I expect to see a lot more mortgage-related consumer
protection claims working their way through the courts. The complaint alleged as follows: Plaintiffs
bought a home in 2007 from defendant, and refinanced with JPM in 2010. They received a letter from JPM that the loan
was paid in full. But over two months
later, they got another letter informing them that they owed $5176 “due to
‘shortage’ in pay off amount.” They sent
letters and emails to JPM asking for an explanation, understandably, and a
month later received an email telling them that the shortage “pertain[ed] to an
internal issue regarding the payoff amount that [defendant] confirmed during
the refinancing,” but were told to “not be alarmed” and that they would “not be
negatively impacted.”
But a few weeks
later, they got another letter
telling them that the payoff was short by almost $3700. They again sought an explanation from JPM, which
two weeks later told them that the first “shortage” “pertained to an insurance
disbursement” that “has been resolved” and that the second occurred because the
tax department had “overpaid [the] county” and was awaiting a refund. (Why was this plaintiffs’ problem? Who knows?)
On the same day, JPM told plaintiffs that it might have to take the
funds out of their escrow account, requiring them to increase their monthly
payment in order to refill the account.
Plaintiffs promptly requested a reconciliation and
resolution of the issue. Eight months later, they got a letter
telling them that their payments were increasing by $465 due to an “impound
shortage.” They called JPM and were told
the problem was a shortage in the escrow account. They contacted JPM several
times, but didn’t receive any explanation that made sense. In order to avoid credit problems, they made
the increased payments. A year later,
JPM told them that their monthly payment was decreasing by $320 a month. They
again requested a reconciliation, but didn’t get one. Thereafter, they sent, through counsel, two Qualified
Written Requests (“QWRs”) to JPM. JPM
didn’t include the requested information in its response to the first and
failed to respond to the second.
At the time of suit, plaintiffs hadn’t received a response
about their refinanced loan, and didn’t know whether their first loan was paid
in full or why their payments increased then decreased. While this was going on, interest rates
reached an historic low. They wanted to
refinance to take advantage of this and reduce their monthly payments, but
without understanding the status of their current and past loans were too
uncertain to take any action.
They sued for violation of the Real Estate Settlement
Procedures Act and California’s related Rosenthal Act governing debt collection,
both of which claims the court declined to dismiss. They also alleged violation of the UCL,
negligence, and negligent/intentional infliction of emotional distress. The UCL borrows violation of other laws, and
the RESPA violation qualified. JPM
argued that plaintiffs lacked standing because they didn’t allege they suffered
any actual harm. (I know why defendants
do this, but it bugs me that now any failure to state a claim is labeled “standing.” Don’t we have a rich and highly developed
vocabulary for reasons a claim might fail?)
Here, plaintiffs alleged that as a result of JPM’s failure to respond to
their QWRs, they “have not been able to refinance their loan to take advantage
of the low interest rates and save thousands per year on their mortgage
payments.” That was enough to plead
actual harm.
Turning to the negligence claim, JPM argued that plaintiffs
failed to plead facts showing it owed them any duty of care. “As a general rule, a financial institution
owes no duty of care to a borrower when the institution’s involvement in the
loan transaction does not exceed the scope of its conventional role as a mere
lender of money.” Because plaintiffs
based their claims on conduct occurring in the ordinary course and scope of
defendant’s participation in the loan transaction, no duty of care arose and
the claim was dismissed.
Likewise, plaintiffs failed to plead extreme and outrageous
conduct, so the emotional distress claims failed.
No comments:
Post a Comment