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In re RFC and RESCAP Liquidating Trust Actions

United States District Court, D. Minnesota

June 21, 2017

In Re RFC and RESCAP Liquidating Trust Actions

          ORDER REGARDING THE MOTION TO COMPEL DISCOVERY OF SERVICING RECORDS FILED BY DEFENDANT PROVIDENT FUNDING AND JOINED BY DEFENDANT FIRST GUARANTY MORTGAGE CORPORATION

          SUSAN RICHARD NELSON, United States District Judge

         Before the Court is the Motion to Compel Discovery of Servicing Records filed by Defendant Provident Funding (“Provident”) [Doc. No. 2447] and joined by Defendant First Guaranty Mortgage Corporation (“First Guaranty”) [Doc. No. 2468]. For the reasons set forth below, Defendants' motion is granted in part and denied in part.

         I. DISCUSSION

         Defendants bring the instant motion to compel Plaintiffs Residential Funding Company, LLC and the ResCap Liquidating Trust (collectively, “RFC” or “Plaintiffs”) to produce servicing records that Provident and First Guaranty identified in their respective loan-by-loan “gap analyses.” Provident indicates that “servicing documents” include “payment histories, comment logs, and other hard-copy servicing-related documents.” (Provident's Mem. Supp. Mot. to Compel at 1 [Doc. No. 2450].)

         A. Homecomings' and GMAC Mortgage's Primary Loan Servicing

         In general, the “primary servicing” of a residential mortgage loan consists of collecting the monthly mortgage payments and corresponding with borrowers should any payment issues arise. (Chatleain Aff. ¶ 3 [Doc. No. 2549].) Persons doing this work, “primary servicers, ” typically maintain two types of data in connection with primary servicing: (1) payment histories, showing amounts and dates of payment, as well as delinquency and default dates, if applicable; and (2) primary servicers' notes, showing evidence of contact with the borrower, such as telephone calls. (Id. ¶ 4.)

         Prior to April 2007, Homecomings, RFC's affiliate, undertook the primary servicing for most loans in RFC's residential mortgage backed securities (“RMBS), using a loan servicing system called “LSAMS.” (Id. ¶ 5.) After April 2007, the primary servicing data for loans that Homecomings was actively servicing moved to another RFC affiliate, GMAC Mortgage, which assumed the primary servicing responsibility for Homecomings' loans. (Id. ¶ 6.) GMAC Mortgage used a servicing platform called “LoanServ.” (Id.) Although LoanServ is a commercially available platform sold and supported by FiServ, Inc. (“FiServ”), GMAC Mortgage used a customized, proprietary version of LoanServ. (Chatleain Aff. ¶ 7; Wahl Aff. ¶ 12 [Doc. No. 1859].) FiServ is a third-party service provider with which GMAC Mortgage contracted for the storage, management, and maintenance of primary servicing data. (Wahl Aff. ¶ 12.) In April 2007, the primary servicing data for loans that had been serviced using the LSAMS system, but were no longer actively serviced, was archived and remained on the LSAMS system. (Chatleain Decl. ¶ 8; Wahl Aff. ¶ 11.)

         Prior to February 2013, GMAC Mortgage used the LoanServ platform to access data stored at FiServ. (Wahl Aff. ¶ 13.) In addition, GMAC Mortgage stored a subset of the data itself in Fi-Serv's data warehouse utility called InformEnt. (Id.) The information stored on InformEnt was designed for reporting purposes and was accessible through an application called Business Objects. (Id. ¶ 14.) The end users of Business Objects required extensive data knowledge and training in that application. (Id.)

         B. Sale to Ocwen Loan Servicing, LLC

         In February 2013, as part of the bankruptcy proceedings involving GMAC Mortgage and its parent company Residential Capital, LLC, Ocwen Loan Servicing, LLC (“Ocwen”) purchased GMAC Mortgage's loan servicing business at auction. (Chatleain Aff. ¶¶ 13-14.) In addition to the mortgage servicing rights, Ocwen acquired all related books and records, computer equipment, fixtures, and real property related to the GMAC Mortgage servicing business, pursuant to the court-approved sale. (Id. ¶ 15; Wahl Aff. ¶ 15.) When Ocwen acquired GMAC Mortgage's servicing platform, it also acquired GMAC Mortgage's infrastructure, servers, platforms, and contracts, including the LSAMS and LoanServ platforms and the contract with FiServ. (Wahl Aff. ¶ 16.) Consequently, all of GMAC Mortgage's available LSAMS data and LoanServ data-including data related to Homecomings and GMAC Mortgage-serviced loans that were liquidated prior to February 2013-were transferred to Ocwen in February 2013. (Id.) Colette Wahl, who oversees the Technology and Operations Group of ResCap, attests that ResCap has no reason to believe that any LSAMS data that was not transferred to LoanServ in April 2007 was deleted between April 2007 and the transfer to Ocwen. (Id. ¶ 17.) Likewise, Wahl states that ResCap has no reason to believe that any LoanServ data was deleted between April 2007 and the transfer to Ocwen in 2013, including data on loans liquidated between April 2007 and February 2013. (Id.)

         Following the sale to Ocwen, ResCap requested and obtained from Ocwen a “snapshot” of the primary servicing data stored in the InformEnt data warehouse, as it existed at that time. (Id. ¶ 20.) Ms. Wahl and her colleague Cindy Chatleain, who is also in ResCap's Technology and Operations Group, state that the snapshot data is not readily accessible. (Wahl Aff. ¶¶ 20, 22-25; Chatleain Aff. ¶¶ 19, 24.) It consists of over 650 separate Oracle data tables, with each table containing up to 577 fields, and each field containing up to 100 million rows of data. (Id.) Further, they assert that extracting the data for the more than 7.2 million loans in the snapshot would take more than 400 hours of work, or about 50 days of one person's full-time work. (Wahl Aff. ¶ 23; Chatleain Aff. ¶ 21.) Even then, the information would be incomplete, they contend, and not viewable in a format that would allow a user to review the servicing information in a single document or spreadsheet. (Chatleain Aff. ¶ ¶ 21-22; Wahl Aff. ¶¶ 24.) Further, because the data fields contain only codes, Ms. Wahl and Ms. Chatleain estimate that it would take several weeks just to calculate an estimate of the work involved in linking the data so that all of the primary servicing data for a given loan could be viewed together, and the codes linked to the appropriate code tables. (Chatleain Aff. ¶ 22; Wahl Aff. ¶ 25.)

         C. Discovery

         The factual recitation below by no means fully documents the lengthy discovery process concerning primary loan servicing documents, but notes some of the events identified by the parties in their memoranda. In response to Defendants' request for all loan servicing records, in January 2015, Plaintiffs agreed to produce loan servicing files for the at-issue loans in Plaintiffs' “possession, custody or control” that Plaintiffs could “locate through a reasonable search.” (Supalla Decl., Ex. A (RFC's Responses to Defs.' First Set of Interrogs. and Requests for Prod. at Request No. 2) [Doc. No. 2454].) Defendants also subpoenaed third party Ocwen in April 2015 for loan servicing-related documents.

         In approximately June 2015, Plaintiffs began to analyze all available servicing-related documents and data in their possession in order to determine what information was retained after the sale of the servicing platform to GMAC Mortgage, and where it might be stored, as well as what servicing-related information was transferred to Ocwen as part of the sale. (Wahl Decl. ¶ 9 [Doc. No. 2548].) After ...


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