Face Time Required Before Foreclosure

A Norfolk U.S. District Court accepts a magistrate judge’s recommendation to allow plaintiff homeowner to proceed with her breach of contract claim alleging defendant failed to conduct a face-to-face interview prior to foreclosing on her property; the court rejects defendant’s claim that the parties’ extensive history of dealings constitutes an exception to the required pre-foreclosure face-to-face meeting.

According to plaintiff’s allegations, defendant did not meet all required conditions precedent before commencing foreclosure and acted on rights not yet accrued This breach of the terms of the deed of trust constitutes a breach of contract. Plaintiff alleges she was injured by this breach; actual damages include costs and attorney’s fees to prevent improper foreclosure, default servicing fees, and foreclosure fees, as well as varied emotional distress damages.

The court also declines to dismiss plaintiff’s claim for breach of the implied covenant of good faith and fair dealing. Inducing a plaintiff to forego making payments and falsely conveying the status of a loan modification agreement can be sufficient grounds for a claim of breach of implied good faith and fair dealing. Failing to review a loan modification request, failing to properly consider the plaintiff for an alternative loan modification, or failing to conduct a proper review of a loan modification request before commencing foreclosure, none of which are contractual obligations that would appear in a deed of trust or note, do not constitute a breach of implied good faith and fair dealing. Rather, they constitute disguised HAMP claims.

Here, however, plaintiff brings this count on the contractual relationship established by the note, secured by the deed of trust, on the property. When defendant’s representative stated plaintiff’s loan modification agreement had been “pulled,” when in fact defendant had filed it with the land records department of the state court, defendant was not “honest in fact,” or reasonable, in making such incorrect assertions. Plaintiff would like for the court to infer that defendant’s unreasonable statements induced her to stop making payments toward her mortgage. By alleging defendant falsely represented that plaintiff’s loan modification had been pulled, plaintiff alleges sufficient facts to state a claim for breach of the implied covenant of good faith and fair dealing.

However, the court will strike plaintiff’s claim for punitive damages because the complaint fails to allege in an independent tort sufficient facts to show defendant behaved maliciously.

Parris v. PNC Mortgage (Smith, Leonard) No. 2:14cv142, July 28, 2014; July 7, 2014; USDC at Norfolk, Va. VLW 014-3-389, 21 pp.