So a judge took it upon himself to drastically reduce the damages which a jury found should be paid to California homeowner Phillip Linza (Linza v. PHH Mortgage, et al.), according to the Sacramento Bee:
The jury awarded $514,000 in compensatory damages and $15.7million in punitive damages. The judge decided the award was vastly overblown. In a written opinion, Berrier [the judge] said, “There was no evidence that the errors made were intentional or made in reckless disregard of causing emotional distress.”
National Mortgage News gives more details on the judge’s ruling:
The judge did acknowledge that PHH had acted as a “bad party” to the loan modification contract. PHH made “inconsistent demands for payment arguably repudiating the modification contract, threatened [Linza] with foreclosure, refused to return his many calls or to apologize for or correct its errors, refused to enter into a new agreement and even ridiculed his plight.”
Regardless, Judge Berrier said there was no evidence to support claims of negligence or fraud.
“As a general rule, a financial institution owes no duty of care to a borrower when the institution’s involvement in the loan transaction does not exceed the scope of its conventional role as a mere lender of money,” the judge wrote.
PHH is a third-party servicer of the loan, which is owned by investors in a private-label mortgage-backed security trust.
This judge apparently would like to come off as a dupe rather than being in on the fraud. The quote that appears to confirm that is the one above that “a financial institution owes no duty of care to a borrower” if that institution is “a mere lender of money.” PHH is clearly not the lender in this case, and surely Judge Berrier is aware of that.
Interestingly, the judge did find that PHH was a “bad party,” but apparently not so bad that they had to part with $16 million, even though it’s widely known that a single mortgage note two times or more of its face value on the secondary market (see “Guest Post: Mortgages Were Pledged To Multiple Buyers At The Same Time”), not to mention bloated servicing fees and/or other trash fees that are tacked on in “default” servicing.
A press release from Linza’s attorneys mentions the judge’s double-talk:
We were perplexed by the judges ruling given the jury’s award of $15.7 million in punitive damages and the judges own $5 million bond to secure the award during the post-trial period. Regardless, this decision must be viewed as a major victory for California homeowners as it empowers homeowners with the knowledge that anyone suffering from modification violations by their servicer can take legal action. No one can argue that $158,000 isnt a significant sum, explained Stephen Foondos, founder and sr. managing attorney of United Law Center, attorneys for the Plaintiff. This courts ruling merely emboldens the nationwide movement toward holding servicers accountable for mistreating its customers in the servicing of their loan. In overturning the jury, the judge ruled that PHH Mortgages conduct and subsequent attempts to foreclose on Mr. Linza were merely, an insensitive breach of contract.
As for Mr. Linza, his case continues. We were not surprised by the courts ruling as it is yet another example of a lower court not being informed on whats really happening in this industry. Every day there is a report of another nonbank mortgage servicer coming under scrutiny by regulators for various abuses against mortgage holders. We intend to get back the millions of dollars the jury unanimously awarded Mr. Linza, on appeal. Given the nature of this decision, Plaintiff now has the opportunity to establish new law and strengthen existing case law relating to homeowner abuse by servicers. We are used to having to win on appeal, added Foondos.
This month, the mortgage servicing industry has increasingly come under fire by regulators due to their alleged inability to properly service their customers. According to Ben Lane of HousingWire.com, Congressmember Elizabeth Warren sent a letter to the U.S. Government Accountability Office on Oct. 20, 2014 requesting a study of the risks posed to consumers by the unprecedented growth in nonbank mortgage servicing. On Oct. 28, 2014, the Consumer Financial Protection Bureau (CFPB) released a report on the little amount of compliance happening among nonbank servicers with the CFPBs mortgage servicing rules that took effect in Jan. 2014. Most violations were described as unfairly delaying permanent loan modifications and deceiving consumers about status of permanent loan modifications; two of the biggest issues in the Linza case.
At least the judge didn’t overturn the entire decision of the jury, so that’s a modicum of progress…However, to help answer the question in the headline, i.e. “dupes or in on it,” consider the following. The judge had to know that there would be an appeal either way–if he let the damages stand or if, as it has now turned out, he didn’t. So why is he making the homeowner bear the burden and costs of initiating the appeal rather than “bad actor” PHH? If the judge isn’t a dupe or in on it, why would he do that? Just something to ponder…
See our other stories on whether or not judges are being duped by banks or somehow in on the fraud of the banks and servicers: