ORDER GRANTING WELLS FARGO’S MOTIONS TO DISMISS IN RELATED CASES
Now before the Court are the motions to dismiss filed by Defendant Wells Fargo Bank, N.A. d/b/a Wells Fargo Home Mortgage (“Wells Fargo”). Having considered the parties’ papers, the relevant legal authority, and the record in this case, the Court GRANTS Wells Fargo’s motions to dismiss in both related cases without leave to amend. 1
BACKGROUND
A. The Home Affordable Modification Program.
In the midst of the financial crisis of 2008, Congress enacted the Emergency Economic Stabilization Act. In an effort to mitigate the financial impact of the foreclosure crisis and preserve home ownership, the central piece of that legislation was the Trouble Asset Relief Program (“TARP”), through which the Secretary of the Department of Treasury was delegated the board power to “implement a plan that seeks to maximize assistance for homeowners and ... encourage the servicers of the underlying mortgages ... to take advantage of ... other available programs to minimize foreclosures.” 12 U.S.C. § 5219(a).
Acting under this authority, the Secretary of the Treasury announced the “Making Home Affordable Program” which included the “Home Affordable Mortgage Program (“HAMP”) in order to provide relief to borrowers who have defaulted on their mortgage payments or who are likely to default by reducing mortgage payments to sustainable reduced levels, without discharging any of the underlying debt.” (Lucia Compl. at ¶¶ 1, 2.) Under HAMP, loan servicers are provided with incentive payments for issuing permanent loan modifications. Banks that receive federal funding from the TARP are obligated to participate in HAMP. (Id. at ¶ 2.) Wells Fargo received $25 billion in TARP funds *1063 in 2008 and, in exchange, agreed to participate in HAMP. (Id. at ¶ 3.)
Wells Fargo received $25 billion in TARP finds in 2008 and, in exchange, agreed to participate in the HAMP program. (Id. at ¶¶ 2, 28.) Wells Fargo entered into a Servicer Participation Agreement (“SPA”) with the federal government on April 13, 2009. (Id. at ¶ 28.) On March 16, 2010, Wells Fargo entered into an Amended and Restated SPA. (Id. at ¶ 29.) The SPA incorporates supplemental documentation and guidelines issued by the Department of Treasury, Fannie Mae or Freddie Mac, collectively known as the “Program Guidelines.” (Id. ¶ 30.)
Fannie Mae issued its Supplemental Directives (“SDs”) from April 2009 through September 2010, which set out HAMPrelated activities Wells Fargo must perform and all eligibility guidelines. (Id. ¶ 32.) The guidelines set forth basic eligibility criteria and requires the servicer to perform a net present value (“NPV”) analysis, comparing the NPV of a modified loan to the NPV of an unmodified loan. (Id. at ¶¶ 36-39; SD 09-01 at 4-5.) The servicer is required to apply a sequence of steps, the “Standard Modification Waterfall,” to evaluate a hypothetical loan modification that would lower the borrower’s payment to no greater than 31 % of the borrower’s gross monthly income. (Id.; SD 09-01 at 8-10.) The Standard Modification Waterfall includes the steps of reducing the interest rate in increments of .125% down to the floor interest rate of 2%, extending the term of the loan, and forgiving principal. (SD 09-01 at 9-10.) “If the NPV result for the modification scenario is greater than the NPV result for no modification, the result is deemed ‘positive’ and the servicer MUST offer the modification.” (SD 09-01 at 4; Lucia Compl. at ¶ 39.) “If the NPV result for no modification is greater than NPV result for the modification scenario, the modification result is deemed ‘negative’ and the servicer has the option of performing the modification in its discretion.” (SD 09-01 at 4.)
Under HAMP, “[sjervicers must use a two-step process for HAMP modifications. Step one involves providing a Trial Period Plan [“TPP”] outlining the terms of the trial period, and step two involves providing the borrower with an Agreement that outlines the terms of the final modification.” (SD 09-01 at 14.) Under the TPP the homeowner makes mortgage payments based on adjusted loan terms during a three-month trial period. (Lucia Compl. at ¶ 40; SD 09-01 at 17-18.) Plaintiffs allege that Wells Fargo offers TPPs to eligible homeowners through a TPP Contract which promises a permanent HAMP modification for those homeowners who make the required payments under the plan and fulfill the documentation requirements. (Lucia Compl. at ¶ 41.)
B. Plaintiffs Karen and Jeffrey Lucia.
In 1999, Plaintiffs Karen and Jeffrey Lucia purchased and moved into a house located at 4464 Jay Court in Napa, California. (Id. at ¶ 57.) In 2006, the Lucias refinanced their debt on the home by taking out a loan with Wells Fargo in the amount of $520,000. Due to the economic recession, the Lucias lost their jobs and, struggling to make their mortgage payments, sought out a loan modification. (Id. at ¶¶ 58-61.) Wells Fargo did not inform the Lucias that they might qualify for a loan modification under HAMP, but after consulting with the Department of Housing and Urban Development, Ms. Lucia inquired of the bank about how to apply for a HAMP loan modification. (Id. at ¶¶ 61-62.)
Ms. Lucia alleges that she spoke with a Wells Fargo representative who assured *1064 her that the Lucias were pre-approved for the modification and that if they sent in all of the documentation and made all of their reduced payments on time, their reduced monthly payment would become permanent. (Id. at ¶ 62.) After multiple telephone discussions with Wells Fargo representatives about required documentation and, having sent in the required documents and reduced monthly payments, and while still in negotiations with Wells Fargo about the permanent loan modification, without notice on August 12, 2010, the bank initiated a foreclosure sale on the home. (Id. at ¶¶ 63-70.) Wells Fargo indicated that the foreclosure was proceeding because the Lucias’ loan modification application had been denied due to lack of proper documentation. (Id. at ¶ 70.) After the foreclosure, the bank reviewed the matter and indicated that it believed it had not acted improperly. (Id. at ¶ 72.) After the home was purchased by U.S. Bank National Association, Ms. Lucia sent Wells Fargo more of the requested documentation, but received only a notice from the court indicating that the eviction trial had been scheduled for October 22, 2010. (Id. at ¶ 73.)
The Lucias allege the following claims for relief: (1) violation of the Rosenthal Fair Debt Collection Practices Act (“Rosenthal Act”), California Civil Code section 1788, et seq.; (2) violation of the Business and Profession Code section 17200, et seq.; (3) breach of the covenant of good faith and fair dealing; (4) breach of contract (for the TPP agreement); (5) breach of contract (for the TPA contracts); and (6) promissory estoppel.
C. Plaintiff Phillip R. Corvello.
In September 2007, Plaintiff Phillip R. Corvello closed escrow on a home in Fair-field, California and secured a mortgage from Wells Fargo. (Corvello Compl. at ¶ 71.) In the beginning of May 2009, Corvello contacted Wells Fargo and informed the bank that it was unlikely he could remain current on his mortgage payments and discussed options including the Trial Period Plans under HAMP. (Id. at ¶72.) On July 17, 2009, Wells Fargo sent Corvello a form letter indicating that he may qualify for a HAMP TPP. (Id. at ¶ 75.) After Corvello timely complied with all of the requirements specified in the letter and sent in his initial payment, he signed the standard TPP agreement and timely submitted the required documentation and all three TPP payments. (Id. at ¶¶ 78-79.)
The standardized TPP Agreement states in part:
If I [Borrower] am in compliance with the Loan Trial Period and my representations in Section 1 continue to be true in all material respects, then the Lender will provide me with a Loan Modification Agreement, as set forth in Section 3, that would amend and supplement (1) the mortgage on the Property, and (2) the Note secured by the Mortgage.
(Id. at ¶ 61 and Ex. G.) Although Corvello complied with the requirements of the trial period, he was never offered a permanent mortgage modification. (Id. at ¶ 80.)
Corvello alleges the following claims for relief: (1) breach of contract for breach of the TPP Agreement; (2) breach of contract as a third party beneficiary to the TPA; (3) promissory estoppel; (4) breach of the implied covenant of good faith and fair dealing; (5) violation of the Business and Profession Code section 17200, et seq.; and (6) declaratory relief.
The Court shall address additional facts as necessary in the remainder of this Order. The Court shall address the motions to dismiss together in both related cases and only identify distinctions between the cases to the extent they are relevant to the analysis.
*1065 ANALYSIS
A.Legal Standard.
A motion to dismiss is proper under Federal Rule of Civil Procedure 12(b)(6) where the pleadings fail to state a claim upon which relief can be granted. The Court’s “inquiry is limited to the allegations in the complaint, which are accepted as true and construed in the light most favorable to the plaintiff.”
Lazy Y Ranch Ltd. v. Behrens,
Pursuant to
Twombly,
a plaintiff must not merely allege conduct that is conceivable but must instead allege “enough facts to state a claim to relief that is plausible on its face.”
Id.
at 570,
As a general rule, “a district court may not consider any material beyond the pleadings in ruling on a Rule 12(b)(6) motion.”
Branch v. Tunnell,
B. Motions to Dismiss.
Wells Fargo moves to dismiss the Plaintiffs’ claims on a number of bases. The Court shall address each in turn.
1. National Bank Act Preemption.
Wells Fargo contends that Plaintiffs’ state law claims impermissibly impinge on the bank’s ability to service mortgage loans, including making the decision whether and under what circumstances to modify a loan or commence foreclosure proceedings. Pursuant to the National Banking Act (“NBA”), Congress vested the national banks with certain enumerated powers, as “shall be necessary to carry on the business of banking,” including the power to engage in mortgage lending.
See
12 U.S.C. §§ 24, 371(a);
Watters v. Wachovia Bank, N.A.,
Although several district courts within the Ninth Circuit have found that the Home Owners’ Loan Act (“HOLA”), 12 U.S.C. § 1464(b)(10), preempts certain state law claims relating specifically to mortgage processing, the Court finds that the particular claims made in this matter—premised upon state contract law, unfair competition and Rosenthal Act—are state laws of general application.
See Winding v. Cal-Western Reconveyance Corp.,
2. Breach of Contract Claims.
Wells Fargo argues that, while couching their claims as state law breach of contract claims, Plaintiffs are essentially trying to maintain a private right of action to enforce the requirements of HAMP. Neither the Emergency Economic Stabilization Act, which created HAMP, nor HAMP’s guidelines create “a property interest in loan modifications for mortgages in default.”
Williams v. Geithner,
Plaintiffs argue, however, that they are not trying to create a private right of action to enforce HAMP. Rather, Plaintiffs contend that they seek to enforce Wells Fargo’s contractual obligations under the SPA and TPP Contracts, not to claim a constitutionally protected property right in a permanent modification. Plaintiffs allege that Wells Fargo consented to offer them a permanent modification if they successfully completed their TPP, thereby contending that the TPP was a contract that was breached as Plaintiffs fulfilled their obligations under the TPP, and Wells Fargo reneged by failing to offer them a permanent modification. 2 Plaintiffs also argue that the HAMP guidelines in effect at the time of the TPPs at issue here provided that borrowers who successfully completed the TPP and provided all necessary documentation were entitled to receive an offer for permanent loan modification. (See Lucia Opp. Br. at 9; Corvello Opp. Br. at 10-11, citing SD 09-01 at 17-18.)
In order to state a claim for breach of contract, Plaintiffs must allege
*1067
“the existence of the contract, performance by the plaintiff or excuse for nonperformance, breach by the defendant and damages.”
First Commercial Mortgage Co. v. Reece,
Wells Fargo contends that the claim for breach of contract must be dismissed because Plaintiffs have not alleged a cognizable form of consideration to support the existence of a valid contract. Although Plaintiffs must concede that they had a pre-existing duty to make mortgage payments, Plaintiffs contend that the TPP payments are sufficient consideration and the additional consideration suffered was the credit consequences of their partial mortgage payments and fulfilling the burdensome documentation requirements of the loan modification approval process. (Lucia Opp. Br. at 12; Corvello Opp. Br. at 12-13.) Plaintiffs’ allegations, accepted as true, support the existence of the contract to participate in the TPP for the three month trial period, but not a contract for permanent modification after the trial period expired.
3
See Morales v. Chase Home Finance LLC,
Case No. 10-02068 JSW, at 7;
see contra Ansanelli v. JP Morgan Chase Bank, N.A.,
Under California law, the intention of the parties as expressed in the contract is the source of contractual rights and duties.
Pacific Gas & Elec. Co. v. G.W. Thomas Drayage,
I understand that the Plan is not a modification of the Loan Documents and that the Loan Documents will not be modified unless and until (I) I meet all of the conditions required for modification, (ii) I receive a fully executed copy of a Modification Agreement, and (iii) the Modification Effective Date has passed. I further understand and agree that the Lender will not be obligated or bound to make any modification of the Loan Documents if I fail to meet any one of the requirements under this Plan.
(Corvello Compl. Ex. G at ¶ 2G.) The
Grill
court determined that this contractual language “makes clear that providing the requested documents was simply a part of the application process, which plaintiff was willing to complete in the hope that BAC would modify his loan. Under the language of [the TPP Contract], a binding modification would not result unless and until BAC determined that plaintiff complied with the requirements. If BAC so determined, then it would send plaintiff a modification agreement, including a new monthly payment amount, which both plaintiff and defendant would execute.”
The Court has reviewed the decisions of other district courts that have held that the TPP Contract supports a breach of contract claim by borrowers who entered the TPP Contract. Those decisions do not address the specific contract provision considered here and in
Grill
and
Morales. See Durmic v. J.P. Morgan Chase Bank, N.A.,
Plaintiffs specifically allege that “[t]he TPP Contract promises a permanent HAMP modification for those homeowners who make the required payments under the plan and fulfill the documentation requirements” and that “Wells Fargo breached the TPP Contract ... by failing to offer Plaintiffs and members of the Plaintiff Class permanent HAMP modifications at the close of their Trial Periods.” (Lucia Compl. at ¶¶ 41, 110; Corvello Compl. at ¶¶ 57, 94.) Plaintiffs fail to allege, however, that they have met all the conditions set forth in the TPP Contract for loan modification, including receipt of a “fully executed copy of a Modification Agreement,” and therefore fail to allege the existence of a binding contract regarding a permanent loan modification. Accordingly, the motion to dismiss both sets of Plaintiffs’ breach of contract claims are therefore GRANTED.
With regard to whether Plaintiffs could amend their breach of contract claims to allege additional facts, the legal question whether Plaintiffs had a contract for permanent modification does not turn on whether or not Plaintiffs actually qualify for permanent HAMP modification. As the court determined in
Williams v. Geithner,
Congress did not intend for HAMP to mandate loan modifications.
Even if Plaintiffs were able to allege that Wells Fargo determined that they qualified for permanent modification under the Net Present Value analysis, neither will be able to allege that he received a fully executed copy of a Modification Agreement. Thus, amendment of the breach of contract claim would be futile and no leave to amend shall be granted.
3. Breach of the Covenant of Good Faith and Fair Dealing Claims.
Plaintiffs allege that Wells Fargo violated the covenant of good faith and fair dealing in its TPP Contracts by “[flailing to permanently modify loans and/or provide alternatives to foreclosure and using unfair means to keep Plaintiffs and the Plaintiff Class in temporary modification contract” and by “charging and collecting Trail Period Plan payments from Class members, but never extending permanent loan modification offers.” (Lucia Compl. at ¶ 104b; Corvello Compl. at ¶ 110.)
“Every contract ‘imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement.’ ”
Fortaleza v. PNC Financial Services Group, Inc.,
Because Plaintiffs have not sufficiently alleged the existence of a contract for permanent loan modification, Wells Fargo’s motions to dismiss the claims for breach of the implied covenant of good faith and fair dealing are GRANTED.
4. Promissory Estoppel Claims.
Plaintiffs contend that they detrimentally relied upon Wells Fargo’s promise of a permanent modification if they completed three months of trial period payments and completed documentation requirements.
(See, e.g.,
Lucia Compl. at ¶¶ 124-25; Corvello Compl. at ¶¶ 104-05.) Promissory estoppel will bind a promisor “ ‘when he should reasonably expect a substantial change of position, either by act or forbearance, in reliance on his promise, if injustice can be avoided only by its enforcement.’ ”
Mehta v. Wells Fargo Bank, N.A.,
As discussed above, the TPP Contract does not require Wells Fargo to modify an applicant’s loan. HAMP did not, however, *1070 require that servicers verify eligibility pri- or to accepting borrowers into the TPP until the program was amended by directive in January 2010: “A significant program change is a requirement for full verification of borrower eligibility prior to offering a trial period plan.” (SD 10-01 at 1, available at www.hmpadmin.com.) Supplemental Directive 10-01 clarified that under the prior Supplemental Directive 09-01, HAMP “gave servicers the option of placing a borrower into a trial period plan based on verbal financial information obtained from the borrower, subject to later verification during the trial period.” (Id.; see SD 09-01 at 17 (“Servicers are not required to verify financial information pri- or to the effective date of the trial period.”)) The Supplemental Directive 10-01 amended HAMP such that “[ejffective for all HAMP trial period plans with effective dates on or after June 1, 2010, a servicer may only offer a borrower a trial period plan based on verified income documentation in accordance with this Supplemental Directive.” (Id.) The TPP Contract also provides that the borrowers will provide documents to permit verification of income. (Corvello Compl., Ex. G at ¶ Gl.) Thus, at the time Plaintiffs were offered Trial Period modifications, there was no promise that Plaintiffs would be found eligible for permanent loan modification on which Plaintiffs could reasonably rely.
Regardless of any allegation of reasonable reliance, courts have determined that lenders are not required under HAMP to modify eligible loans.
See Marks,
In
Escobedo,
the court determined that the SPA set forth Home Affordable Modification Program Guidelines which provided that “[participating servicers are required to
consider
all eligible loans under the program guidelines unless prohibited by the rules of the applicable PSA and/or other investor servicing agreements.”
Id.
(emphasis added in original). The
Escobedo
court determined that the SPA Agreement under HAMP “does not state that [the servicer] must modify all mortgages that meet the eligibility requirements.”
Id. See also Hoffman,
Having determined that Wells Fargo did not make promises about permanent loan modification, the Court concludes that Plaintiffs fail to allege a claim for promissory estoppel.
See Grill,
5. Breach of Contract Claim Under the SPA.
Plaintiffs assert a breach of contract claim under the Servicer Participation Agreement (“SPA”) between Well Fargo and Fannie Mae. (Lucia Compl. at ¶¶ 114-122; Corvello Compl. at ¶¶ 95-101.) As many district courts in the Ninth Circuit have determined, individual borrowers
*1071
do not have standing to sue under the SPA because they are not intended third party beneficiaries. In
Hoffman,
the court determined that borrower was “an incidental and not an intended beneficiary to the HAMP servicer’s agreement.”
6. Rosenthal Act Claim.
The Lucia Plaintiffs allege that Wells Fargo has violated the Rosenthal Act by making false and deceptive representations in connection with collection of a debt. (Lucia Compl. at ¶ 89.) The Lucias contend that Wells Fargo made misrepresentations “in connection with the collection of any debt,” or using “unfair or unconscionable means to collect or attempt to collect any debt” pursuant to Section 1788.17 of the California Civil Code, which incorporates by reference certain provisions of the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. §§ 1692(e) and (f). (Id.)
Wells Fargo does not dispute Plaintiffs’ allegation that it is a debt collector within the meaning of the Rosenthal Act, but contends that Plaintiffs fail to allege a “demand” for payment of delinquent debt. (Reply at 13-14) (citing
Walcker v. SN Commercial, LLC,
To evaluate claims under the Rosenthal Act, the Court must consider whether the alleged communications from the debt collector would likely mislead the “least sophisticated debtor.”
Guerrero v. RJM Acquisitions LLC,
The “least sophisticated debtor” standard is an objective one.
Swanson,
Therefore, Wells Fargo’s motion to dismiss the Lucias’ claim for relief for violation of the Rosenthal Act is GRANTED.
7. UCL Claim.
Both sets of Plaintiffs allege that Wells Fargo used unfair, deceptive and unlawful means to induce Plaintiffs to enter into Trial Period modifications and deny Plaintiffs permanent modification in violation of the California Business and Professions Code section 17200 (“UCL” or “Section 17200”). (Lucia Compl. at ¶ 95; Corvello Compl. at ¶ 117.) Under Section 17200, unfair competition is defined as “any unlawful, unfair or fraudulent business act or practice” and “unfair, deceptive, untrue or misleading advertising.” See Cal. Bus. & Prof.Code § 17200.
The Lucias’ complaint alleges that Wells Fargo’s unfair business practices include “[flailing to perform loan servicing functions consistent with its responsibilities to Plaintiffs and the Plaintiff Class and its responsibilities under HAMP.” (Lucia Compl. at ¶ 94a.) Plaintiffs do not dispute that HAMP does not create a private right of action.
See Marks,
The Lucias’ complaint also alleges that Wells Fargo engages in unlawful business practices by violating the Rosenthal Act. (Lucia Compl. at ¶ 93.) Both complaints further allege that Wells Fargo engages in fraudulent conduct by making misrepresentations and omissions of fact about permanent loan modifications which induced Plaintiffs to enter the TPP Contracts. (Lucia Compl. at ¶ 95a; Corvello Compl. at ¶ 117.) As the Court has determined that the TPP Contract makes no promise of permanent modification and has dismissed those claims on which the UCL claim is predicated, the Court GRANTS Wells Fargo’s motions to dismiss both sets of Plaintiffs’ claims for relief for violation of Section 17200.
See Rubin v. Wal-Mart Stores, Inc.,
*1073 CONCLUSION
For the foregoing reasons, the Court GRANTS Wells Fargo’s motions to dismiss the two related complaints without leave to amend. Separate judgments shall issue. The clerk shall close both files.
IT IS SO ORDERED.
Notes
. The Court GRANTS the pending motions for leave to file notice of supplemental authority. (.See Case No. 10-04749, doc. nos. 47 and 48; Case No. 10-05072, doc. no. 34.)
. In the Lucias' complaint, Plaintiffs were never even given the TPP Contract, but only allegedly offered terms in conversation over the telephone. Still, the Court shall address the claims under the terms that would have been effective at the time of the alleged oral offer.
. The fact that the Lucias never received a written agreement from Wells Fargo regarding their participation in the Trial Period may be determinative.
See Clark v. Countrywide Home Loans, Inc.,
. Similarly, as the Court has found there is no underlying viable claim for liability, Corvello’s claim for declaratory relief is dismissed.