California: Servicer Claims for Mishandling Loan Modifications are Held to be the Obligations of the Lender

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Servicer Claims for Mishandling Loan Modifications are Held to be the Obligations of the Lender

Court are upholding Negligence Claims against Servicers for Mishandling Loan Modification Applications and holding that the Lender/Investor can be liable under agency Principles.

A California appellate court has held that borrowers can assert claims for both misrepresentation and negligent loan administration against a loan servicer and against an indenture trustee (lender/investor), as the servicer’s principal, resulting from allegedly mishandling a loan modification application  (See Daniels v. Select Portfolio Servicing, Inc., 246 Cal. App. 4th 1150, 201 Cal. Rptr. 3d 390 (2016)).

There is currently a split of authority under California law on whether there is a duty of care imposed by law on a servicer handling a loan modification application. The trend as evidenced by the Daniels case appears to be in favor of finding a duty of care under the law and  permitting the borrower to assert a negligence claim against the loan servicer for mishandling the modification process (Note: There is contrary authority). What should concern all lender/investors is that the Court in this case allowed claims against the lender/investor for acts of the servicer, for both the negligence and intentional misrepresentation claims, based on agency theories

More here…

Copy of the opinion here…

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4closureFraud.org

Comments
2 Responses to “California: Servicer Claims for Mishandling Loan Modifications are Held to be the Obligations of the Lender”
  1. Bruce R Nelson says:

    Can anyone advise me if OPTION ONE is included in this rats nest. Option Ones antics ultimately led tyo my 44 yr old sons worngful death in 2009

    Thanks for any infor

    Bruce R Nelson geezerkatz@yahoo.com

  2. Randall Stephens says:

    “What should concern all lender/investors is that the Court in this case allowed claims against the lender/investor for acts of the servicer …”

    Lender/investor = principal
    Servicer = agent

    “A principal is bound by the acts of the agent, whether general or special, within the authority he has actually given him, which includes, not only the precise act which he authorizes him to do, but also whatever usually belong to the doing of it, or is necessary in its performance.” This is from an antique edition, 100 or so years old, of the “American & English Encyclopedia of Law.”

    More recent is the 2006 Restatement (Third) of Agency, § 6, expressing the universal law of agency that a principal is bound by the acts of the agent.

    The principals should have ALWAYS been concerned in regard to the acts of its agents. Casting this as some new concern is disengenuous. However, this won’t happen effectively until some principals ARE held liable for the misdeeds of its agents.

    (This holds for clients, and attorneys, too. A client is bound by the acts, statements, admissions, of its attorneys.)

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