulted on her mortgage and the servicer commenced a foreclosure action in 2014. In March of 2017, a final judgment of foreclosure was entered in the action. In April of 2017, the borrower submitted an application to the servicer seeking to modify her loan, and the servicer denied the application the next month based on the borrower’s income. The borrower then sent a letter in June of 2017 challenging the rejection, which the servicer again rejected. The borrower brought this action, alleging that the servicer violated RESPA by denying the modification and by “failing to take any action to cancel the foreclosure” while the application was pending, among other claims. The servicer moved to dismiss the complaint.
The Court granted the servicer’s motion. First, it held that RESPA only mandates that a servicer consider a modification application, but does not require that it accept it. In this case, the servicer reviewed the application but made the determination that the borrower’s income was insufficient to modify the loan, and therefore it met its duty under RESPA. Second, the Court held that RESPA only prevents servicers from conducting sales while a modification application is pending, and does not require that the servicer terminate the action. See 12 CFR 1024.41 (preventing a servicer from “mov[ing] for foreclosure judgment or order of sale, or conduct[ing] a foreclosure sale” while the modification application is pending unless certain conditions are met). Because the servicer did not conduct the sale while the application was pending, the Court dismissed the RESPA claim.