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Stolba v. Wells Fargo & Co.

2011 WL 3444078 (U.S. Dist. Ct. D. N.J. 2011)
  • Opinion Date: December 7, 2011
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HAMP; MORTGAGES — Trial period plans under the Home Affordable Mortgage Program may include statements as to future contingent events and those would not be considered misrepresentations, intentional or negligent, even if they turn out to be wrong.

Two New Jersey homeowners applied to their lender-bank for a mortgage loan modification. The bank had acquired the loan from the original lender. The bank told them that they might qualify for a trial period plan (TPP) under the federally funded Home Affordable Modification Program (HAMP). The borrowers made their monthly TPP payments until the bank told them to stop. Then, the bank sent notice of its intent to foreclose on their properties. After going back and forth a few times, the bank told its borrowers that it could not grant a loan modification because it had not received all the documents it had requested. A different homeowner applied for a similar modification with the bank. However, after going back and forth, the bank also told her that her house was in foreclosure.

Both sets of borrowers sued, alleging breach of contract and breach of an implied covenant of good faith and fair dealing. They claimed the bank had fraudulently and negligently made misrepresentations and failed to disclose material facts relating to the loan modifications and foreclosure proceedings. They also alleged the bank had violated the New Jersey Consumer Fraud Act (CFA) and the Fair Debt Collection Practice Act (FDCPA). The bank filed a motion for dismissal.

The Federal Rule of Civil Procedure 12(b)(6) provides for dismissal of a complaint if the plaintiff fails to state a claim upon which relief can be granted. The moving party bears the burden of showing that no claim has been stated, and dismissal is appropriate only if, accepting all of the facts alleged in the complaint as true, the plaintiff has failed to plead “enough facts to state a claim to relief that is plausible on its face.”

Here, the Court granted the bank’s motion to dismiss all claims. Under the FCPA, mortgage servicing companies are not debt collectors and are statutorily exempt from liability. A debt collector does not include the consumer’s creditors, a mortgage servicing company or an assignee of a debt as long as the debt was not in default at the time the loan was assigned. The mortgagee’s complaint admitted that the bank began servicing their debts before they were in default. Therefore the bank was not considered a debt collector under the FDCPA. Secondly, their breach-of-contract claims failed because satisfying the trial period plan conditions for permanent modification under the Home Affordable Modification Program does not guarantee that a borrower will receive a modification. The plain language of the TPP makes clear that there is no such guarantee. Since the Court found that there was no enforceable contract between the bank and the borrowers arising out of the TPP or under the HAMP, a breach of the implied covenant was not possible.

The borrowers further alleged that the bank had fraudulently and negligently misrepresented to them that their respective properties would not be foreclosed upon if they complied with the terms of their TPPs. However, statements as to future or contingent events are not considered misrepresentations, intentional or negligent, even if they turn out wrong. The TPP agreements included numerous conditions and therefore the statements were only a reference to a possible future or conditional event. Furthermore, because of the conditional language the borrowers also failed to establish their reasonable reliance. In addition, they also alleged that the bank had breached its duty of reasonable care in the way it processed and decided on the loan modification application, but the Court concluded that a bank does not owe a duty of care to a borrower, even if the borrower is a consumer.

Lastly, the borrower’s New Jersey Consumer Fraud Act claims failed because they alleged that the unlawful conduct was fraud, but the Court had already dismissed the fraud claim. For all these reasons the bank’s motion for dismissal was granted.


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