Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—EDPa: Misrepresentation of HAMP Mortgage Plan Was a Deceptive Act, (May 10, 2013)

By Jody Coultas, J.D.

A mortgage holder stated a Pennsylvania Unfair Trade Practices-Consumer Protection Law (UTPCPL) claim against Saxon Mortgage Services, Inc. for allegedly misrepresenting its practices related to the Home Affordable Modification Plan (HAMP), according to the federal district court in Philadelphia (Cave v. Saxon Mortgage Services, Inc., May 9, 2013, Padova, J.).

The mortgage holder alleged that, although Saxon participated in the HAMP program, the mortgage company never intended to provide permanent loan modifications to the majority of applicants. After suffering financial hardship, the mortgage holder provided Saxon with all requested financial information in support of his application for a loan modification and was approved for a trial period plan (TPP). Although the mortgage holder met all the requirements of the TPP, Saxon denied modification of the loan. The mortgage holder alleged that Saxon strung him along in an extended trial period and accepted modified payments, even though the temporary trial periods had ended and they were entitled to permanent modifications.

Saxon argued that the mortgage holder failed to state a UTPCPL claim because he did not allege deceptive conduct, justifiable reliance, or injury, and that the economic loss doctrine barred the claim.

To state a UTPCPL claim, a plaintiff must present evidence of a purchase or lease of goods or services primarily for a personal, family, or household purpose, and an ascertainable loss that occurred as a result of a practice declared unlawful by the UTPCPL.

The mortgage holder sufficiently alleged deceptive conduct, justifiable reliance, and injury under the UTPCPL, according to the court. Saxon argued that the allegations were based on Saxon’s failure to perform its contractual obligations under the TPP, and a failure to perform under a contract is not actionable deceptive conduct under the UTPCPL. However, Saxon’s representations were made after their trial periods ended and were made separate from any of Saxon’s obligations under the TPPs. Also, the claims were based on Saxon’s failure to provide the mortgage holder with accurate information about his mortgage, which was unrelated to the contractual obligations.

The court could infer that the mortgage holder relied on, and was deterred from seeking other remedies based on, Saxon’s assurances that he was still in temporary trial plans even after those trial plans had ended. Finally, the mortgage holder alleged an ascertainable injury that resulted from Saxon’s allegedly deceptive acts.

The claims were not barred by the economic loss doctrine, according to the court. The economic loss doctrine prohibits plaintiffs from recovering in tort economic losses to which their entitlement flows only from a contract. Although the UTPCPL claims for damages were similar to those allegedly suffered as a result of the alleged breach of contract, there were additional allegations that were separate and distinct from the contract claims. Therefore, the doctrine did not apply.

The case is No. 12-5366.

Attorneys: Ann Miller (Ann Miller, LLC) for William D. Cave. Jason R. Scherr (Bingham McCutchen LLP) for Saxon Mortgage Services, Inc.

Companies: Saxon Mortgage Services, Inc.

Cases: StateUnfairTradePractices PennsylvaniaNews