BofA, Chase Loan Modification Fraud Class Action Lawsuit Dismissed

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A California judge dismissed a loan modification class action lawsuit claiming that Bank of America, JP Morgan Chase Bank, and other mortgage companies unfairly and fraudulently denied loan modification applications made by distressed homeowners who then foreclosed on their property.

Plaintiffs, who included distressed mortgage holders who eventually foreclosed on their property, claimed that the mortgage service companies denied their loan modification applications after the companies promised the possibility of loan modification as a solution to the plaintiffs’ distressed mortgages. The plaintiffs alleged in the class action lawsuit that they unfairly relied on the mortgage companies’ promises and continued to pay mortgages they could not afford as their loan modification applications were processed and, as a result, when their loan modification applications were eventually denied, they went into default and foreclosure. The distressed home owners claimed the mortgage companies acted fraudulently and violated California debt-collection and unfair competition laws.

Judge David O. Carter had required the plaintiffs amend their complaint several times, and dismissed this third attempt with prejudice on Feb. 20.

The judge determined that the plaintiffs’ fraud claims failed “for a lack of specificity.” The judge noted “[u]nder California law, ”fraud’ means an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury'” and “[p]laintiffs were told in order to survive a … motion to dismiss, [p]laintiffs must include ‘specificity, namely names, dates, [and] places, to their allegations.'” The judge pointed out, “[a]lthough [p]laintiffs have provided details concerning the who, what where, when, and how … [p]laintiffs still have not provided any detailed allegations that [p]laintiffs’ foreclosures ‘were due to a justifiable reliance on a misrepresentation and not due to [p]laintiff’s failures to pay their mortgage.'”

The judge also dismissed plaintiffs’ claims under the California’s debt collection laws; “Plaintiffs were told that in order to survive a … motion to dismiss, Plaintiffs must either demonstrate that the Defendants broke the law, or provide enough facts, pled with particularity, so as to meet the heightened standard of [federal law] … however … Plaintiffs cannot be said to have experienced any injury in fact, simply from not receiving loan modifications that the Plaintiffs wanted, but were never entitled to.”

The judge also dismissed the plaintiffs’ final claims brought under the California’s unfair competition laws: “In the Courts previous ruling, Plaintiffs were told that in order to survive a … motion to dismiss, Plaintiffs must demonstrate that servicer Defendants were ‘debt collector[s]’ … that were engaged in the process of ‘collecting a debt.'” The judge used one plaintiff’s allegations to demonstrate that the plaintiffs “again fail[ed] to plead facts adequately.”

The judge pointed out that a particular plaintiff, Ot Bonsynat, “asserts that ‘each and every time he contacted [defendant] OneWest by telephone, he was first greeted by a recorded message that informed him the [sic] OneWest was [sic] debt collector, collecting a debt and that any information provided by Plaintiff, would be used for that purpose,'” and “Plaintiff also claims that ‘OneWest was assigned Plaintiff’s mortgage upon purchasing the assets of IndyMac Bank from the FDIC in March 2009 … [and] that his mortgage loan was in default prior to OneWest being assigned the servicing rights to his mortgage loan.”

But the judge also pointed out that “Bonsynat claims that the Notice of Default was issued on December 10, 209, which of course is after March 2009” and “Bonsynat does not provide facts to demonstrate that default occurred prior as to distinguish it from a mere mortgage service company – which of course would also not fall under the … definition of a debt collector”(emphasis in original).

The plaintiffs are represented by Khinh V. Yam of Khinh V. Yam Law Offices and Todd S. Dion of the Law Office of Todd S. Dion.

The Bank of America, JP Morgan Chase Loan Modification Class Action Lawsuit is Tom Casault, et. al. v. Federal National Mortgage Association, et. al., Case No. 2:11-cv-10520, in the U.S. District Court for the Central District of California.