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Big Win For Homeowners – California Supreme Court Depublishes Aspiras v. Wells Fargo

On August 21, 2013, the California Court of Appeal issued a negative ruling against homeowners in an area homeowners thought they were winning.

The story begins in February 2013, when the California Court of Appeals (the First District), issued a groundbreaking decision in Jolley v. Chase, which found that mortgage servicers could be held liable for negligence if they mishandled the loan modification process and caused foreseeable harm to affected homeowners. This ruling was a significant win for homeowners who had long sought to hold mortgage servicing companies accountable for fraudulent, unfair, and deceptive conduct when reviewing people for and negotiating loan modifications. The ruling was also a watershed moment for homeowners since most of the case law prior to this ruling found that banks could never be held liable for negligence in the loan modification context—no matter how egregious their conduct.

Prior to Jolley, most judges based their decisions on the holding of Nymark v. Heart Fed Savings & Loan Assn, a 1991 appellate case in which the court decided that Heart Federal could not be held liable for negligence in the context of the origination of mortgage loan.  Although the court in Nymark was clear that the specific facts of each case must be analyzed according to a 6-factor test to determine if a duty of care existed, most courts simply assumed, based on the Nymark holding that no bank could ever be held negligent in any context involving mortgage loan banking.

The excitement and apparent progress made in Jolley lasted a few months, when, in August 2013, the Fourth District issued its decision in Aspiras v. Wells Fargo, which directly contradicted the holding inJolley and found, as court had so many times before, that banks could never be negligent in their handling of a loan modification application.  The Aspiras holding created a “split” in authority and was expected to be appealed to the California Supreme Court so that the highest court in California could settle the issue.

As expected, the plaintiffs in Aspiras filed a petition for review on October 29, 2013, asking that the California Supreme Court review the appellate court’s order and overturn its findings.  Chase filed its response to that petition in opposition to the plaintiffs’ request. Soon after, Kent Qian, of the National Housing Law Project (“NHLP”) filed a letter asking the court to depublish the Aspiras case, a move which would essentially negate the case’s precedential value and limit is binding effect on any other court.  The letter seeking depublication is a brilliantly written analysis of (1) why Aspiras was wrongly decided, (2) how public policy favors the outcome in Jolley, and (3) why Nymark had been so wrongly understood.The letter can be read here.

It worked! The California Supreme Court denied review of the case, but granted the NHLP’s request to deplublish Aspiras. While no one can be certain why the Supreme Court did what it did, the outcome is undoubtedly a big win for homeowners.  The Jolley ruling, together with the Homeowners’ Bill of Rights, and plain-old negligence principals should now be sufficient to hold servicers accountable for engaging in negligent conduct, when they do things like repeatedly lose documents, misrepresent facts during the loan modification process, dual-track into foreclosure, renege on promises to modify, and wrongly deny people for modification.

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