Appeal from a judgment of the Superior Court of Orange County, Gregory Munoz, Judge. (Super. Ct. No. 30-2010-00425322)
The opinion of the court was delivered by: Fybel, J.
CERTIFIED FOR PUBLICATION
Affirmed in part, reversed in part, and remanded.
As authorized by Congress, the United States Department of the Treasury implemented the Home Affordable Mortgage Program (HAMP) to help homeowners avoid foreclosure during the housing market crisis of 2008. "The goal of HAMP is to provide relief to borrowers who have defaulted on their mortgage payments or who are likely to default by reducing mortgage payments to sustainable levels, without discharging any of the underlying debt." (Bosque v. Wells Fargo Bank, N.A. (D.Mass. 2011) 762 F.Supp.2d 342, 347.)
After her home loan went into default, plaintiff Genevieve West agreed to a trial period plan (TPP), a form of temporary loan payment reduction under HAMP, from defendant JPMorgan Chase Bank, N.A. (Chase Bank),*fn1 which had acquired her loan from the original lender. West complied with the terms of the TPP, and timely made every reduced monthly payment on her loan during the trial period and afterwards. Nonetheless, Chase Bank denied West a permanent loan modification, and West's home was sold at a trustee's sale just two days after Chase Bank told her, so West alleged, that no foreclosure sale was scheduled.
West brought this lawsuit alleging fraud, breach of written contract, promissory estoppel, and other causes of action, against Chase Bank. The trial court sustained without leave to amend Chase Bank's demurrer to the third amended complaint, and West appealed from the subsequent judgment. We hold that West stated causes of action for fraud, negligent misrepresentation, breach of written contract, promissory estoppel, and unfair competition, and therefore reverse the judgment on those causes of action. We affirm only on the causes of action for conversion, to set aside or vacate void trustee sale, for slander of title, and to quiet title.
In holding that West stated a cause of action for breach of written contract, we agree with the analysis and interpretation of HAMP presented in the recent opinion of the United States Court of Appeals for the Seventh Circuit in Wigod v. Wells Fargo Bank, N.A. (7th Cir. 2012) 673 F.3d 547, 556-557 (Wigod). Core to our decision is the court's conclusion in Wigod, supra, 673 F.3d at page 557, that when a borrower complies with all the terms of a TPP, and the borrower's representations remain true and correct, the loan servicer must offer the borrower a permanent loan modification. As a party to a TPP, a borrower may sue the lender or loan servicer for its breach. (Id. at p. 559, fn. 4.) Because West complied with all the terms of the TPP, Chase Bank had to offer her a permanent loan modification.
To explain HAMP, we quote extensively from Wigod, supra, 673 F.3d at pages 556-557:
"In response to rapidly deteriorating financial market conditions in the late summer and early fall of 2008, Congress enacted the Emergency Economic Stabilization Act, P.L. 110-343, 122 Stat. 3765. The centerpiece of the Act was the Troubled Asset Relief Program (TARP), which required the Secretary of the Treasury, among many other duties and powers, to 'implement a plan that seeks to maximize assistance for homeowners and . . . encourage the servicers of the underlying mortgages . . . to take advantage of . . . available programs to minimize foreclosures.' 12 U.S.C. § 5219(a). Congress also granted the Secretary the authority to 'use loan guarantees and credit enhancements to facilitate loan modifications to prevent avoidable foreclosures.' Id.
"Pursuant to this authority, in February 2009 the Secretary set aside up to $50 billion of TARP funds to induce lenders to refinance mortgages with more favorable interest rates and thereby allow homeowners to avoid foreclosure. The Secretary negotiated Servicer Participation Agreements (SPAs) with dozens of home loan servicers . . . . Under the terms of the SPAs, servicers agreed to identify homeowners who were in default or would likely soon be in default on their mortgage payments, and to modify the loans of those eligible under the program. In exchange, servicers would receive a $1,000 payment for each permanent modification, along with other incentives. The SPAs stated that servicers 'shall perform the loan modification . . . described in . . . the Program guidelines and procedures issued by the Treasury . . . and . . . any supplemental documentation, instructions, bulletins, letters, directives, or other communications . . . issued by the Treasury.' In such supplemental guidelines, Treasury directed servicers to determine each borrower's eligibility for a modification by following what amounted to a three-step process:
"First, the borrower had to meet certain threshold requirements, including that the loan originated on or before January 1, 2009; it was secured by the borrower's primary residence; the mortgage payments were more than 31 percent of the borrower's monthly income; and, for a one-unit home, the current unpaid principal balance was no greater than $729,750.
"Second, the servicer calculated a modification using a 'waterfall' method, applying enumerated changes in a specified order until the borrower's monthly mortgage payment ratio dropped 'as close as possible to 31 percent.'
"Third, the servicer applied a Net Present Value (NPV) test to assess whether the modified mortgage's value to the servicer would be greater than the return on the mortgage if unmodified. The NPV test is 'essentially an accounting calculation to determine whether it is more profitable to modify the loan or allow the loan to go into foreclosure.' [Citation.] If the NPV result was negative--that is, the value of the modified mortgage would be lower than the servicer's expected return after foreclosure--the servicer was not obliged to offer a modification. If the NPV was positive, however, the Treasury directives said that 'the servicer MUST offer the modification.' Supplemental Directive 09-01. [¶] . . . [¶]
"Where a borrower qualified for a HAMP loan modification, the modification process itself consisted of two stages. After determining a borrower was eligible, the servicer implemented a Trial Period Plan (TPP) under the new loan repayment terms it formulated using the waterfall method. The trial period under the TPP lasted three or more months, during which time the lender 'must service the mortgage loan . . . in the same manner as it would service a loan in forbearance.' Supplemental Directive 09-01. After the trial period, if the borrower complied with all terms of the TPP Agreement--including making all required payments and providing all required documentation--and if the borrower's representations remained true and correct, the servicer had to offer a permanent modification. See Supplemental Directive 09-01 ('If the borrower complies with the terms and conditions of the [TPP], the loan modification will become effective on the first day of the month following the trial period. . . .')." (Fourth ellipsis & italics added, fn. omitted.)
In Wigod, supra, 673 F.3d at pages 576-586, the Seventh Circuit Court of Appeals concluded HAMP does not preempt or otherwise displace state law causes of action. The court also recognized a borrower may assert state law claims, such as breach of contract, based directly on a TPP agreement because the borrower is in direct privity with the lender or loan servicer. (Wigod, supra, at p. 559 & fn. 4.) We do not address whether HAMP creates a private right of action because West has asserted only California state law claims.
West's third amended complaint alleged the following facts.
West obtained an adjustable rate home loan in the sum of $645,000, secured by a deed of trust on her home. The deed of trust, which was recorded in September 2006, named Washington Mutual Bank, F.A. (Washington Mutual), as the lender and beneficiary, California Reconveyance Company as the trustee, and West as the borrower. In 2008, Chase Bank acquired Washington Mutual and purchased certain of its assets, including West's loan.
West failed to make payments on the home loan. As a consequence, a notice of default and election to sell under the deed of trust was recorded in March 2009. According to the notice of default, West was $17,795.91 in arrears as of March 17, 2009.
In April 2009, a substitution of trustee was recorded. It named Quality Loan Service Corporation (QLSC) as trustee in place of California Reconveyance Company.
In July 2009, Washington Mutual informed West she had been approved for a TPP, which Washington Mutual called a "Trial Plan Agreement." The approval letter stated: "Since you have told us you're committed to pursuing a stay-in-home option, you have been approved for a Trial Plan Agreement. If 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." In August 2009, West entered into the Trial Plan Agreement with Washington Mutual. The Trial Plan Agreement required West to make an initial payment of $1,931.86 by August 1, 2009, and additional payments in that amount on September 1 and October 1. The Trial Plan Agreement stated: "If you do not make your payments on time, or if any of your payments are returned for non-sufficient funds, this Agreement will be in breach and collection and/or foreclosure activity will resume."
West made all three payments under the Trial Plan Agreement and continued thereafter to make monthly payments in the required amount. In January 2010 and again in March 2010, Chase Bank confirmed receipt of documents that West had submitted in support of her request for a permanent loan modification under HAMP. In the letters confirming receipt of those documents, Chase Bank advised West to "continue to make your trial period payments on time."
By letter dated April 5, 2010, Chase Bank notified West that "we have determined that you do not qualify for a modification through the Making Home Affordable ('MHA') modification program or through other modification programs offered by Chase at this time." Chase Bank's determination was based on a calculation of West's "Net Present Value" (NPV) under a formula developed by the Department of the Treasury. The letter stated: "If we receive a request from you within thirty (30) calendar days from the date of this letter, we will provide you with the date the NPV calculation was completed and the input values noted below. If, within thirty (30) calendar days of receiving this information you provide us with evidence that any of these input values are inaccurate, and those inaccuracies are material, for example a significant difference in your gross monthly income or an inaccurate zip code, we will conduct a new NPV evaluation. While there is no guarantee that a new NPV evaluation will result in the owner of your Loan approving a modification, we want to ensure that the NPV evaluation is based on accurate information."
On April 8, 2010, West "and or" her representative contacted Chase Bank, informed the bank it had used outdated financial information, and requested a "re-evaluation" (boldface & underscoring omitted) using updated financial information. Chase Bank did not send West the NPV data and input values that she had requested.
On May 24, 2010, West again informed Chase Bank that it had used outdated financial information and that she would submit "updated financial information, and any other information necessary to make the input data accurate." West alleged: "On or about May 24, 2010, [West] and or her representative conducted a conference call with the loan modification department of CHASE BANK, who [sic] agreed and promised [West] that [she] could resubmit her updated financial data for re-evaluation for HAMP modification solutions, and that there was no foreclosure sale date or sale scheduled."*fn2 (Boldface & underscoring omitted.)
Also on May 24, West made her 10th reduced payment of $1,931.86, which Chase Bank rejected and returned to her.
Although Chase Bank had told West no foreclosure sale had been scheduled, her home was sold at a trustee's sale conducted on May 26, 2010. "In violation of its promises and said letter, and HAMP rules (and Supplemental Directives), two (2) days later, CHASE BANK secretly, sold [West]'s home, on May 26,2010 during the re-evaluation period. CHASE BANK issued letters dated May20, 2010, received May 24, 2010, rejecting [West]'s 10th payment . . . , made pursuant to the continuing forbearance agreement."
A trustee's deed upon sale was recorded on June 10, 2010. The deed identified Green Island Holdings, LP, as the grantee, and recited, "[s]aid property was sold by said Trustee at public auction on 5/26/2010 at the place named in the Notice of Sale . . . ."
On May 28, 2010, two days after the trustee's sale, Chase Bank's Homeownership Preservation Office sent West a letter telling her: "More and more Americans are struggling to keep up with their mortgage payments. If you are experiencing financial difficulty, you have a variety of options that might help you get back on track, and keep you out of foreclosure." The letter invited West to meet with "specialists from Chase" at a "local event" to "work out the best solution to your current needs."
On August 18, 2010, nearly three months after the trustee's sale, the "Chase Fulfillment Center" sent West information about the Home Affordable Foreclosure Alternatives (HAFA) program. The letter stated: "HAFA is a United States Treasury program providing financial incentives to servicers and eligible borrowers working together on foreclosure alternatives, such as a short sale or deed-in-lieu. These alternatives may provide a more favorable outcome than a foreclosure sale by avoiding extended vacancy periods and costly foreclosures. [¶] If you are interested in the requirements for ...