Ninth Circuit Panel Reinstates Borrower’s Claims Under California’s Unfair Competition Law

A panel of the United States Court of Appeals for the Ninth Circuit recently reinstated a borrower’s claims for alleged damages suffered as a result of a mortgage lender’s failure to modify the loan on her home despite agreeing to send her a modification agreement.  The panel found that the borrower had presented sufficient evidence to survive a motion for summary judgment for claims under California’s Unfair Competition Law (UCL) and breach of contract.

As background, the borrower alleged that after she failed to make a mortgage payment, the mortgage lender strung her along for over two years, offering her loan modifications when in fact it considered her to be ineligible for any modification due to the size of the loan.  The mortgage lender offered modified payments for multiple trial periods, stating that it would consider a permanent loan workout solution at the conclusion of each trial period.  After accepting payments under these temporary trials, the mortgage lender instituted foreclosure sale proceedings, while at the same time sending the borrower yet another letter encouraging her to seek a modification.  At that point, the borrower decided not to comply with the lender’s requests.  Two years after her first application for a modification, the mortgage lender sent the borrower a letter formally denying her application for failure to provide requested documents.

On appeal, the Ninth Circuit panel reversed the summary judgment decision entered by the district court in favor of the mortgage lender.  It found that the facts would support a verdict in the borrower’s favor that she was “the victim of an unconscionable process.”  The mortgage lender knew that the borrower was a 68-year-old nurse who was in economic and personal distress, but kept accepting her money while moving the goal posts for a loan modification.  Despite several attempts by the borrower—both in person and through other means—to seek its guidance, the mortgage lender continued to string her along.

In addition, the Ninth Circuit panel reversed the district court’s failure to address the borrower’s breach of contract claim in her complaint, which she had filed pro se.  The language of one of the mortgage lender’s letters explicitly stated that if the borrower sent in certain payments during a temporary trial period, the lender would send her an agreement for her signature “which will modify the loan as necessary to reflect this new payment amount.”  The complaint alleged that the borrower made the payments during the trial period, which would obligate the mortgage lender to offer her a modification, but the mortgage lender did not send the borrower an agreement.

Finally, the Ninth Circuit panel reinstated the borrower’s TILA claim for rescission, which the district court had dismissed for failure to state a claim, because of the Supreme Court’s subsequent ruling in Jesinoski v. Countrywide Home Loans, Inc., 135 S. Ct. 790 (2015).  In Jesinoski, the Supreme Court had held that a borrower has the right under TILA to rescind certain loans.  The borrower argued that she sent the mortgage lender a TILA rescission letter within the time period required by the statute.  The Ninth Circuit panel remanded for the district court to allow the borrower to amend her operative complaint to add that claim, on the condition that the borrower provide the rescission letter to the court promptly.

The case is Oskoui v. J.P. Morgan Chase Bank, N.A.