Arizona Appeals Court Reverses Direction: Dismissal of Borrower's Claims Reversed

JOIN US TONIGHT AT 6PM Eastern time on The Neil Garfield Show. We will discuss this decision and other important developments affecting consumers, borrowers and banks.

Congratulations to Attorney Barbara J. Forde!!

HIGHLIGHTS: Steinberger v Hon. McVey/OneWest

Discharge of Debt — money that OneWest received from FDIC to pay off loss on loan discharges the debt. If it is true that the FDIC has already reimbursed OneWest for all or part of [the borrower’s] default, OneWest may not be entitled to recover that amount from [the borrower}. This corroborates what we have been writing in this blog regarding third-party payments and the existence of co-obligors. To the extent that third party payments have been received by the creditor this court is saying that nobody can collect those same payments (on the same debt) from the borrower.

Unconscionability: Procedural and Substantive: Unfair surprise and fairness, respectively, are the main elements. This opinion raises the possibility of bringing claims that might have been barred by the TILA Statute of Limitations. Pleading requirements are strict. But if you read the decision you can tell that there is room for borrowers to oppose enforcement of contracts that produced sticker shock and other unfair surprises.

Quiet title: This Court concluded that you can’t quiet title based upon the weakness of someone else’s claim. You must allege your right to title and that the parties served have no claim.

Negligence Per Se: Opening a whole new area for litigation this Court concluded that negligence and negligence per se, were valid causes of action for damages and other relief in connection with the handling of modification and other requests.

Negligent Performance of an Undertaking:  This court concluded that the borrower has a cause of action is the lender or the lenders agents or representatives Lord her into defaulting on her loan with the prospect of a loan modification and then negligently administered her application for the modification, causing her to fall so far behind on her payments that it was no longer possible to reinstate her original loan. Borrower must allege that she never obtained a loan modification and that the bank’s conduct ultimately led to the foreclosure on her home.

Good Samaritan Doctrine:  Lender may be held liable under the Good Samaritan Doctrine when a lender or its agent or representative induces a borrower to default on his or her loan by promising a loan modification if he or she defaults. If the borrower in reliance on the promise to modify the loan subsequently defaults on the loan and the lender fails to process the loan modification or due to the lender or agent or representative’s negligence the borrower is not granted a loan modification and the lender subsequently forecloses on the borrower’s property. Note: this is in Arizona decision and is subject to review by the Arizona Supreme Court. It is not dispositive as to all actions in Arizona and can only be used as persuasive authority in other states or federal court.

 Cause of action to avoid a trustee’s sale: The Hogan decision was considered governing but as we pointed out when the decision was made, the Arizona Supreme Court went out of its way to say that  the borrower never alleged that the trustee lacked the authority to conduct a trustee sale and therefore its decision did not address this issue. This court points that out and upheld the borrowers cause of action to avoid a trustee sale based upon the claim that the trustee did not have the authority to conduct a sale of the property. The reasoning behind this decision may well apply in judicial states as well.

 This decision needs to be analyzed carefully. I have only just received it. In the coming days I will provide additional analysis.

Tags: Arizona Appeals, Barbara J Forde, Cause of action to avoid a trustee's sale, credit default swaps, discharge of debt, Good Samaritan Doctrine, insurance, Negligent Performance of an Undertaking, Servicer advances, Steinberger v Hon.McVey/OneWest, third party payments, Unconscionability: Procedural and Substantive
Posted in Corruption, evidence, expert witness, foreclosure defenses, Modification, Pleading, securities fraud, Servicer |