Lueras v. BAC Home Loans Servicing, LP
221 Cal. App. 4th 49
| Cal. Ct. App. | 2013Background
- Lueras refinanced in 2007 with a $385,000 loan secured by a deed of trust; he paid until financial hardship began in 2008.
- In 2009, Lueras sought a loan modification; Bank of America offered the HomeSaver Forbearance program instead of HAMP.
- For the six-month deferral, Lueras paid reduced monthly amounts and Bank of America suspended foreclosure; lender could resume foreclosure at end of deferral if no feasible alternative identified.
- Between 2010–2011, Lueras submitted documents for a HAMP modification; multiple sale dates were postponed pending approval from Fannie Mae.
- May 5, 2011 letter stated Lueras did not qualify for a modification but would be contacted for other options; May 6, 2011 letter indicated review for possible HAMP modification; trustee’s sale was reset but ultimately occurred May 18, 2011 and then was said to be reset pending approval.
- Foreclosure sale was allegedly rescinded before the trustee’s deed was recorded, and Lueras retained title; the First Amended Complaint pleaded several causes of action but the trial court sustained demurrers without leave to amend as to Bank of America, ReconTrust, and Fannie Mae.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Duty of care owed by lender/servicer on modification foreclosures | Lueras asserts a duty to offer/consider foreclosure alternatives and to act reasonably in handling modification requests. | Lenders owe no duty beyond contract and the loan documents in modification/foreclosure contexts. | No general common-law duty to offer/approve modifications; duty may arise for negligent misrepresentation but not for negligence. |
| Breach of the Forbearance Agreement and related duties | Bank of America breached by terminating deferral and failing to offer a resolution before foreclosure. | Forbearance agreement not binding as executed; no obligation to offer modification unless required by terms or by Announcement 09-05R. | Leave to amend allowed to plead negligent misrepresentation/breach concepts; contract interpretation requires further development; for breach of contract, matters remanded for amendment. |
| Civil Code §2923.5 viability | Lueras alleges failure to explore foreclosure alternatives before default notice. | Section 2923.5 only affords a one-time postponement remedy before default; sale already conducted. | Claim barred as the remedy is limited and the remedy sought was not for postponement; claim not viable. |
| Fraud/ Misrepresentation viability | Bank of America misrepresented loan modification status and sale postponement; caused reliance and damages. | Alleged misrepresentations lacked justifiable reliance and damages, especially given rescission of sale. | Fraud demurrer sustained; however, leave to amend possible with evidentiary support; majority permits amendment as to fraud against Bank of America. |
| Unfair and unlawful practices (UCL) standing and merits | Lueras suffered economic injury (foreclosure risk) and was deceived by misrepresentations; standing should be recognized. | No standing under §17204; economic injury not adequately pleaded; many alleged practices not unlawful, unfair, or fraudulent. | Standing may be cured by amendment; some alleged practices may state UCL claims if amended to plead causation and injury. |
Key Cases Cited
- Nymark v. Heart Federal Savings & Loan Assn., 231 Cal.App.3d 1089 (Cal. Ct. App. 1991) (no duty to borrowers in typical lending context; Biakanja factors used to evaluate duty)
- Jolley v. Chase Home Finance, LLC, 213 Cal.App.4th 872 (Cal. Ct. App. 2013) (constructive duty discussion; notes Homeowner policies and potential duty to review modification requests)
- West v. JPMorgan Chase Bank, N.A., 214 Cal.App.4th 780 (Cal. Ct. App. 2013) (interpreting TPP/HAMP directives as imposing certain duties in modifying loans; policy guidance applied to home loans)
- Gomes v. Countrywide Home Loans, Inc., 192 Cal.App.4th 1149 (Cal. Ct. App. 2011) (limits on non-judicial foreclosure scheme; no extra duties beyond statute/agreements)
- Kwikset Corp. v. Superior Court, 51 Cal.4th 310 (Cal. 2011) (standing prong for UCL requires injury and causation; multiple ways to plead injury)