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Tenth Circuit Rejects Consumer Protection Lawsuit Alleging Servicer Overcharges - Berneike v. CitiMortgage

March 12, 2013

At Howard Law, P.C., our Moreno Valley foreclosure defense attorneys have read many cases involving incorrect charges from a mortgage company. Some incorrect charges grow from apparent attempts to take advantage of consumers who aren't well equipped to deal with complex legal and financial documents; others may be ordinary accounting mistakes exacerbated by the tendency of loan servicers to push homeowners into a "foreclosure mill" without considering individual cases. In Berneike v. CitiMortgage, Adriana Berneike alleged that CitiMortgage, her loan servicer, was charging incorrect and improper fees. After she didn't get a response that satisfied her from more than 100 letters, Berneike sued over violations of the Real Estate Settlement Procedures Act and a Utah consumer protection law. The federal district court dismissed for failure to state a claim, and the Tenth U.S. Circuit Court of Appeals affirmed.

On January 13, 2010, Berneike faxed 22 letters to a CitiMortgage office in Illinois and six others to an address in Nevada. All of them claimed Citi was incorrectly billing her for overcharges and incorrect fees; the opinion goes into no more detail. On January 29, she sent 58 more letters to a Nevada office, repeating the improper billing claim and asking for explanations of specific fees. All were marked "Qualified Written Request (RESPA)." Citi sent back a letter Feb. 3 explaining that the fees in question stemmed from a change in her tax escrow account, but Berneike sent another letter in June seeking further explanation, followed by a set of 47 letters in July. Citi's only further response was a letter seeking a late fee related to a returned check. Berneike's complaint says she has paid every bill she received in full, but is still facing foreclosure and bankruptcy because of the overcharges.

She filed a lawsuit in Utah state court, alleging breach of contract, breach of covenant of good faith and fair dealing, violations of Utah's consumer protection law and RESPA violations. Citi removed the case to federal court and was granted a dismissal for failure to state a claim. Berneike appeals that dismissal.

The Tenth Circuit first upheld the dismissal of the RESPA claim, finding that Berneike failed to send her letters to the correct office, as required by RESPA. It rejected arguments that Citi waived this argument by responding to her first round of letters. The court next upheld the dismissal of the Utah Consumer Sales Practices Act claim. While the state high court has not decided whether this law applies to mortgages, the Tenth said, it has ruled that it is preempted when the conduct is governed by another, more specific, law. Because mortgage servicing and mortgages are heavily regulated by the state, the appeals court agreed that Berneike's claim should be dismissed. It upheld the dismissal of the remaining common-law claims, saying they were too conclusory and lacked facts about performance or breach of the contract.

The Tenth Circuit's opinion here goes into detail about the quantity of letters Berneike sent, as if to judge her for being a nuisance. But Vincent Howard and our Orange County foreclosure defense lawyers know that desperate homeowners will do whatever they feel they need to do to get the attention of their loan servicers. During the early housing downturn, when people still believed loan modifications could help avert foreclosures, homeowners trying to hold on to their property were often given a runaround: left on hold endlessly, transferred between departments, or ignored for so long that their paperwork needed to be updated when the lenders finally got around to reading it. Under those circumstances, it's only sensible for homeowners to send multiple letters, in hopes of getting anyone's attention. Vincent Howard and our Rancho Cucamonga foreclosure defense attorneys offer another option: a lawsuit, whenever we believe our clients' rights were violated.

If you're trying to hold on to your home and your loan servicer or lender has declined to give you fair consideration, don't hesitate to call Vincent Howard and the team at Howard Law. For a consultation, send us a message online or call 1-800-872-5925.

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