Hanrahran v. Specialized Loan Servicing, LLC

Citations: 54 F. Supp. 3d 149; 2014 U.S. Dist. LEXIS 150859; 2014 WL 5389829Docket: Civil Action No. 14-10397-PBS

Court: District Court, D. Massachusetts; October 23, 2014; Federal District Court

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Plaintiff Mary Ellen Hanrahran alleges that Specialized Loan Servicing, LLC (SLS) violated her rights under Massachusetts General Laws Chapter 93A by delaying and evading her attempts to obtain a loan modification through the Home Affordable Modification Program (HAMP). After an initial motion to dismiss her complaint was granted, Hanrahran filed an amended complaint, prompting SLS to move for dismissal again, which was denied.

The facts, accepted as true for this motion, include that Hanrahran secured a loan of $100,800 in November 2006, with SLS becoming the loan servicer in January 2012 and issuing a Notice of Intention to Foreclose in March 2012. Following this, SLS notified Hanrahran that she qualified to apply for HAMP, a program designed to modify loans to help homeowners avoid foreclosure.

Hanrahran, eligible for HAMP due to her circumstances, submitted her application in October 2012. SLS acknowledged receipt and assured her no further documentation was needed. However, despite HAMP regulations requiring a decision within 30 days, SLS failed to provide any updates from November 2012 to April 2013, while continuing to accrue costs and fees on her mortgage.

By April 22, 2013, Hanrahran had not received a response regarding her HAMP application and was informed her mortgage was in default and referred to foreclosure. She subsequently sent a written demand for relief under Chapter 93A on May 4, 2013. In June 2013, SLS informed her she did not qualify for a modification under the National Mortgage Settlement but failed to address her HAMP application despite her repeated inquiries.

In January 2014, SLS sent another letter regarding her rights to request a loan modification, leading Hanrahran to submit a new application on February 12, 2014, with the necessary supporting documentation.

In April 2014, SLS responded to Hanrahran's application for mortgage relief, claiming she had not been evaluated for programs like HAMP due to her failure to provide required documents. However, SLS had previously stated that certain documents were needed, yet no notice was ever sent to her regarding this. Hanrahran asserts she submitted all necessary documentation. Despite this, SLS continued to impose additional costs, fees, and interest on her mortgage. On June 26, 2014, over a year and a half after her initial request for HAMP relief, SLS denied her application, falsely claiming that the denial was due to a minimal reduction in her mortgage payment. In reality, a HAMP modification would have significantly lowered her interest rate from 5% to as low as 2%, greatly reducing her monthly payment. SLS instead offered a trial modification at a higher monthly payment than her original amount from October 2012. Hanrahran states that SLS’s actions have forced her into a situation where she must choose between an increased mortgage payment or foreclosure, incurring credit damage, interest accumulation, and additional costs. She seeks monetary damages for unfair and deceptive practices under Massachusetts law, an injunction against foreclosure, specific performance for a loan modification, and reimbursement for legal costs. SLS has moved to dismiss her complaint under Rule 12(b)(6), asserting that her allegations do not sufficiently establish a claim for relief. To withstand such a motion, factual allegations must demonstrate a plausible claim, allowing reasonable inferences of liability against SLS. For a valid claim under the Massachusetts Consumer Protection Act, the plaintiff must show that SLS engaged in trade or business and committed an unfair or deceptive act causing economic harm. SLS contends that Hanrahran's complaint fails to adequately allege either an unfair practice or economic injury, which is disputed.

Hanrahran's amended complaint sufficiently alleges that SLS engaged in unfair or deceptive business practices regarding her HAMP application. Massachusetts law does not provide a precise definition of "unfair or deceptive" under Chapter 93A, as noted in Kattar v. Demoulas, where defining these terms is seen as impractical due to human inventiveness. Importantly, a statutory violation is not required for a Chapter 93A claim, meaning the law can create new substantive rights and render previously lawful conduct unlawful. Massachusetts courts have established guidelines to assess whether conduct is deceptive—defined as having the capacity to mislead consumers—and unfair, which involves factors such as alignment with established concepts of unfairness, morality, and potential substantial injury to consumers or competitors. The equities between the parties are also considered, focusing on both parties' conduct and knowledge. Ultimately, what constitutes an unfair trade practice is determined by factual findings, with the court serving a gatekeeping function.

In cases related to HAMP, courts have recognized that a bank’s handling of loan modification efforts can be actionable under Chapter 93A if deemed unfair or deceptive on its own. Notably, a violation of HAMP that is independently unfair or deceptive can support a Chapter 93A claim, despite HAMP lacking a private cause of action. Claims must go beyond mere technical violations or clerical errors; significant issues must be alleged to establish liability under Chapter 93A for HAMP violations.

Plaintiffs have successfully opposed motions to dismiss by alleging a consistent pattern of misrepresentation, delays, and evasiveness in handling HAMP applications. Notable cases include Hannigan v. Bank of America, where the court denied the dismissal motion due to repeated requests for previously submitted information, and Charest v. Fed. Nat’l Mortg. Assoc., where the court found issues such as unnecessary document requests and miscalculations regarding the applicant's income. The court in Morris distinguished between minor technical violations of HAMP and more significant violations under Chapter 93A, emphasizing the importance of demonstrating unfairness beyond trivial errors. 

In the case of Hanrahran, she claimed that SLS mishandled her HAMP application by delaying response for nearly twenty months, failing to provide necessary information, and ultimately denying her application based on false claims of missing documents. This pattern of behavior, including continued foreclosure referrals and accruing fees, constituted significant unfair or deceptive conduct rather than mere clerical errors. The court acknowledged the severity of SLS’s actions, which were detrimental to Hanrahran’s attempt to secure a loan modification.

The defendants' actions, when viewed collectively rather than in isolation, are sufficient to allege unfair or deceptive business practices under Chapter 93A, despite individual actions not constituting violations. The court finds that the amended complaint's claims of repeated delays, evasion, and misrepresentation meet the criteria for such a claim. Regarding economic injury, the court rejects SLS's argument that Hanrahran's complaint lacks sufficient pleading of economic harm. Massachusetts courts now require that unfair or deceptive acts must lead to identifiable harm to the consumer. In the context of home loan modifications, a Chapter 93A claim can be upheld if the plaintiff shows that the defendants' conduct placed them in a worse position, as seen in recent case law. Hanrahran alleges that SLS's actions have resulted in higher monthly payments, accumulated interest, credit damage, and late fees—costs she would have avoided had her application been evaluated fairly or denied promptly. These allegations fulfill the requirement for a plausible Chapter 93A claim. Consequently, the court denies the defendant's motion to dismiss the amended complaint.