Lesson. It would seem to be extraordinarily challenging for a borrower to assert a viable claim against a lender arising out of a failed HAMP loan mod.
Case cite. Taylor v. JPMorgan Chase Bank, 958 F.3d 556 (7th Cir. 2020)
Legal issue. Whether Borrower’s claims for promissory estoppel, fraud, and intentional infliction of emotional distress should have been dismissed.
Vital facts. This is my third post about Taylor. See my March 11 and March 18 posts for background on this case, which centered on negotiations surrounding a potential loan mod under HAMP. To the Borrower’s chagrin, Lender did not ultimately grant the loan mod.
Among other things, Borrower pointed to language in the TPP indicating that Lender would modify the loan if Borrower qualified. Borrower also alleged that employees of Lender told him that his documents were “in receipt for processing” and that two other employees told him they had “received” his documents and were “forwarding” them. Basically, Borrower felt that he was misled and that Lender did not process the application in good faith.
Procedural history. The trial court granted Lender’s motion for judgment on the pleadings.
Key rules. “To hold [Lender] accountable under a theory of promissory estoppel, [Borrower] needed to allege that [Lender] made a definite promise to modify his loan.” An expression of intention or desire is not a promise.
A claim for fraud requires a misrepresentation about a past or existing fact. Indiana law does not support a claim based upon the misrepresentation of the speaker’s current intentions.
A claim for intentional infliction of emotional distress requires “extreme and outrageous” conduct.
Holding. Affirmed.
Policy/rationale. As to the promissory estoppel theory, the Court said that the statements at issue did not “convey a definite promise.” Indeed the commitment to modify “came with express strings” that were disclosed to Borrower.
Regarding the fraud claim, the Court found that the alleged misrepresentations “even if credited as entirely true,” could not “be construed as [Lender] committing to a permanent loan modification in the future.”
With respect to the action for intentional infliction of emotional distress, the Court didn’t buy the idea that the alleged conduct was extreme or outrageous. The Court followed the Indiana Court of Appeals decision in Jaffri (see HAMP post below): “‘any mishandling of’ HAMP by a loan servicer, ‘even if intentional,’ did not establish the tort of emotional distress because the HAMP applicant’s options ‘would have been even more limited’ if the program were not in place.” That rationale carried the day in Taylor.
Related posts.
- Indiana Upholds Dismissal Of Residential Borrower’s Tort Claims Arising Out Of Alleged HAMP Violations
- Email Evidence Of Alleged Loan Modification And Promissory Estoppel Defeats Auto Dealer Lender’s Summary Judgment Motion
- Borrowers Sue Lender Over Alleged Wrongs From Loan Modification Agreement
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Part of my practice includes representing lenders, as well as their mortgage loan servicers, entangled in consumer finance disputes. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at john.waller@dinsmore.com. Also, don’t forget that you can follow me on Twitter @JohnDWaller or on LinkedIn, or you can subscribe to posts via RSS or email as noted on my home page.