A California appeals court ruled that U.S. Bank (USB: 27.65 +2.41%) reneged on its promise to negotiate a mortgage modification, which is sufficient cause for the homeowner to sue the bank for fraud in a scathing ruling alleging the bank never had any intention of working with the homeowner.
However, the court also ruled that the homeowner, Claudia Jacqueline Aceves, lacked sufficient cause to get her home back after the foreclosure sale. Arguments related to robo-signing and alleged irregularities in the foreclosure process were dismissed and were not enough to set aside the completed foreclosure.
What could become a landmark foreclosure ruling is both a win and a loss for mortgage servicers. While servicers prevailed on issues of alleged defects in the foreclosure process, the court spent most of its 15-page ruling discussing how U.S. Bank promised to negotiate a potential loan modification if the homeowner agreed to dismiss her bankruptcy case, which protected the home from seizure. Yet, when the homeowner exited bankruptcy to negotiate a modification, the bank opted to foreclose without negotiating.
For homeowners, the case affirms their ability to go after banks and mortgage lenders for monetary damages when lenders promise to negotiate mortgage modifications but fail to do so in good faith.
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