9th Circuit Opens Door to Modification Fraud and RESCISSION: Oskoui v Chase

The 9th Circuit has laid bare its frustration — and that of thousands of other judges — with the inability to get a straight answer on modification, the collection of trial payments, and the damage caused by misleading statements or outright misrepresentation, whether negligent or intentional. This explicitly opens the door for homeowner actions in negligent misrepresentation, fraud, breach of implied contract, breach of implied covenant of good faith and estoppel. Hundreds of thousands of cases are affected — at least as to claims for money damages. Whether this will bleed over into courts of equity who are hearing foreclosure cases remains to be seen.

Modification Fraud or breach of Contract — even when the “offer” of modification is illusory. This is typical bait and switch practice in the industry. the homeowner thinks they are in a modification when Chase was merely dragging “trial payments” out of her.

Rescission counts, although the court states that the homeowner must raise it in her pleadings against Chase.

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THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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see Mahin-Oskoui-v.-J.P.-Morgan-Chase-Bank

I have had many judges express their concerns privately and publicly. They all point to two main things that disturbs them. One is the apparent randomness of modifications and the other is the pattern of musical servicers that change regularly. They worry that this indicates something deeper is going on but that homeowners and their lawyers are not concentrating on these factors.

Modifications are random. Although this case reveals some of the intrinsic objective factors in granting a modifications, the hidden ones still predominate.

The plain fact is that “servicers” are NOT acting in the interest of the investors, the borrowers, or even the loan. Their plan, well executed thus far, is to bring as many cases to foreclosure as possible. Period.

They have been and still are trashing the alleged collateral for the alleged loan. Nobody wins, nobody mitigates their losses under this plan except the Master Servicers/Underwriters who seek two goals: (a) collection of non-existent servicer advances and (b) getting a judge to enter an order allowing foreclosure — thus producing the FIRST LEGAL DOCUMENT in the illusory chain.

The reason why the actual trustee never appears in court is that they are paid to stay away, thus insuring the investors will be screwed.

The following are quotes from this remarkable case:

  • It boils down to this. With its March 1, 2010 letter, Chase deceptively enticed and invited Oskoui into a process with the demonstrably false promise that a loan modification was within her reach if she were to make three monthly payments of $2,988.49 each. The next day – and for the first time – Chase eliminated a HAMP modification from its menu, but neither advised Oskoui what the CHAMP Guidelines required nor suspended additional payments until it could determine her CHAMP eligibility. Chase now says in its brief that the CHAMP Guidelines did not have the HAMP loan balance limitation, but conspicuous by its absence in Chase’s representation is any reference to the NPV test. Chase’s counsel suggested during oral argument that Chase had a valid reason for continuing the process as it did, i.e., that Oskoui’s income situation might have improved. On this record, any such expectation would have been patently unreasonable.
  • The facts in this record would amply support a verdict on this claim in Oskoui’s favor on the ground that she was the victim of an unconscionable process. Chase knew that she was a 68 year old nurse in serious economic and personal distress, yet it strung her along for two years, kept moving the finish line, accepted her money, and then brushed her aside. During this process, Oskoui made numerous frustrating attempts in person and by other means to seek guidance from Chase, only to be turned away.
  • The district court erred in failing to acknowledge Oskoui’s claim for breach of contract in her pro se complaint. She explicitly styled her complaint on its first page as one for “BREACH OF CONTRACT AND BREACH OF IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALINGS
  • The Seventh Circuit’s opinion in Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547 (7th Cir. 2012), which we identified in Corvello v. Wells Fargo Bank, NA, 728 F.3d 878, 880 (9th Cir. 2013) (per curiam) as “the leading federal appellate decision” on this issue of contract, illuminates the viability of Oskoui’s claim. As in the case now before us, Wells Fargo argued in Wigod that its TPP language was not an enforceable offer because it was conditioned on Wells Fargo’s further review of Wigod’s financial information to ensure that she qualified under HAMP. Wigod, 673 F.3d at 561. The Seventh Circuit dismissed this contention as an unreasonable reading of the TPP. The court pointed out that the TPP spelled out two conditions precedent to Wells Fargo’s obligation to offer a permanent modification, and that Wigod alleged that she fulfilled both conditions. Id. at 560–61.

    Once Oskoui made her three payments, Chase was obligated by the explicit language of its offer to send her an Agreement for her signature “which will modify the loan as necessary to reflect this new payment amount.” Chase did not call it either a HAMP agreement or a CHAMP agreement, just an “Agreement.” What program the Agreement was part of is irrelevant. Chase must abide by its own language. It did not live up to its promise. If Oskoui did not consider the offered modification to be acceptable, at that point she could have extracted herself from this aspect of her difficult situation instead of soldiering on towards a beckoning mirage.

On October 1, 2010, Oskoui sent a $2,988.49 payment to Chase. Nevertheless, on October 25, 2010, a foreclosure notice appeared on her front door, listing a foreclosure sale date of November 18, 2010. Remarkably, Chase allegedly sent her another letter dated November 1, 2010 encouraging her to continue to seek a modification. Chase even told her she might “qualify for monetary incentives that will be used to pay down the principal balance of your loan if you make your modified payments on time.” At this point, Oskoui withdrew from the process. She was now $33,738.00 poorer with nothing to show for her efforts to comply with Chase’s requests.

Notwithstanding Oskoui’s explanation of her understandable withdrawal from the exhausting two-year process, the district court granted Chase’s motion for summary judgment on the ground that she had failed in late 2010 to provide Chase with the “requested documentation to support her loan modification request.” The court declined to entertain her contractual claim because she had only “conclusorily” asserted that the “modification back-and-forth ripened into a contract with Chase” and remarked that she “sensibly” had not included a breach of contract claim in her first amended complaint.

The published HAMP Guidelines disqualified Oskoui from HAMP relief. In an age of computerized records, Chase no doubt had this disqualifying information at its fingertips and could have made this simple determination within a matter of minutes. But instead of determining eligibility before asking for money – a logical protocol called for by HAMP as of January 28, 2010 – Chase asked Oskoui for more payments. See Bushell v. JPMorgan Chase Bank, N.A., 220 Cal. App. 4th 915, 924 n.4 (Cal. Ct. App. 2013) (citing U.S. Dep’t of Treasury, HAMP Supplemental Directive No. 10-01 (Jan. 28, 2010)). And even when Chase told Oskoui the next day that she did not qualify for HAMP, it did not inform her of her precarious situation concerning unexplained “other alternatives,” preferring instead to accept payments for seven additional months.

Quotes and Comments:

Loan Modification

The panel reversed the district court’s summary judgment in favor of J.P. Morgan Chase Bank, N.A. in Mahin Oskoui’s action seeking damages she allegedly suffered when she unsuccessfully attempted to modify the loan on her home.

The panel held that the facts plainly demonstrated a viable claim under California’s Unfair Competition Law on the ground that Oskoui was a victim of an unconscionable process.

The panel also held that the district court erred in failing to acknowledge Oskoui’s claim for breach of contract in her pro se complaint. The panel remanded with instructions to permit Oskoui to amend if necessary and to proceed with her complaint for a breach of contract.

The panel also remanded with instructions to permit Oskoui to amend her complaint to allege a right to rescind pursuant to Jesinoski v. Countrywide Home Loans, Inc., 135 S. Ct. 790 (2015)

The most interesting part of this opinion is that the 9th Circuit Panel decided that Chase was creating a contract when it didn’t mean to do so. And so, not realizing they had created a contract, cumulatively, they breached it.

Mahin Oskoui sued defendant J.P. Morgan Chase Bank, N.A. (“Chase”) for damages allegedly suffered when she unsuccessfully attempted over a two-year period to modify the loan on her home. Acting as her own attorney, she asserted inter alia claims for a breach of contract, “breach of implied covenant of good faith and fair dealings,” and a violation of California’s Unfair Competition Law (“UCL”), CAL. BUS. & PROF. CODE § 17200, the latter based on an assertion that she had been victimized by Chase’s unfair or fraudulent business acts or practices. She also attempted to sue Chase for a violation of 15 U.S.C. § 1601, the Truth in Lending Act (“TILA”). Without argument, the district court declined to consider Oskoui’s breach of contract claim and granted summary judgment to defendant Chase.

On May 21, 2009, Chase sent her a letter offering her a “Trial Plan Agreement.” The letter did not advise her of what was required of a borrower or of a loan

OSKOUI V. J.P. MORGAN CHASE BANK 5

for approval under the applicable modification rules, regulations, and guidelines. The letter did advise her that “[i]f you comply with all the terms of this Agreement, we’ll consider a permanent workout solution for your loan once the Trial Plan has been completed.” The only specified term of the Agreement was that Oskoui remit three equal payments of $3,280.05 to Chase between July and September 2009. Oskoui signed the Agreement on June 1, 2009.

Oskoui fully complied with the Agreement’s payment term by timely sending $9,840.15 to Chase, only to be informed on November 10, 2009, that she did not qualify “at this time” for a modification under either the federal Making Home Affordable Program (“HAMP”), 12 U.S.C. § 5219(a), or the Chase Modification Program (“CHAMP”) because “[y]our income is insufficient for the amount of credit you have requested.” Her monthly income during that period was $10,575.00. Chase gave Oskoui no additional reasons for its denial even though its internal paperwork reveals two others, each apparently fatal to her attempt to modify her loan. One barrier was the unpaid principal balance on the loan – $833,000 – which was higher than the amount allowed under the HAMP Guidelines. This factor rendered her ineligible for a HAMP modification. The other barrier, which made her ineligible for CHAMP relief, was the loan’s failure to satisfy Chase’s net present value test (“NPV”).

Not only did Chase fail to advise Oskoui that she was not eligible for these modifications, it told her instead that “we may be able to offer other alternatives to help avoid the negative impact” of foreclosure and a deficiency judgment. Chase failed to explain what its “other alternatives” were or what Oskoui would be required to demonstrate to qualify for them.

Given this enticing invitation, Oskoui tried again, by submitting in January 2010 another application for a loan modification. She had no inkling that Chase had already determined that she was not eligible because of the amount of the unpaid balance of the loan and the NPV problems with it.

On March 1, 2010, Chase responded by letter to Oskoui’s new application. This letter said Chase “wants to help you stay in your home” and confirmed receipt and review of “your verification of income documentation.” Included with the letter were three payment coupons and three return envelopes, each coupon in the amount of $2,988.49, and due on April 1, May 1, and June 1, 2010. The March 1, 2010 letter also stated on the first page: “After successful completion of the Trial Period Plan, CHASE will send you a Modification Agreement for your signature which will modify the Loan as necessary to reflect this new payment amount.” (emphasis added). Chase said not a word about any concerns about her income and did not specify anything in that regard as a condition precedent to a modification. The March 1, 2010 letter says on page 2, however, that “[i]f all payments are made as scheduled, we will consider a permanent workout solution for your Loan.” This language on page 2, which is followed by bold type detailing the manner in which she should remit her payments, when read in the light of Chase’s promise on page 1 creates at best a misleading ambiguity. Page 2 attempts to temper what Chase offered and promised on page 1: a Modification Agreement for her signature. Once again, as with Chase’s November 10, 2009 letter, its March 1, 2010 letter, which Oskoui appended to her complaint as “Exhibit A,” failed to alert her to her apparent ineligibility for a modification.

The next event in this drawn-out process came as quickly as night extinguishes the day. On March 2, 2010, one day after Chase’s letter welcoming Oskoui for a second time to its Trial Period Plan (“TPP”) and acknowledging receipt of her income verification documents, Chase sent her another letter telling her for the first time that she was not eligible for a federal HAMP modification “because the current unpaid principal balance on your Loan is higher than the program limit . . . .” Not only did the letter omit any reference to the fatal NPV test, it said that Chase was “happy” to tell Oskoui that she “may be eligible for other modification programs” and that Chase may be able to offer “other alternatives” to stave off “the negative impact a possible foreclosure may have on [her] credit rating, the risk of a deficiency judgment . . . and the possible adverse tax effects of a foreclosure . . . .” Oskoui took these consequences as menacing threats, not friendly legal advice

12 Responses

  1. I also was not eligible for a modification with Chase because I had a USDA loan and the home was not my primary residence. This is something they knew from the first conversation. Of course I was denied the modification, but that’s after 6 months of phone calls, “lost” documents, and the beginnings of foreclosure proceedings. I was told the loan specialist would receive a “slap on the wrist” for advising me to begin the modification process and to stop payment on my mortgage.
    This is the only case I’ve seen mentioned concerning this in the last couple years. Is more being done? Can someone point me in the right direction?

  2. Oskoui’s claim of rescission will go nowhere in the district court. The FIRREA Act (12 USC 1821(d)(3-13) deprives the courts of jurisdiction in the absence of a claimants exhaustion of the administrative process pursuant to FIRREA. With respect to a Notice of Rescission I vehemently disagree with the opinions of the Courts on this matter. However, the Courts are replete with opinions that claim a voluntary acquisition of a failed bank, such as the case with CHASE acquisition of WaMu assets via the Purchase and Assumption Agreement, FIRREA’s deprivation of a courts jurisdiction to hear claims, absent exhaustion of the administrative process, extends to banks who voluntarily acquire the assets of a failed bank. I do not believer the strict language of the law in FIRREA does not support these opinions. Case citations: 28 F.3d 376, Natl. Union Fire Ins. v. City Sav. FSB; 348 F.3d 1075, McCarthy v. FDIC; and 673 F.3d 1207, Benson v. Chase.
    I pray Oskoui prevails in her fight, unfortunately for Ms. Oskoui truth, honor, and justice are rarely if ever present within our judicial system.

  3. chase already had a class action for denying loan mods and misleading struggling homesowners. Chase is the worst one imo. reneged on 2 loan mods with me. There was a class action by federal court judge in boston. As usual lawyers walked away with millions and homeowner walked away with nothing. was promised a loan mod if remained in the lawsuit. ABSOLUTELY NOTHING! FURTHER DECEPTION EVEN BEING PART OF A CLASS ACTION. ITS ALL bs AND NOBODY SEEMS TO CARE.

  4. Here’s the part of the decision which addresses the TILA Rescission claim …apparently the Pro we never included the actual letter of rescission in her complaint ..but this court is now allowing her to amend her complaint by including the copy of her letter of rescission.

    (interestingly because I did include the copy of my Rescission letter in my Answer to the Foreclosure complaint and clearly pleaded that I had already rescinded the loan under TILA prior to servicer Wells Fargo obtaining an Assignment of Mortgage months after the rescission in order to file the Foreclosure …in essence they fabricated an Assignment to transfer void instru ents and then filed a foreclosure complaint based on the void instruments …established their standing on the void instruments….and we’re granted summary judgment without a trial on the void instruments)

    From the case posted by NG……
    In her original complaint, Oskoui included a claim for a
    violation of the Truth in Leading Act. Judge Wu dismissed
    this allegation pursuant to Fed. R. Civ. P. 12(b)6 for failure
    to state a claim. Subsequently, the Supreme Court decided
    Jesinoski v. Countrywide Home Loans, Inc., 135 S. Ct. 790
    (2015). The Court held that TILA gives a borrower the right
    to rescind certain loans, and that this right may be exercised
    by a written notice from the borrower to the lender within
    three years after the consummation of the transaction. Oskoui
    now asks for leave to amend her operative complaint to
    articulate a claim for rescission. She asserts that she sent a
    TILA rescission letter to Chase in December 2009, within the
    three years required by the statute. 15 U.S.C. § 1635(f).
    Chase responds that its agreement with the FDIC protects it
    from any liability WaMu may have had in connection with its
    previous business. Oskoui says not so because she sent her
    rescission letter to Chase, not to WaMu.
    This dispute is best resolved in the district court.
    Accordingly, we remand with instructions to permit Oskoui
    to amend her complaint to allege a right to rescind pursuant
    to Jesinoski. However, this permission to amend is
    conditional on her prompt delivery to the court of the
    “rescission” letter of December 2009 to which she refers in
    her brief.

  5. Hello Tradewinz- Please call or email a member of the LendingLies staff and we will be glad to assist you.
    info@lendinglies.com
    202-838-6345

  6. I think it’s time we fight all of them banks against us. Wish I knew a lawyer that would take it case. We need to shut them down or at least get compensated for our losses and years in the legal abuse syndrome. Someone please help us we need something done before another home is Lost

  7. Reblogged this on Deadly Clear and commented:
    No doubt in my mind Fannie thought it could usurp HAMP rules just like it did Rule 17. Maybe Fannie & Freddie will also be bought by the NYSE owned by ICE.

  8. JAMES same situation we should talk… maybe a class action here… could reach in the billions..

  9. Boy I’ve written this so many times on this blog… Wells fargo put me in the HAMP and I wasn’t even qualifed for it.. I MEAN I WASN’T SUPPOSED TO BE PUT IN IT SINCE MINE WAS A SECOND HOME! AND SECOND HOMEs COULD NOT PARTAKE IN THE HAMP PROGRAM yet!! Wells put me in it TWICE.. taking lower payments then !! telling me OOPPS! we made a mistake.. BUT still took my home in Foreclosure because i was by then in default. I could not find a lawyer to help me? why is it now 7 years later?? it might matter.
    How can they write me a letter telling me I QUALIFY.. without even knowing I don’t. or did they?? Please find me a lawyer. I HATE WELLS FARGO.

  10. I need to speak to a NJ attorney or someone who can point me in the right direction about this case and the relevancy of my situation 6098681171

  11. This is so sad. I thought that Chase was doing a pretty fair job of helping people. That was my experience with them and Jamie Dimon back when they helped by 91 year old mom. Chase seemed to be pretty good at listening and working with people so this comes as a real surprise!!
    Bank of America, on the other hand, is one of the most crooked, corrupt, and terrible lenders out there. I have never, ever encountered anyone like them. My experience with them is mirrored in the recent 10th Circuit Court Ruling in Colorado on August 15, 2017 in George et al. V. Urban Settlement Services and crooked old Bank of America in their huge racketeering scam that is now allowed to go forward. We just need more attorneys and states to join in on behalf of ALL Americans nationwide as this is so unfair in my humble opinion and I think the one lawfirm is just going to sell us all down the river for pennies!!!

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