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UTA To File Amicus Brief In Case Determining If Loan Servicers Owes A Borrower A Duty Of Care

UTA, along with the California Mortgage Association and the California Mortgage Bankers Association, will be filing an amicus brief to reduce exposure to future tort claims brought by borrowers. The California Supreme Court has agreed to hear arguments in Sheen v. Wells Fargo, a case that will have far-reaching impacts on both servicers and trustees.

In Sheen v. Wells Fargo, the court will decide whether a loan servicer owes a borrower a tort duty of care when processing loss mitigation applications. UTA agrees with the appellate court’s decision which found no such duty (“… a lender does not owe a borrower a tort duty of care during a loan modification negotiation”).

Although trustees are not the focus of this action, the decision will have a direct impact on trustees since most borrowers include trustees when claiming personal injury and emotional distress due to foreclosure proceedings. If the court affirms the appellate court’s decision and concludes that borrower losses are purely economic, then trustees can use that argument to oppose claims based on HOBR and other statutory violations which are also considered torts.

“Our amicus brief, filed in conjunction with the California Mortgage Bankers Association and the California Mortgage Association, will argue that the law of contract and the law of restitution have been developed for the specific purpose of allocating economic losses that result from the negotiation and performance of contracts,” said UTA Corporate Counsel, Martin T. McGuinn. “We agree with the decision in Carbajal v. Wells Fargo Bank, which noted that ‘it is strange to impose a negligence duty on lenders to carefully review modification applications when there is no such tort duty to approve applications as a result of that review.’”

Please contribute to UTA’s Amicus Brief Fund today, to help finance the cost of the brief filing. Make checks payable to ‘United Trustees Association’ (note for Amicus Fund) and mail to: UTA, 1405 Warner Avenue, Suite B, Tustin, CA 92780. If you would like to pay by credit card, please contact Kristie Benko at info@unitedtrustees.com.

 

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