Have you been offered a trial plan from your lender through HAMP? Did you complete all your trial plan payments but now your lender isn’t doing what you thought they agreed to do?
What options do you have? Can you make them perform?
The answer is a big, fat MAYBE.
I got this from an ActiveRain blog post by Steve Vondran, Esq. He is a Real Estate Attorney licensed to practice law in Arizona (serving greater Phoenix) and California (Serving most areas of California). He currently practices foreclosure defense and predatory lending law. If you have more questions, please go to the article and then contact an attorney.
Disclosure: I am not a lawyer so you should seek competent legal advice if you believe any of these conditions apply to your situation. I have no business or personal connections to Mr. Vondran or his practice and am not recommending that you use his services.
You need to understand a few legal terms if you’re thinking about taking your lender to court.
1. Fraud / Negligent Misrepresentation:
The elements of fraud are: (1) misrepresentation (false representation, concealment, or nondisclosure); (2) knowledge of falsity; (3) intent to defraud, i.e., to induce reliance; (4) justifiable reliance; and (5) resulting damages. Lazar v. Superior Court, 12 Cal. 4th 631, 638, 49 Cal. Rptr. 2d 377 (1996).
The elements of negligent misrepresentation are: (1) the misrepresentation of a past or existing material fact; (2) without reasonable ground for believing it to be true; (3) with intent to induce another’s reliance on the fact misrepresented; (4) justifiable reliance on the misrepresentation; and (5) resulting damages. Id.; see also Alliance Mortgage Co. v. Rothwell, 10 Cal. 4th 1226, 1239, fn. 4, 44 Cal. Rptr. 2d 352 (1995) (negligent misrepresentation is a species of the tort of deceit and like fraud, requires a misrepresentation, justifiable reliance, and damages).
2. Fraudulent Inducement:
This is a claim which is like a hybrid claim of breach of contract and tort. The essence of the claim is that the defendant fraudulently induced a party to enter into a contract.
This cause of action generally requires knowing and intentional false statements of material fact (a material factual omission may not be sufficient but should be explored) which reasonably induce a homeowner to rely on the statements, and which false statements were relied upon to their detriment.
Where this action lies, the Courts may allow specific performance of the contract as a remedy and where fraud is clearly shown, punitive damages may be available.
3. Breach of Covenant of Good Faith and Fair Dealing
Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement.” Carma Developers, Inc. v. Marathon Dev. Cal., Inc., 2 Cal.4th 342, 371, 6 Cal.Rptr.2d 467, 826 P.2d 710 (1992) (quoting Restatement (Second) of Contracts § 205). “The covenant of good faith finds particular application in situations where one party is invested with a discretionary power affecting the rights of another. Such power must be exercised in good faith. See Marsu, B.V. v. Walt Disney Co., 185 F.3d 932, C.A.9 (Cal.),1999.
The Cause of action for tortious breach of implied covenant of good faith and fair dealing exists if special relationship between parties is characterized by elements of public interest, adhesion, and fiduciary responsibility. Kittredge Sports Co. v. Superior Court, 213 Cal.App.3d 1045, 261 Cal.Rptr. 857
These are the most likely legal grounds (in my opinion) that you could file on. There are other (California specific) arguments listed in the ActiveRain article including:
- Violation of California Civil Code Section 17200
- Violation of California Consumer Legal remedies Act (Cal Civ. Code Section 1770 et seq.)
So What Can You Do?
- You were given a trial plan loan modification offer, agreement, or other documents, and you made payments under the trial plan as agreed
- No material representations you made pursuant to the agreement have changed during the period of the contract, AND
- If the lender or loan servicer refused to follow through with the trial plan, said you don’t qualify for a loan modification, or sold you house from underneath you,
You may need to see a real estate, predatory lending, and/or foreclosure attorney to review whether or not you have a valid legal case to assert for either specific performance of the contract, or potentially money damages, including potentially punitive damages.
You might also want to check out this article from a couple weeks ago on the Consumer Warning Network blog: Lawsuit Filed to Shake-Up Loan Modification Limbo.Home Affordable Modification, law overview, Laws, state laws