The opinion of the court was delivered by: George C. Smith, Judge United States District Court
Plaintiffs filed this putative class action on June 3, 2005 (Doc. 1). Defendant then moved to dismiss on August 19, 2005 (Doc. 9). On October 10, 2005, Plaintiffs filed an Amended Complaint (Doc. 15). Thereafter, on November 14, 2005, Defendant filed its second motion to dismiss (Doc. 21). Defendant moves to dismiss Counts II through VII of Plaintiffs' Amended Complaint and to strike the unsupported allegations of Count III. This Motion is now ripe for review. For the reasons that follow, the Court GRANTS in part and DENIES in part Defendant's Motion to Dismiss.
For purposes of ruling on Defendant's Motion to Dismiss, the Court accepts as true the well-pleaded facts set forth in the Amended Complaint (Doc. 15).
Plaintiff Martin V. Webb is a resident of Kingston, Tennessee whose home-secured loan was serviced by Defendant Chase during the period covered by this action. Plaintiff Waltraud Carter is a resident of Aurora, Colorado whose home-secured loan was serviced by Defendant Chase during the period covered by this action.
Defendant Chase Manhattan Mortgage Corporation ("Chase") is a New Jersey corporation with its headquarters and principal place of business in New Jersey. Its parent, J.P. Morgan Chase ("JPM"), is located at 270 Park Avenue, New York, New York, 10017. JPM, however, has not been named as a Defendant. Nonetheless, Plaintiffs allege that JPM colluded with Chase to, inter alia, funnel prospective borrowers to Chase with full knowledge of its illegal and other improper practices described herein.
Plaintiffs Webb and Carter bring this action on behalf of themselves and all those whose loans were serviced by Chase on or after August 1, 1999 and/or who were affected, or whose loans and/or escrowed funds were affected by at least one of the following practices:
a. assessment of excess or improper force placed hazard insurance premiums and assessment of improper flood insurance premiums;
b. accepting the mortgagor's payments (and negotiating any checks issued pursuant thereto) and placing the funds received in "suspense" in lieu of timely crediting them to the mortgagor's account;
c. negotiating payments made by or on behalf of the mortgagor but failing to credit them timely to the mortgagor's account;
d. incorrectly posting amounts received on account;
e. failing to keep and provide to Class members comprehensible and accurate records of amounts received from mortgagors on account;
f. assessing late fees on payments that had been received by Chase when due; and
g. improperly using funds held by Chase in escrow to benefit itself and otherwise misusing such funds.
Plaintiffs' claims are based on form loan documents, standardized servicing practices, form letters, and accounting standards that were used or implemented by Chase on a nationwide basis. Chase controlled and implemented the challenged practices, including those carried out by Chase from within this District and from its headquarters in Edison, New Jersey.
Plaintiffs allege that Chase engages in a uniform scheme and course of conduct to inflate its corporate profits by force-placing hazard insurance on properties which secure the mortgages that it services. If a borrower fails to purchase or maintain hazard insurance on his or her property, according to standard mortgage instruments, the mortgagee can "force place," or purchase insurance itself to protect the mortgagee's rights in the property, then pass the actual cost of such coverage to the borrower. Chase, however, routinely force places insurance unnecessarily where the borrower actually has insurance in place and/or where Chase improperly failed to make insurance payments from the borrowers' escrow accounts. Chase also routinely obtains coverage in amounts which do not fairly reflect the mortgagors' interest in the underlying properties consistent with Chase's fiduciary obligations to such borrowers. Plaintiffs allege that Chase receives kickbacks or other disguised benefits from the insurance companies from which it purchases such insurance and does not obtain coverage at the lowest available cost to borrowers.
Further, Plaintiffs allege that Chase routinely fails to respond to borrowers' written disputes or requests for information made pursuant to RESPA; fails to notify borrowers that it has force placed insurance, that it has imposed fees and charges, and that it will collect unjustified attorneys' fees and other charges in connection with collection and foreclosure activities; fails to promptly and accurately credit their accounts when payments are made; and otherwise fails to provide accurate or timely information to borrowers concerning their accounts.
Plaintiffs assert that Chase, in association with others, has engaged in a course of conduct to inflate its corporate profits by forceplacing hazard insurance on properties which are subject to mortgages that it services or owns, based on standard mortgage instruments which provide that the mortgagee can do whatever is necessary to protect the mortgagees rates and the property. In procuring this "coverage," however, Chase routinely bills and attempts to collect from the borrowers alleged "premium disbursements" for the force-placed insurance that far exceed the ordinary charges for the former or ...