Summary:
In a detailed but pragmatic opinion, Chief Judge Catherine Eagles offers a tidy roadmap for mortgage-servicing litigation in the Middle District — clarifying what sticks at the pleading stage (loss-mitigation fee violations, RESPA damages, UDTPA claims) and what gets tossed to the curb (negligence, joint venture fantasies, and the perennial “they threatened foreclosure!” count that courts treat like the boy who cried wolf).
The result: Custer’s strongest claims live another day, and mortgage servicers get a reminder that North Carolina’s Mortgage Debt Collection and Servicing Act (MDCSA) actually has teeth — especially the 30-day fee-disclosure rules in N.C. Gen. Stat. § 45-91.
Personal Jurisdiction: If You Service in NC, You Answer in NC:
Simmons Bank tried the predictable “we’re nowhere near North Carolina” argument — but once you service a North Carolina mortgage, communicate with a North Carolina borrower, and collect North Carolina payments, the long-arm statute and Due Process Clause converge in perfect harmony.
Judge Eagles had no trouble finding specific jurisdiction, especially where DMI was acting as Simmons’ agent and the alleged misconduct arose out of the servicing relationship itself.
Practice Point: Servicers who acquire loans on NC property should stop pretending they’re “not doing business” here. The MDNC is not impressed by that argument.
No Rule 8 “Shotgun Pleading” Here:
Simmons also lobbed the increasingly popular “shotgun complaint” argument. Judge Eagles — correctly — found this complaint was not one of those sprawling, defendant-lumping monstrosities that courts love to mock in footnotes. Custer actually separated his allegations and counts with some clarity.
Claim-Splitting Defense Rejected:
DMI argued that Custer improperly brought two separate cases:
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Custer I – a narrow class action about illegal pay-by-phone fees.
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Custer II – an individual action about loss-mitigation misconduct, RESPA violations, and wrongful account handling.
Even though both involve the same subservicer and overlapping time periods, the factual nuclei were distinct. Judge Eagles correctly held that North Carolina plaintiffs are not required to put every egg in the same basket just because one of them got mentioned in a demand letter.
This support the argument that while an Objection to Claim in a Chapter 13 case might appropriate deal with the disallowance of illegal mortgage servicer fees under N.C.G.S. § 45-91, a debtor could raise claims for damages in separate actions or even in other forums than the bankruptcy court.
Surviving Claims
1. NCDCA — Loss-Mitigation Fees (Count I)
This is the heart of the opinion.
Custer alleged that DMI:
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charged “Loss Mitigation Attorney Fees,”
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failed to send the required clear and conspicuous explanation within 30 days,
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and passed through stale fees older than 30 days —
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all in violation of § 45-91(1)(b) and § 45-91(3).
Judge Eagles recognizes that violations of the MDCSA constitute unfair acts under Chapter 75, and emotional distress is a cognizable injury under the NCDCA.
This claim stays in.
Why This Matters: The MDCSA may be North Carolina’s most underutilized consumer-protection statute. Servicers routinely treat the 30-day disclosure rule as optional. It isn’t — and Custer shows courts will enforce it.
2. NCDCA — False Representations About the Amount Owed (Count III(b))
Custer alleged that after signing a loan-mod agreement:
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the servicers sent him incorrect payment amounts,
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misrepresented the amount owed,
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and later admitted they had done so.
That’s enough to survive dismissal. Even a single incorrect statement, if used to collect a debt, satisfies N.C. Gen. Stat. § 75-54(4).
3. RESPA — Loss-Mitigation Handling (Count II)
DMI argued Custer failed to allege “actual damages.” Judge Eagles disagreed.
Allegations that:
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RESPA delays forced him into a worse modification,
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increased capitalized interest, and
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brought him closer to foreclosure
are more than sufficient.
This tracks the increasingly borrower-friendly reading of RESPA damages that’s shown up in recent Fourth Circuit and district-court decisions.
4. UDTPA (Count IV)
Servicers argued that the NCDCA provides the exclusive remedy and bars a standalone UDTPA claim.
Not necessarily so.
Judge Eagles notes that:
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the MDCSA and SAFE Act impose duties beyond pure “debt collection,”
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the defendants have not yet admitted they are “debt collectors” under the NCDCA, and
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a factual record is needed before declaring exclusivity.
The UDTPA claims survive, at least for now.
Commentary: This is important. Servicers love arguing that Chapter 75 only applies through the NCDCA. This opinion confirms what practitioners know: mortgage servicing involves more than “debt collection.” Servicers have independent statutory duties — especially under § 45-93 — and violating those duties can support a UDTPA claim.
Dismissed Claims:
1. NCDCA — Communicating With a Represented Consumer (Count III(a))
Custer didn’t identify any specific communication after the attorney-rep notice. Courts don’t accept “they kept calling me” without dates or examples. This was correctly dismissed.
2. NCDCA — Threatening an Illegal Foreclosure (Count III(c))
Simply alleging “they pursued foreclosure” isn’t enough.
North Carolina courts have long held that lawful foreclosure threats are not UDTPA violations unless the borrower alleges the foreclosure itself was unlawful.
This claim dies — again, correctly.
3. Negligence (Count V)
Custer conceded dismissal.
4. Joint Venture (Count VI)
The “Simmons + DMI = Joint Venture” theory gets a swift judicial eye-roll.
Joint ventures require:
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shared profits, and
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mutual control.
Servicer and subservicer do not share profits, and DMI does not get to boss Simmons Bank around. Dismissed with prejudice.
Takeaways:
1. The MDCSA is no longer the forgotten stepchild of NC consumer law.
Judge Eagles treats § 45-91’s fee-disclosure rule as a meaningful, enforceable statute — and one that can trigger treble damages via Chapter 75. These protections are well known in bankruptcy courts from cases including Saeed, Peach and most recently Rogers.
Mortgage servicers should now be on notice that violations of these restrictions and notice requirements will result in requests for treble damages.
2. Servicing misconduct during loan modifications is fertile litigation ground.
RESPA, MDCSA, NCDCA, UDTPA — all survived in some form. North Carolina homeowners are uniquely well-protected if counsel knows the statutory landscape.
3. Not every misdeed equals a foreclosure-threat claim.
Courts require specificity — and borrowers must allege the threat itself was unlawful.
4. Joint venture theories between servicers and subservicers should be permanently retired.
We can stop wasting keystrokes on them.
Final Commentary:
Custer v. Simmons Bank & DMI is a solid example of how North Carolina’s layered statutory scheme protects mortgage borrowers — and how servicers’ casual treatment of fee disclosures, modification timelines, and payment accuracy can open them to real litigation risk.
As more cases like Custer develop, expect to see:
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More MDCSA enforcement,
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More RESPA damages claims tied to loan-mod failures, and
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More UDTPA claims survive despite NCDCA “exclusivity” defenses.
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Debtors in bankruptcy cases seeking treble damages for violation of N.C.G.S. § 45-91 (whether in bankruptcy court claims objection or subsequent suits in federal district court.)
North Carolina continues to be one of the few states where mortgage servicers can’t treat homeowners as an afterthought — and the federal courts are beginning to treat these statutes as more than decorative wall hangings.
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