Client Alert: From the Scheer Law Group: Servicer Claims for Mishandling Loan Modifications are Held to be the Obligations of the Lender

To All SLG Clients and Affiliates.
From: Spencer Scheer
Date: July 7, 2016
Subject:  Client Alert: From the Scheer Law Group

Court are upholding Negligence Claims against Servicers for Mishandling Loan Modification Applications and holding that the Lender/Investor can be liable under agency Principles.

A California appellate court has held that borrowers can assert claims for both misrepresentation and negligent loan administration against a loan servicer and against an indenture trustee (lender/investor), as the servicer’s principal, resulting from allegedly mishandling a loan modification application  (See Daniels v. Select Portfolio Servicing, Inc., 246 Cal. App. 4th 1150, 201 Cal. Rptr. 3d 390 (2016)).

There is currently a split of authority under California law on whether there is a duty of care imposed by law on a servicer handling a…