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No Fraud Claim for Loan Application Notice

A Lynchburg U.S. District Court grants defendant bank’s motion to dismiss a fraud action filed by a borrower who lost his home to foreclosure.

Plaintiff claims he did not receive the bank’s notice that he had not been approved for a loan modification, dated Nov. 10, 2011, until Nov. 28, 2011, and that his home was sold at foreclosure on Nov. 14, 2011. He claims the bank intentionally misled him to believe his property would not be sold at foreclosure until he had first received a non-approval notice, an opportunity to appeal that decision, a chance to explore other alternatives to foreclosure and an opportunity to bring his mortgage current.

Because the alleged misrepresentations referenced future events, they are properly assessed in a claim for actual, as opposed to constructive, fraud. Plaintiff claims a Sept. 29, 2011 letter from the bank falsely assured him his eligibility for loan modification would be determined within 30 calendar days, when in actuality, it took 42 days. He says this misrepresentation made him believe the foreclosure sale scheduled for Nov. 14, 2011, would not occur unless he had heard back from the bank regarding the status of his application. However, there is nothing in the letter declaring that the 30-day time limit would begin on Sept. 29. To the contrary, the letters states the 30 days would begin to run once the application package was determined to be complete, and plaintiff does not allege on what day that might have been. Moreover, the letter does not suggest that, if the review period were to take longer than 30 days, a pending foreclosure sale would necessarily be postponed or canceled.

Second, plaintiff claims the Sept. 29 letter represented that if his application was denied, he would be told the reasons and given a chance to appeal or bring his mortgage current. A close reading of the letter reveals the bank did not affirmatively state it would refrain from foreclosing on or selling the property after denial of the application.

Although the Sept. 29 letter states plaintiff would be informed of the reasons for non-eligibility, it does not state the bank would wait for plaintiff to receive the non-approval notice before proceeding with foreclosure.

Finally, although plaintiff says the bank’s assignment of a “relationship manager” to his account gave him a false sense of security, the bank’s letter only states the relationship manager would serve as the sole point of contact for account information, and advises plaintiff to call or send an email if he has questions.

Plaintiff has not alleged facts showing he would have otherwise been able to keep the property upon denial of his application.

Fraud claim dismissed.

Martin v. U.S. Bank Nat’l Ass’n (Moon) No. 6:12cv00002, June 19, 2012; Lynchburg U.S. District Court VLW 012-3-267, 10 pp.

VLW 012-3-267

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