Servicers Sued Over Denied Mods

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Big mortgage servicers are the target of lawsuits by borrowers who claim they were unfairly denied a loan modification. Class-action certification is sought in some of the cases.

A decision by a federal district court to dismiss a lawsuit was reversed by the Seventh Circuit Court, Patton Boggs LLP reported. The district court had determined that a communication made “in connection with the collection of any debt”and need not explicitly demand repayment of that debt to be covered by the Fair Debt Collection Practices Act.

In its reversal, the Seventh Circuit held that the absence of such payment demand is not, alone, dispositive of the act’s application. Instead, the court instructs lower courts to also consider the nature of the parties’ relationship and the purpose and context of the communication.

Aurora Loan Services LLC was named as the defendant is a class-action lawsuit filed in U.S. District Court for the Northern District of California on behalf borrowers who allegedly paid “tens of thousands of dollars each” based on promises of loan modifications that they never received, Hagens Berman Sobol Shapiro LLP announced on Aug. 20. Aurora allegedly collected six “large” monthly payments from each of the borrowers and is accused of earning more than $100 million from the scheme.

“After a period of months, Aurora foreclosed on the homes without giving the borrowers any notice that their requests for loan modification were denied and without allowing borrowers access to any method for ending their loan deficiency, despite the provisions of the workout agreements,” the law firm claims.

One couple allegedly paid $33,500 in trial payments only to receive a notice to vacate after the home was foreclosed without their knowledge.

A lawsuit was filed by Anthony and April Soper against Bank of America Corp. because they were turned down for a loan modification, according to published reports this month. The Lake Stevens, Wash., couple claim they made trial payments ahead of the due dates and don’t know why their modification was denied.

A federal court in Nashville will determine at a Sept. 30 hearing whether their case will be consolidated with more than a dozen other lawsuits.

In Arizona, a lawsuit filed in federal court against BofA seeks class action certification, Courthouse News Service reported. BofA allegedly finds it more profitable to deny HAMP modifications than complete them, based on the complaint filed by Hagens Berman Sobol Shapiro.

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Mortgage Daily Staff

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