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Tenth Circuit Affirms Dismissal of Chain-of-Assignments Foreclosure Lawsuit - Toone v. Wells Fargo Bank

March 25, 2013

Vincent Howard and our Fontana foreclosure defense attorneys recently reviewed a foreclosure lawsuit that contained allegations about the Home Affordable Modification Program--HAMP, the much-maligned Obama administration effort to stop foreclosures. The program famously did not stop foreclosures, which we believe had a lot to do with its lack of enforcement measures. Indeed, one of the chief arguments leading to routine dismissal of HAMP lawsuits is that it contains no private right of action; it also contains no accountability provisions for lenders. In Toone v. Wells Fargo Bank, Utah homeowners Bryan and JoLynne Toone argued that financial companies violated their rights during the HAMP process and when foreclosing. The Tenth U.S. Circuit Court of Appeals upheld dismissal, finding their complaint didn't adequately specify most of their injuries.

The Toones took their mortgage out in 1998 from Premier Mortgage Service Corp. of America, which served as lender and beneficiary. Inwest Title Services was trustee. The note was assigned several times and securitized, with Bank of America the final lender. In 2009, the Toones fell behind on their mortgage and Bank of America made eTitle Insurance Agency the successor trustee. eTitle immediately started foreclosure proceedings. The Toones signed a HAMP agreement about a month later, with Wells Fargo, their servicer. For reasons not detailed, the loan modification was not successful and eTitle conducted a foreclosure sale in January of 2011. The Toones sued the same day in Utah state court, alleging problems with the foreclosure process, violations of Utah consumer protection laws, breach of covenant of good faith and fair dealing, and violations of the FDCPA and RESPA. The suit was dismissed to federal court and dismissed.

On appeal, the Tenth Circuit affirmed dismissal. The heart of the case, it said, was the Toones' challenges to the assignments of the note. They said the first assignment was signed by the wrong party and the remaining ones were robo-signed, but the Tenth said the documents themselves contradict this. Because Accubanc was Premier's agent as well as the assignee, the court said, there is no impropriety in Accubanc assigning the note to itself. "The other endorsements look regular on their face," the Tenth said, and the Toones don't allege robo-signing with enough specificity to explain why they see problems. This takes care of many of the claims, the Tenth said. On the remainder, it found not enough specificity on the FDCPA allegations because no supporting facts were included. Similarly, the breach allegations against Wells Fargo, for its behavior during the HAMP process, didn't specify what was violated. And while the Toones did allege a RESPA violation, the court said, they did not plead actual damages arising from it.

Vincent Howard and our Corona foreclosure defense lawyers would enjoy seeing a more in-depth discussion of HAMP allegations. As we noted above, most courts have found no private right of action under HAMP even when they feel the pleadings are specific enough. However, at least one court--the Seventh Circuit--has permitted a claim to go forward under state common-law and consumer protection statute claims (in Illinois). We certainly would have preferred some enforcement mechanism written into HAMP itself, but because courts have not found one, we would like to see how courts outside the Seventh handle well-pleaded state-law claims. Vincent Howard and our Costa Mesa foreclosure defense attorneys have seen many, many cases of incompetence or misbehavior under HAMP, and do not believe it should be rewarded with immunity from lawsuits.

If you believe your loan servicer lied to you or misled you while you were seeking a loan modification, don't wait to contact Howard Law, P.C., for help. You can reach us through our website or call 1-800-872-5925 toll-free.

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