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Moreno v. Select Portfolio Servicing

June 23, 2010


The opinion of the court was delivered by: Oliver W. Wanger United States District Judge


Before the Court is Plaintiff Anthony Moreno's motion to remand this action to the Tulare County Superior Court.*fn1

Plaintiff filed a Verified Complaint for: (1) Fraud, (2) Deceit, (3) Unfair Business Practices under California Business and Professions Code § 17200, (4) Breach of Contract, (5) Declaratory Relief, (6) Specific Performance, and (7) Injunction.

Defendants are Select Portfolio Servicing, Inc. ("SPS"), and Does 1-25. The Complaint alleges: 1. This is a 'trial plan fraud' case which involves a homeowner who was promised a loan modification, and a Defendant (the Loan Servicing Company), SELECT PORTFOLIO SERVICING, INC. ... that fraudulently, deceptively, maliciously, and oppressively offered a loan modification and then refused to honor the agreement after SIX LOAN PAYMENTS were made under a string of THREE Deceptive Contracts.

Plaintiff is alleged to be a citizen of California and the owner of property at 31866 Road 138 #B, Visalia, California, and SPS is alleged to be a citizen of Utah. As the "Statement of Facts," the Complaint alleges:

9. Plaintiff fell behind on his loan payments and sought out a loan modification from his loan servicer, SPS.

10. On or around July 2009, Plaintiff spoke with a representative of Defendant Loan Servicer, (Mr. Tony Rasmussen - Phone # 801-313-2161), and others in the loss mitigation department, who took Plaintiff's financial information over the phone, including Plaintiff's gross monthly income and monthly expenses, and then explained to Plaintiff that Plaintiff qualified for loan modification given his income, expenses, and hardship, and that all Plaintiff had to do was submit their [sic] financial documentation to SPS to confirm the data given over the phone and a loan modification would be thereafter and in due course provided.

11. Following this conversation, and based upon reliance of the statements made by Mr. Rasmussen, (who on information and belief is an employee acting within the course and scope of his employment, and who is authorized by Defendant to make such statements and assertions, which ultimately proved to be false, deceptive, manipulative, and misleading) Plaintiff did thereby submit his financial documentation to Defendant as requested, including income and expenses and hardship information and all other information requested.

12. In response to this financial

submission, Defendant thereafter, on or around August 6, 2009, did deliver to Plaintiff a 'HOME AFFORDABLE MODIFICATION TRIAL PERIOD PLAN' (for Investor Loan #412444593). Again, the true beneficiary/investor has never been identified, but once identified will be added as a defendant to this complaint.

13. The Modification agreement stated that it had 'an effective date of 9/01/2009).' (See Attached Exhibit 'A' for a true and correct copy of the loan modification agreement which is incorporated herein by reference.

14. The first paragraph of the contract stated: 'If I am in compliance with this trial period plan ('the Plan') and my representations in Section 1 continue to be true in all material respects THEN THE LENDER WILL PROVIDE ME WITH A HOME AFFORDABLE MODIFICATION AGREEMENT' [sic] AS SET FORTH IN SECTION 3 ... that would amend and supplement the mortgage ... and note.'

15. Section 3 of the agreement stated: 'If I comply with the requirements in Section 2 and my representations in Section 1 continue to be true in all material respects THE LENDER WILL SEND ME A MODIFICATION AGREEMENT FOR MY SIGNATURE WHICH WILL MODIFY MY LOAN DOCUMENTS ... ['].

16. It is not clear by this agreement who the 'Lender' is that SPS is referring to, and the true nature of the investor/beneficiary of the loan has been intentionally concealed.

17. The Trial Plan agreement also contained Section 1. 'My representations' which contained a list of items Plaintiff certifies in regards to his finances, and his property.

18. The payment under the trial plan agreement was $678.74 per month, and the agreement called for three payments beginning in (/1/09) [sic] and ending 11/01/09.

19. Plaintiff agreed to the terms and conditions of this loan modification trial plan agreement, and made all three payments in a timely manner as required by the agreement.

20. Plaintiff executed the loan modification agreement on 8-10-09.

21. Defendant accepted and cashed each and every payment which finalized the contract by full performance and the alleged loan default was thereby cured.

22. In making the payments under this agreement, Plaintiff was lead [sic] to believe, informed and intentionally induced to make these three loan payments based on Plaintiff's income and expenses which were submitted to Defendant's representative (which income was approximately $3,800 per month, and monthly expenses which were approximately $3,000 per month) which Plaintiff was deceptively lead [sic] to believe were sufficient for the Obama Making Home Affordable Loan Modification (HAMP).

23. However, the under the President's HAMP modification program, a borrower does not qualify for a modification if their 'back-end' debt-to-income ratio exceeds 55%.

24. Plaintiff's back-end debt ratio at the time of this trial plan agreement was approximately 79% which exceeds the guidelines outlined in the President's modification program.

25. Defendant should have therefore informed Plaintiff that he did not qualify for the HAMP modification program.

26. The Trial Plan agreement Cover Page [sic] that was also sent to Plaintiff, referenced the President's making Home Affordable Loan Modification Symbol, which was further used as a false inducement to induce Plaintiff to sign the Loan Modification Agreement.

27. Defendant, by and through their [sic] agents, employees, and contractors, did therefore make false statements of fact, which were made to induce Plaintiff's justifiable reliance that Plaintiff qualified for a loan modification under HAMP, and that by sending in three trial plan payments, Plaintiff would receive an additional modification agreement.

28. Plaintiff relied on these false statements of fact to his detriment, and suffered damages as a result, including outof-pocket expenses, pain and suffering, mental distress and other damages to be proven at trial.

29. To make matters worse, Defendant's [sic] refused to honor the above-referenced loan modification, and instead, issued a second MAKING HOME AFFORDABLE LOAN MODIFICATION AGREEMENT to Defendant on or around October 7, 2009.

30. This Second [sic] agreement was similar to the first agreement, but the 'trial plan' payments were now nearly doubled to $1,288.98 (on information and belief this was done to force a default of the loan since Defendant realized that Plaintiff could afford a reasonable monthly payment of $678.74 (which is in line with the 31% front-end ratio contemplated by HAMP as a reasonable housing ratio).

31. The 31% housing ration [sic] must include and cover principal, interest, tax, insurance and association dues ('PITIA').

32. The $1,288.98 payment was for include [sic] principal and interest (but not tax, insurance, and/or association dues) and even at this figure the payment alone creates a 33.98% housing ratio which exceeds the guidelines set forth under HAMP.

33. Therefore, the Defendant intentionally sought to induce Plaintiff to make loan payments that they thought Plaintiff would be unable to afford, and which would result in his default of the mortgage loan.

34. On information and belief, Defendant is incentivized under certain agreements, including a pooling and servicing agreement, to lead homeowners toward foreclosure, rather than to legitimately modify their loans, and Defendant acted intentionally, fraudulently, intentionally [sic], willfully, wantonly, callously, and with a plan and design to induce Plaintiff into making additional 'trial plan' loan payments, under the guise that they qualified for President Obama's HAMP program when in fact that was blatantly false.

35. The Trial plan agreement (for this second modification agreement) was executed by Plaintiff on 10/26/09 and the contract was completed by full performance - as was the first agreement - after Plaintiff made the three requested payments in a timely manner.

36. See Attached 'Exhibit B' for a true and correct copy of the SECOND loan modification agreement which is ...

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