Recovery for Emotional Distress Because of Foreclosure After a Loan Modification Was Promised

A California Appellate Court has held that a borrower on a home loan may recover for intentional infliction of emotional distress by a lender that falsely promised to modify her loan but then proceeded to foreclose. [Ragland vs. U.S. Bank, N.A. 2012 Westlaw-(Cal. App.)]. The individual borrower sought a loan modification, from her mortgage lender. She was told that she had qualified for the loan modification, and the bank would not be pursuing the foreclosure, pending the completion of the paperwork (Have you heard this before?). As a result of the bank’s promises, she stopped making payments to the bank. Guess what? The bank foreclosed anyway. The borrower brought suit against the bank, claiming that the bank had acted wrongfully and had intentional inflicted emotional distress. She lost on the trial level but won on appeal. The appellate court said that the bank’s conduct, if proven, “was as extreme as to exceed all bounds of decency in our society” (That is the legal standard to prove intentional infliction of emotional distress.) What did the bank apparently do? All the stuff that I have heard over and over from my clients. Lost files, constantly changing personnel assigned to the file, no coordination between the loan modification department and the foreclosure department. Finally, the banks are being held accountable for their incompetence. Maybe we can finally get a little decency and fair play from lenders.

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