SunCoastToday.com By Bob Feingold 11/5/2014
The U.S. District Court ruled last week that a pattern of delay and evasive and erroneous responses to a consumer requesting a loan modification under the Home Affordable Modification Program (HAMP), can be the basis for a lawsuit under Massachusetts General Law Chapter 93A, the Consumer Protection Statute. Hanrahran v. Specialized Loan Servicing, LLC (1:14-cv-10397-PBS) (Oct. 23, 2014).
In this case, a Brockton woman obtained a Countrywide home loan in 2006. which was secured by a mortgage on her home. After Bank of America purchased Countrywide, it contracted with Specialized Loan Servicing, LLC (SLS), to service her loan. SLS sent her a notice that she was eligible for a loan modification and she promptly filed her application. Under the applicable formula, she was entitled to a 30 percent reduction in her monthly payments. Instead of approving her application, SLS informed her that that the mortgage was in default and referred for foreclosure. She sent a demand for relief under MGL 93A. SLS continued to deny her application for HAMP for cording to the court, “for dubious reasons.” SLS delayed her HAMP application and request for almost 20 months. and during this time SLS added fees and interest to her normal monthly mortgage payment.
The woman filed a complaint alleging unfair or deceptive business practices during the processing of her HAMP application. SLS filed a motion to dismiss.
The Federal District Court found that that SLS’s actions were more than minor delays or clerical errors. The court recognized that there is a fine line between normal errors and delays and those that would constitute unfair and deceptive business practices. The court ruled that the plaintiff alleged sufficient facts that would constitute unfair business practices, and that the cumulative impact of all of the actions and omissions by SLS amounted to a basis for a Chapter 93A violation.
The court’s language is instructive:
SLS failed to respond to Hanrahran’s HAMP application for almost 20 months, despite repeated requests to do so. And when they finally rejected her application, they did so for dubious reasons, falsely stating that she was missing documents and failed to respond to one of their notices. Meanwhile, SLS continued to refer Hanrahran to foreclosure and pile on fees and costs as she was strung along for more than a year-and-a-half. Although none of these actions might amount to a Chapter 93A violation on their own, “the relevant conduct is the entirety of defendants’ actions, not each action viewed in isolation.”
The court also ruled that the economic injury is recoverable because Hanrahan faces higher payments now than she would under HAMP; she has to pay accumulated interest, as well as late charges and her credit was damaged.
This is an important case because the Federal District Court is acknowledging that the cumulative effect of delay and inappropriate practices by a bank or servicing agency during a loan modification application process can be the basis of a 93A claim, which permits multiple damages and attorneys’ fees.
Lenders and servicing companies need to take this liability exposure into account in formulating their methods for processing loan modification requests. Consumers need to be aware that lenders and loan servicing companies must act in good faith and be accurate, efficient and fair.
