Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—DAz: Mortgage Company Did Not Have A Duty to Disclose Loan Modification Repercussions, (Dec 13, 2012)

By Jody Coultas, J.D.

Home owners could not state an Arizona Consumer Fraud Act (CFA) claim against a mortgage company that allegedly failed to disclose material information concerning a loan modification, according to the federal district court in Tucson (Loomis v. U.S. Bank Home Mortgage, December 11, 2012, Jorgenson, C.).

The home owners inquired about refinancing their home and agreed to consider a Home Affordable Modification Program. Upon consideration of the loan modification, their mortgage status appeared as modified and adversely affected the credit information that the mortgage company furnished to the consumer reporting agencies. The home owners alleged that the mortgage company intentionally failed to disclose this fact in violation of the CFA.

Because the home owners could not show a duty to disclose the alleged omissions, the court dismissed the claim. A CFA claim can be based on omission where a duty to disclose can be shown. The home owners failed to establish that the mortgage company had a duty to disclose the effect an inquiry into a home modification program could have on their credit score. A mortgage lender typically does not owe any fiduciary duty to a borrower. Because the home owners may be able to establish a duty to disclose, the claim was dismissed with leave to amend.

The case is No. CV-11-00735-TUC-CKJ.

Kira Ann Schlesinger (Schlesinger Conrad PLLC) for Dean Patrick Loomis. Christopher Bradley Vynalek (Quarles & Brady LLP) for U.S. Bank Home Mortgage.

Cases: StateUnfairTradePractices ArizonaNews