Saika v. Ocwen Loan Servicing, LLC
357 F. Supp. 3d 704
E.D. Ill.2018Background
- Saika and Shakibai applied for a HAMP loan modification while Ocwen serviced their mortgage; Ocwen sent a Trial Period Plan (TPP) and a Modification Agreement addressed only to Saika.
- The TPP required reduced monthly payments; Plaintiffs had an automatic biweekly debit set up for a higher amount. Ocwen told them not to change the debit, but never adjusted it to the TPP amount and continued debiting the larger sum.
- Saika signed and returned the Modification Agreement alone; Ocwen never countersigned. Ocwen later placed payments in a suspense account, continued sending delinquency notices, and reported the loan as delinquent.
- Ocwen denied the permanent modification, explaining the account appeared current (per investor/Fannie Mae rules), and transferred servicing to Nationstar. Nationstar later foreclosed, obtained a default judgment, and ultimately negotiated a less favorable modification in 2017.
- Plaintiffs sued in state court asserting breach of the Modification Agreement and a claim under the Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA); Ocwen removed and moved to dismiss under Rule 12(b)(6).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of Modification Agreement (contract claim) | Saika accepted by signing and returning the Agreement; Ocwen promised modification | Agreement required all signatories on Loan Documents (including Shakibai) to sign; because co-owner didn’t sign, no acceptance | Dismissed: no valid acceptance where Agreement prescribed signature of all persons on loan/title and co-owner didn’t sign; contract claim dismissed without prejudice |
| Mend-the-hold doctrine (bar new defenses) | Ocwen previously denied modification for investor rules; cannot now assert non-signature defense | Mend-the-hold does not prevent adding defenses after suit; only bars midstream, unjustified change | Rejected: Seventh Circuit precedent permits adding defenses after suit; mend-the-hold does not foreclose Ocwen’s signature defense |
| ICFA — unfair practice (substance) | Ocwen’s conduct (forcing higher payments, misapplying payments, misleading communications, reporting delinquency) was oppressive and violated HAMP/public policy | Plaintiffs merely allege breach of contract and harms not actionable under ICFA | Sustained: complaint sufficiently alleges unfairness (oppression, violation of HAMP guidelines, substantial consumer injury) and survives dismissal |
| ICFA — proximate causation | Ocwen’s instructions and payment handling caused excess payments, confusion, and contributed to foreclosure and worse later modification terms | Subsequent default judgment and bankruptcy broke causal chain; intervening events defeat causation | Dismissal denied: proximate cause adequately pleaded at pleading stage; causation is generally factual and may be tested later on summary judgment |
Key Cases Cited
- Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547 (7th Cir. 2012) (HAMP/TPP framework and that servicer misconduct during modification process can support ICFA claim)
- Newman v. Metro. Life Ins. Co., 885 F.3d 992 (7th Cir. 2018) (ICFA unfairness — oppression and substantial injury analysis)
- Robinson v. Toyota Motor Credit Corp., 775 N.E.2d 951 (Ill. 2002) (ICFA unfairness factors and public-policy baseline)
- On-Site Screening, Inc. v. United States, 687 F.3d 896 (7th Cir. 2012) (mend-the-hold does not bar adding defenses after suit is filed)
- Avila v. CitiMortgage, Inc., 801 F.3d 777 (7th Cir. 2015) (elements required for an Illinois breach-of-contract claim)