Following Alvarez v. BAC Home Loan Servicing, L.P. (2014) 228 Cal.App.4th 941, this decision holds that a loan servicer owes a borrower a duty of care in handling the borrower’s loan modification application. It also holds that the borrower stated viable fraud and negligent misrepresentation claims based on the loan servicer’s allegedly false statement that it had received all the documents it required to make a decision on the loan modification request. The loan’s owner is liable on these claims since the loan servicer acts as its agent. However, the borrower could not hold a subsequent loan servicer liable for the prior loan servicer’s misrepresentations. The decision also holds that the West/Wigod line of authority giving borrowers a breach of contract claim when they are not given a permanent loan modification after successfully completing a trial period plan applies only to HAMP loan modifications because the Treasury’s HAMP guidelines provide the needed definiteness to the contract terms, but the required definite terms are missing when the loan modification application is processed under a non-HAMP proprietary loan modification program—at least unless the plaintiff can allege the required definiteness by other means. The decision also casts doubt on whether a loan servicer’s breach of an agreement to provide a loan modification is a defense to enforcement of the loan by a later loan servicer. The decision rejects a promissory estoppel claim relating to the supposedly promised loan modification for lack of a definite promise since terms of the promised modification were not specified.
California Court of Appeal, Sixth District (Walsh, J., sitting by designation); April 26, 2016; 2016 WL 1688595