Homeowner sues Bank of America for alleged fraud in small claim court and wins

Written by Biloxi

Here is an unusual and clever lawsuit filed by a Calfornia homeowner to Bank of America. The homeowner sues Bank of America in small claims court for alleged fraud and wins. I am not going to be surprised if other homeowners follows suit and sues their mortgage lender in small claims court rather than in a civil court.

Dave Graham, a homeowner from Big Bear City, California, sued Bank of America for fraud because the bank put Mr. Graham into a loan modification when the bank knew from the start Mr. Graham did not qualify.

Here is the story:

The length of the [loan modification] agreement was supposed to be 90 days, but Graham was not told he was turned down for the program until May 21, 2010, 18 months after entering into the agreement. He was then told he would have to pay the delinquent amount of around $7,000, which resulted from the $400 reduction to his monthly payment, or his home would be foreclosed on.

And how did Mr. Graham prove and win his case? Mr. Graham simply use the calculation outlined in the loan modification program whether someone qualified for the program. In this case, Mr. Graham participated in the goverment program, Making Home Affordable Program. Under the Making Home Affordable Program, the homeowner must make three month trial partial payments on time. And the lender has 90 days to tell the client whether the loan modification is approved for a permenant loan modification. Mr. Graham brought to small claim court an expert witness, Alan Sims of the Center for Litigation and Consumer Real Estate Education.  Bank of America brought its representative to the court. However, the bank representative's testimony went into the favor of Mr. Graham:

Bank of America’s representative, mortgage service specialist Anthony Lopez, admitted in court that the lender continued to accept modified payments for many months after the bank determined Graham was not approved for the modification.

Lopez told the judge there were attempts to contact Graham to notify him, but the phone number on file was incorrect and the notice sent was mailed to Graham’s physical address instead of the mailing address. The mailing address is a P.O. Box because Big Bear City is a rural area and does not have home postal delivery in most areas. The P.O. Box address was on file with Bank of America as the mailing address.

[Judge John] Pacheco asked Lopez why when Graham called each month to check on his status and pay his monthly modified loan amount that he was not told that he had been turned down for the loan modification. 'People that do take these calls aren’t, let’s say, experienced or certified negotiators,' Lopez stated in court. 'They are collectors. ... They have minimal training in the modification process.'
 
Judge John Pacheco had ruled that "Bank of America was in violation of California Civil Code 1565-1590, particularly 1572, suppression of facts and 1575, undue influence." The judge awarded Mr. Graham $7,595.00 and won his case on December 17. Bank of America is expected to appealed. This is a first known case by a homeowner to take a bank to small claims court where a bank has been found guilty by reason of fraud. I am sure that other homeowners from other states will follow suit to sue banks in small claims court. After all, there are no jurors and no defense attorney and no prosecutor. The decision maker is just the judge.