Washington CPA Class Action Against Mortgage Servicer Moves Forward

On October 18, 2019, the U.S. District Court for the Eastern District of Washington found that plaintiffs properly alleged a claim under the Washington Consumer Protection Act (CPA) that a mortgage servicer unfairly denied hundreds of mortgage modification requests due to an error in the mortgage servicer’s software.

Plaintiffs lost their home in a January 2012 foreclosure sale after the mortgage servicer rejected their mortgage modification application.  They brought a CPA claim on behalf of each Washington member of the class and an unjust enrichment claim on their own behalf and on behalf of a nationwide class.

In August 2018, the mortgage servicer allegedly disclosed that a calculation error in its mortgage loan modification underwriting software resulted in approximately 870 improper loan modification denials dating back to the financial crisis.  However, the mortgage servicer knew about the error since 2015.

In the order granting in part defendant’s motion to dismiss and denying defendant’s motion to strike the class action, the district court rejected the mortgage servicer’s argument that the plaintiff’s CPA claim was an impermissible attempt to enforce the Home Affordable Modification Program (HAMP).  The court explained that, although the conduct is related to the mortgage servicer’s HAMP participation, the plaintiffs were seeking to enforce a state cause of action rather than the terms of the HAMP agreement.

The court, however, dismissed the plaintiff’s unjust enrichment claim.  The court agreed with the mortgage servicer’s position that the relationship between the mortgage servicer and the plaintiffs were governed by contract, and since the alleged benefits of the unjust enrichment claim were governed by contract, the plaintiffs were not able to maintain their unjust enrichment claim.

Finally, while the mortgage servicer argued that the plaintiffs could not allege a Washington class sufficiently numerous to sustain a class action, the plaintiffs argued that the size of the class is unknown because the investigation remains ongoing.  The court decided that the dispute indicated it was too early to determine whether the class was sufficiently numerous to sustain a class action.