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Rusty Krouse and Brenna Krouse v. Bac Home Loans Servicing

July 6, 2012


The opinion of the court was delivered by: Morrison C. England, Jr. United States District Judge


Presently before the Court is Defendants' Motion to Dismiss ("MTD") Plaintiffs' Third Amended Complaint ("TAC") (ECF No. 30) for failure to state a claim upon which relief may be granted pursuant to Federal Rule of Civil Procedure 12(b)(6).*fn2


On December 19, 2007, Plaintiffs procured a $417,000 loan for the real property located at 6950 Elm Tree Lane, Orangevale, California, 95662, which was secured by a Promissory Note and a Deed of Trust (which was recorded on December 26, 2007). (See MTD at 3, MTD, EXs. A & B (Note & Deed).)*fn4 At that time Plaintiffs were provided with the Truth in Lending Act disclosures, explaining the terms of their loan. (See, id. at Ex. C.) Also on December 19, Plaintiffs received and signed two Notices of the Right to Cancel ("NRC"), which set out the time reserved for Plaintiffs to rescind the loan agreement.*fn5 (Id. at Ex. D)

In early 2009, Plaintiffs found it difficult to make their mortgage payments. As a result, in April 2009, Plaintiffs applied for a loan modification through the Home Affordable Modification Program ("HAMP"), serviced by Bank of America N.A. ("BoA"). (TAC at ¶¶ 70-74.)

In July 2009, after reviewing Plaintiffs' financial information, BoA informed Plaintiffs during the course of a telephone conversation that they had conditionally met the eligibility requirements to qualify for a permanent loan modification under the HAMP. (Id. at ¶ 74.) Plaintiffs claim that BoA also explained that if the Plaintiffs made three timely trial period plan ("TPP") payments of $2,345, then BoA would provide a permanent loan modification. (Id.)

On August 23, 2009, Plaintiffs were approved for and received TPP documents, which they signed. (TAC at ¶ 75; TAC, Ex. 7 ("TPP".) The TPP documents explained how Plaintiffs were required to make three timely TPP payments for the months of August, October, and November 2009.*fn6 (Id. at ¶ 76.) Plaintiffs state that they timely made the three TPP payments and continued to make the TPP payments after November 2009. (Id. at §§ 77-79.)

In December 2009, Plaintiffs contacted Defendants and were told they were "still under review" and must continue making their mortgage payments. (Id. at ¶ 81.) Plaintiffs then received a letter dated December 12, 2009, from BoA requesting their tax returns and the most recent profit and loss statement. (Id. at ¶ 82.) Plaintiffs allege the tax returns and similar financial information had previously been submitted to Defendants prior to starting the TPP. (Id.)

In January and February 2010, Plaintiffs received letters from BoA requesting tax returns, documentation stating Plaintiffs were not subject to homeowners' association dues, and documentation showing completion of credit counseling. (Id. at ¶¶ 83, 85.) Again, Plaintiffs claim these documents were already in BoA's custody, but they produced the documents. (Id.)

During the latter part of January 2010, Plaintiffs received a letter from BoA claiming Plaintiffs had not made all necessary TPP payments. (Id. at ¶ 84.) Plaintiffs thereafter requested and received a copy of their loan history from Defendants, which, they assert, indicated that Plaintiffs made every payment since entering the TPP trial period. (Id.)

In February 2010, Plaintiffs called to inquire as to the status of the loan modification, and the purpose of the document request, but did not receive a conclusive answer. (Id. at ¶ 86.)

Between February and June 2010, Plaintiffs continued to make their TPP payments and communicated with BoA on seven separate occasions. (Id. at ¶¶ 85-90.) By phone and in writing, BoA repeatedly assured Plaintiffs that they had satisfied the HAMP requirements and had been approved for the permanent loan modification and that the paperwork would be sent to them in the near future. (Id.) Plaintiffs were instructed to continue making their mortgage payments while awaiting the loan modification paperwork. (Id. at ¶ 88.) However, the promised paperwork never arrived. (Id. at ¶ 90.)

Then, on June 25, 2010, Plaintiffs received a letter from BoA informing them that they had not qualified for a HAMP modification due to a negative net present value test result. (Id. at ¶ 91.) Four days later, on June 29, Plaintiffs contacted BoA by telephone. (Id.) According to Plaintiffs, the BoA representative "confirmed" Plaintiffs' loan modification had been approved in February of 2009. (Id.)

Plaintiffs never received the final loan modification documents. (Id.) Instead, BoA allegedly initiated a collection process, which Plaintiffs contend caused them severe emotional distress ...

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