U.S. District Court
Where a plaintiff has brought a breach of contract complaint arising out of a foreclosure, the defendants are entitled to summary judgment despite the plaintiff’s claim that the defendants breached Paragraph 22 of the mortgage by failing to advise him that he had the right to reinstate the loan at least five days before the scheduled foreclosure auction date and by acting on his foreclosure without a mortgage servicer license from the Division of Banking.
“Plaintiff Jason Leone brought this case against Defendants Nationstar Mortgage, LLC and HSBC Bank USA National Association as Trustee for Mortgage Pass-Through Certificates, Series MLMI 2005-A10 (‘HSBC’) for breach of contract arising out of the foreclosure on his real property located in North Kingstown, Rhode Island. Mr. Leone alleges that HSBC and Nationstar breached the mortgage, specifically Paragraph 22, in two ways: (1) by failing to advise him that he had the right to reinstate the loan at least five days before the scheduled foreclosure auction date and (2) by sending the Notice prior to obtaining a mortgage servicer license from the Division of Banking as Rhode Island law requires. …
“The Court examines Mr. Leone’s two arguments, that (1) Defendants failed to advise him that he had the right to reinstate the loan at least five days before the scheduled foreclosure auction date and, (2) Nationstar acted on his foreclosure without a mortgage servicer license from the Division of Banking. Because the Court finds that there are no disputed issues of material fact in the record and that Mr. Leone’s arguments in support of his claim are unpersuasive, the Court grants Defendants’ Motion for Summary Judgment. …
“Mr. Leone alleged in his complaint and maintains in his opposition to the motion that the Notice gave an incorrect date by which to cure the default because it should have been five days before the foreclosure as dictated in Paragraph 19 of the mortgage. Defendants argue that Mr. Leone conflates, and confuses, the act of curing a default after receiving Paragraph 22 Notice and reinstating a mortgage after the cure period ends as set forth in Paragraph 19. First, it is well settled that Paragraph 19 does not have a notice requirement, so Mr. Leone was not entitled to any communication about his rights under that part of the mortgage. …
“Moreover, it is undisputed that Nationstar sent Mr. Leone a Notice that stated everything that was required under Paragraph 22. It advised him that the mortgage was in default for failure to make the payment due on October 1, 2007 and all subsequent payments. It communicated the total amount due and the date by which he had to cure and also that he had the right to reinstate after acceleration and to bring an action in court. Paragraph 22 does not require notice of a fictional right to cure a default or cure an arrearage up to five days before foreclosure. Therefore, it is undisputed that Defendants complied with the notice requirements in the mortgage and were not in breach of the contract. …
“The Court turns to the statutory language to determine the scope of the licensing of loan servicers and any prohibitions on their activities. …
“Considering the statute as a whole, … the Court notes that the Legislature enacted a section stating ‘[a]ny revocation, suspension, or surrender of a license shall not impair or affect the obligation of any preexisting lawful contract between the licensee and any customer.’ R.L Gen. Laws §19-14-17. This section unambiguously states that a servicer’s lack of a license (whether it is because it was revoked, suspended, or surrendered) does not affect the existing contractual relationship between the servicer and the mortgagee. This interpretation makes sense in this case since the Division of Banking took no action against Nationstar in the form of a cease-and desist order even though it knew Nationstar was continuing to conduct business while its application was pending. And the Consent Agreement did not address whether any business done during the pendency of Nationstar’s license was valid or not. Therefore, the Court finds that the statutory scheme governing the licensing of third-party servicers does not dictate that any action taken by an unlicensed servicer is void. …
“Nationstar’s lapse in licensing and conduct during the pendency of its application with full knowledge of the Division of Banking did not breach the mortgage.”
Leone v. Nationstar Mortgage, LLC, et al. (Lawyers Weekly No. 52-095-23) (11 pages) (McConnell, C.J.) (C.A. No. 21-323-JJM-LDA) (Oct. 5, 2023).
