424 F.Supp.3d 614
N.D. Cal.2020Background:
- Plaintiffs Roy Hahn and Linda Montgomery (and their trust) owned a San Francisco condominium secured by a 2005 mortgage; they defaulted in December 2013 after significant IRS liabilities.
- Plaintiffs submitted multiple loss-mitigation (loan modification) applications to Chase and then to servicer Select Portfolio Servicing, Inc. (SPS) between 2014–2016.
- SPS acknowledged "complete" applications in March 2015 and July 2016 but requested a property appraisal; when appraisals were not obtained, SPS deemed the applications "withdrawn."
- A Notice of Default was recorded in November 2016 and a Notice of Trustee’s Sale in February 2017; foreclosure sales were later postponed/cancelled, and Plaintiffs sold the residence in May 2017.
- Plaintiffs sued alleging RESPA violations (12 C.F.R. §1024.41), UCL claims (unlawful, unfair, fraudulent), and negligence; SPS moved for summary judgment and the court granted judgment for SPS on all claims.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether SPS violated 12 C.F.R. §1024.41(b)(2) (acknowledgement/complete notice) | Hahn: SPS failed to properly acknowledge/handle applications timely | SPS: complied with the 5-day acknowledgement and (b)(2) procedures | Court: Plaintiffs withdrew (b)(2) claim at argument; summary judgment for SPS on (b)(2) claim |
| Whether SPS violated 12 C.F.R. §1024.41(c)(1) by deeming applications withdrawn instead of granting/denying within 30 days when appraisal missing | Hahn: Regulation required a grant/denial within 30 days regardless; withdrawing for lack of appraisal violated (c)(1) | SPS: (c)(1) required a written determination within 30 days; servicer may request third‑party info and treat application as facially complete while seeking missing info; deeming withdrawn was permitted | Court: No violation—SPS’s actions complied with (c)(1) as applied; later 2017 amendments cited by Plaintiffs were not retroactive |
| Causation & actual damages under RESPA (including claimed lost equity, fees, ruined credit, emotional distress) | Hahn: SPS’s mishandling caused foreclosure pressure, a "fire-sale" loss, fees, ruined credit, and emotional distress | SPS: Plaintiffs cannot show pecuniary or causally linked damages; many claimed harms speculative or unrelated; emotional distress not clearly recoverable | Court: Plaintiffs failed to show damages causally linked to any RESPA violation; speculative lost-equity and fee claims insufficient; emotional-distress not resolved but insufficient evidence of causation; summary judgment for SPS |
| UCL standing (unlawful, unfair, fraudulent prongs) | Hahn: UCL claims derive from the same alleged misconduct and caused injury (loss, fees, lost opportunities) | SPS: UCL claims are derivative of RESPA (so fail if RESPA fails) and Plaintiffs lack injury-in-fact to confer UCL standing | Court: Unlawful prong fails with RESPA; unfair/fraudulent prongs lack injury-in-fact showing—summary judgment for SPS |
| Negligence: whether SPS owed a common‑law duty in processing loan modification applications | Hahn: SPS negligently handled applications causing harm | SPS: No common-law duty to process/approve modifications; lender/servicer rule bars such duty | Court: Adopted Ninth Circuit and California authority (Lueras/Anderson line) finding no duty; summary judgment for SPS |
Key Cases Cited
- Celotex Corp. v. Catrett, 477 U.S. 317 (1986) (moving party’s summary judgment burdens and nonmovant’s response standard)
- Scott v. Harris, 550 U.S. 372 (2007) (summary judgment—record viewed as whole cannot support nonmovant)
- Tolan v. Cotton, 572 U.S. 650 (2014) (evidence and inferences at summary judgment viewed in nonmovant’s favor)
- Lage v. Ocwen Loan Servicing LLC, 839 F.3d 1003 (11th Cir. 2016) (once servicer determines application complete or requested materials received, application is facially complete)
- Lueras v. BAC Home Loans Servicing, LP, 221 Cal. App. 4th 49 (2013) (Biakanja factors do not impose duty to offer/approve loan modifications)
- Anderson v. Deutsche Bank Nat. Tr. Co. Americas, [citation="649 F. App'x 550"] (9th Cir. 2016) (Biakanja factors do not support duty for delays in processing modification applications)
- Merrill v. Navegar, 26 Cal. 4th 465 (2001) (elements and analysis for negligence under California law)
- Navellier v. Sletten, 262 F.3d 923 (9th Cir. 2001) (speculative damages insufficient to survive summary judgment)
- FTC v. Stefanchik, 559 F.3d 924 (9th Cir. 2009) (bald assertions or a scintilla of evidence insufficient to defeat summary judgment)