The United States District Court for the Eastern District of New York recently granted a defendant loan servicer’s motion to dismiss a Real Estate Settlement Procedures Act (“RESPA”) claim, holding that plaintiff’s alleged injuries were not proximately caused by defendant. See Galli v. Astoria Bank, 2017 WL 4325824 (E.D.N.Y. Sept. 27, 2017). In the case, plaintiff defaulted on his loan with defendant and defendant foreclosed on the property and scheduled a foreclosure sale. According to plaintiff’s complaint, plaintiff then submitted a complete loss mitigation application two months before the scheduled foreclosure sale and, despite making assurances to the contrary, defendant did not adjourn the sale or respond to the application. On the day of the sale, plaintiff filed for emergency bankruptcy protection. Three months later, plaintiff brought this action under RESPA. Among his other claims, plaintiff alleged that defendant violated 12 CFR 1024.41 by not responding to the loss mitigation package and by proceeding with the sale while the loss mitigation application was pending. Defendant moved to dismiss the action.
The Court granted defendant’s motion to dismiss. The Court first found that plaintiff had standing to bring these claims. Although defendant argued that plaintiff’s harm was “self-inflicted,” the Court held that defendant’s alleged failure to respond to a timely mitigation application resulted in actual damages in the form of plaintiff’s bankruptcy-related fees. Nonetheless, the Court found that defendant’s actions were not the proximate cause of plaintiff’s damages. Plaintiff admitted in his papers that he would have filed for bankruptcy if defendant had denied his loss mitigation application. “By extension, Plaintiff’s loss mitigation application would only have helped him avoid filing for bankruptcy if Defendant had provided him with a specific loss mitigation option, which it was not obligated to provide pursuant to 12 C.F.R. § 1024.41(a). Therefore, the causal nexus to Plaintiff’s actual damages is premised upon being provided with a specific loss mitigation option, and not any alleged violations of Section 1024.41.” Accordingly, the Court dismissed the complaint with prejudice.