Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—DMd: Chase May Be Liable For Actions Relating to a Loan Modification and Reinstatement Plan , (Jan 10, 2013)

By Jody Coultas, J.D.

The federal district court in Greenbelt, Maryland, has declined to dismiss a Maryland Consumer Protection Act (CPA) claim based on a mortgage loan modification and loan reinstatement (Marchese v. JPMorgan Chase Bank, N.A., January 8, 2013, Russell, G.). The home owner’s motion to remand also was denied because both parties agreed that complete diversity of citizenship existed and the amount in controversy exceeded $75,000.

After falling behind on his mortgage payments, Chase initiated foreclosure proceedings through a law firm. The home owner then sought a mortgage modification under the Home Affordable Modification Program (HAMP) and entered into a trial period loan modification plan with Chase. Although the home owner complied with the plan, Chase did not provide him with a modification agreement for his signature as agreed. Months after the agreement period ended, Chase informed the home owner that he needed more income to qualify for a permanent loan modification and stopped honoring the trial period plan and that he would need to reapply for a loan modification.

The home owner reapplied for a loan modification and requested a reinstatement amount from the law firm. Pursuant to the reinstatement quote, the home owner sent the agreed-to amount to Chase. The law firm accepted the funds, but Chase returned the funds, indicating that the funds were insufficient to cure the default. Both Chase and the law firm verified the funds sent were the correct amount.

Based on his dealings with Chase, the home owner filed the CPA claims alleging that Chase failed to comply with Maryland law in the handling of the mortgage.

Consumer Protection Law

Under the CPA, it is unlawful for a person to use unfair or deceptive trade practices by means of false or misleading statements in the extension of credit or the collection of consumer debts. A plaintiff must allege not only that the defendant made a false or misleading statement in the extension of credit or the collection of consumer debts, but also that the statement caused an actual loss or injury.

Because Chase was a collector of debt, the court held that the CPA applied to Chase’s actions relating to the loan modification and reinstatement. Extension of credit is the right to defer payment of debt or to incur debt and defer its payment, offered or granted primarily for personal, family, or household purposes. Chase’s argument that since it was not a debt collector under the Maryland Consumer Debt Collection Act the debt collector provision of the CPA did not apply was dismissed.

The home owner pled the CPA claims with sufficient particularity to state a claim, according to the court. The claim included dates and contents of myriad oral or written statements about the loan modification and reinstatement that had the capacity, tendency, or effect of deceiving or misleading him about the status of his modification and his ability to cure the default through a timely reinstatement payment.

The home owner sufficiently pled actual injury or loss under the CPA, according to the court. It was sufficient to allege that Chase caused the home owner to suffer penalties, lost credit opportunities, and emotional distress as a result of the CPA violations. Chase failed to proffer any case law supporting the proposition that the evidence did not constitute an actual injury or loss under the CPA.

Remand

The home owner’s request for trebled damages on a $50,000 claim was sufficient for the court to find that the amount in controversy exceeded $75,000. In cases where the plaintiff’s damage claim is less than $75,000, removal is proper only if the defendant can prove to a legal certainty that the plaintiff would recover more if the plaintiff won. Trebled damages are considered when determining the amount in controversy. The home owner’s attempt to categorize the claim for compensatory damages as unspecified because he did not enumerate actual damages was without merit. Also, the court found that the request for a declaration that the power of sale clause in the deed of trust was of no effect placed the value of the mortgage loan in controversy and thus, met the jurisdictional threshold.

The case is No. GLR-12-1480.

Phillip R Robinson (Legg Law Firm LLC) for Dean C. Marchese. Chad King (Simcox and Barclay LLP) JPMorgan Chase Bank, N.A.

Cases: StateUnfairTradePractices MarylandNews