X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
A case against Bank of America Corp. alleging improper denials of homeowners’ loan modification applications has survived a dismissal motion in Boston federal court. On July 6, Judge Rya Zobel of the District of Massachusetts dismissed some claims but denied dismissal of others in a multidistrict litigation brought with regard to a BOA subsidiary’s administration of applications brought pursuant to the federal Home Affordable Loan Modification Program (HAMP). The U.S. Department of the Treasury’s HAMP program was designed to help 3 million to 4 million homeowners avoid foreclosure. It calls for loan servicers to change the terms of mortgages for eligible homeowners. The case, In re Bank of America Home Affordable Loan Modification Program, involves 46 named plaintiffs who obtained home mortgage loans from BAC Home Loans Servicing LP, a BOA subsidiary. The bank accepted $25 billion from the U.S. government’s Troubled Asset Relief Program, which shored up financial institutions after the sector’s sharp downturn in 2008. The bank also signed a contract with the Treasury Department in April 2009 to participate in HAMP. Zobel ruled that several claims of a proposed class of plaintiffs who participated in a so-called temporary “Trial Period Plan” to modify their notes and mortgages can move forward. The plan, which stemmed from the bank’s participation in HAMP, allowed borrowers to make reduced payments during a trial period based on their financial documentation. The plan promised borrowers who complied with the trial plan for three months a permanent mortgage modification as long as their income statements were accurate. These claims of this class include breach of contract, promissory estoppel and breach of the implied covenant of good faith and fair dealing. Zobel also ruled that trial-period-plan plaintiffs living in Arizona, California, Illinois, Maryland, Massachusetts, Oregon, New Jersey, Pennsylvania and Wisconsin can pursue claims alleging violations of their states’ consumer protection laws. But the order dismissed the claims of a second proposed class and allegations that the bank violated the federal Equal Credit Opportunity Act. The second proposed class included homeowners whose mortgage loans have been serviced by BOA or BAC, but who weren’t part of the trial period plan. Those plaintiffs claimed they were the intended beneficiaries of the servicer participation agreement between BOA and the U.S. Treasury in which BOA agreed to participate in the HAMP program. The order also denied the plaintiffs’ preliminary injunction motion seeking to bar the bank from foreclosing on 37 homeowners, whom they claim are in imminent danger of losing their homes, until the case is resolved. Zobel noted that the bank claims that “all named plaintiffs are already beneficiaries of a ‘voluntary foreclosure hold.’ “ Zobel wrote that the trial-period-plan plaintiffs supported their contract and promissory estoppel claims with a complaint that “meticulously details each plaintiff’s initial and ongoing compliance with all conditions.” “That is sufficient to defeat the motion on this ground,” she wrote. Her ruling also allowed that class’s good faith and fair dealing claim to move forward on similar grounds. “[T]he complaint states that BOA willfully failed to modify qualifying loans, declined to properly train and supervise its agents, encouraged and/or allowed employees to make inaccurate representations, all ‘in bad faith and for its own economic benefit,’ ” Zobel wrote. “ These allegations are sufficient to state a claim.” She further ruled that the state consumer protection claims could proceed “even in the absence of a private means of recovery if the alleged violation is unfair or deceptive. It is a principle expressly adopted by the Massachusetts courts and not disavowed in any of the state statutes here invoked.” In her ruling about the proposed servicer participation agreement class, Zobel cited the U.S. Supreme Court’s ruling in Astra USA Inc. v. Santa Clara County this year, which offered guidance for courts seeking to determine whether a plaintiff is a third-party beneficiary to a government contract. “[C]ourts must first determine whether the contract intended to provide the plaintiff with a legal cause of action, not merely whether the plaintiff is within the class the contract was intended to benefit,” Zobel wrote. Zobel concluded that the plaintiffs bringing the claims with regard to the servicer participation agreement lack standing to bring both their breach of contract and promissory estoppel claims and their good faith and fair dealing claim fails “because they have not stated a claim for breach of contract.” Finally, Zobel denied the Equal Credit Opportunity Act claim: Notification to the customers wasn’t necessary, she wrote, “because defendants did not take an adverse action; they did not refuse to grant credit as plaintiffs had requested.” The plaintiffs’ co-lead counsel, Steve Berman, managing partner of Seattle’s Hagens Berman Sobol Shapiro, said, “People need these modifications; we think it’s a very just cause for these folks to be allowed to go forward.” Berman acknowledged that his team wasn’t happy about the Equal Credit Opportunity Act claim ruling “but the bulk of the claim that will allow these people to get a good remedy under their state consumer protection law survived, and we’re happy.” Berman said the servicer participation agreement plaintiffs’ claims were a long shot. “It’s kind of what we expected,” he said. “[That] claim was on the edge in light of the recent Supreme Court case involving Astra.” BOA spokeswoman Shirley Norton said, “The Bank is pleased that the Court dismissed four of the eight counts in the consolidated complaint, including the nationwide claims.” The bank’s lawyers at Boston’s Goodwin Procter referred questions to their client. Several other firms that also represent Bank of America, did not respond to requests for comment. They include Ballard Spahr of Philadelphia, Bryan Cave, Fulcher Hagler of Augusta, Ga. and Seattle’s Lane Powell. Sheri Qualters can be contacted at [email protected].

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.