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Homeowner wins groundbreaking case, is awarded over $200,000 in damages (even compensation for emotional distress)

In a groundbreaking new case, mortgage and loan holder Cenlar has been found guilty of violating RESPA sections. Will this pave the way for similar suits?

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Unfortunately, many homeowners have found themselves in a position of not being able to make their mortgage payment which can then lead to a foreclosure situation if the homeowner is unable to negotiate a modification to their loan. Leticia Lucero was in a similar situation and she contends that CENLAR acted maliciously to send her not only into a near state of foreclosure after renegotiating a permanent loan modification, but also to a state of severe mental stress.

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Leticia Lucero brought action against her mortgage loan servicer (Cenlar) alleging they violated the Real Estate Settlement Procedures Act (RESPA), breached contractual and good faith obligations, and committed the tort of outrage when it charged attorney’s fees and costs to Lucero’s mortgage account and refused to explain the charges upon her and her attorney’s requests.

How it got to this point

In August of 2006, Lucero and her then husband took out a mortgage for $391,000. Lucero began to fall behind making payments in 2010, and a Notice of Default was issued on behalf of Cenlar on August 27, 2012. Lucero had concerns regarding this Notice and was not satisfied with Cenlar’s response to her request for information, so she hired an attorney.

With her attorney’s help, she was able to secure a loan modification and was clear of default by March 2013.

However, Cenlar continued to report that she was in default despite her successful modification.

Here’s where things start to get messy

Lucero was unable to resolve her default status through any means of communication, so she filed suit against Cenlar in April 2013. Cenlar defended their actions, stating they did nothing wrong. However, in December of 2013, they sent Lucero the following letter: “Dear Mortgagor(s): In keeping with Washington law, please be advised that we have charged your loan account for the fee described, one the date and in the amount indicated on the below list.”

Cenlar had fined Lucero $1,261.42 in attorney’s fees and costs on her mortgage account (monthly statement).

Lucero contested these charges and requested more information on December 29, 2013. Cenlar acknowledged her request, but did not provide the information.

A second request for additional information was made in March 2014, but Cenlar did not respond for three months. They did however continue to send letters telling Lucero fees were being charged and demanded payment.

Finally, on June 18, 2014 Cenlar’s attorneys responded to Lucero’s December request for more information. She then learned that the fees were being charged pursuant to the Deed of Trust and that notification of the account activity was required by a federal regulation.

Up until this point, Lucero had no idea what she was being charged for, or why Cenlar was demanding money after a successful modification.

And messier still

At trial, Cenlar provided only the barest information regarding the decision-making process that resulted in the costs on Lucero’s monthly mortgage statements. In fact, Cenlar’s sole witness had no personal knowledge of the process and didn’t participate in the decision. Cenlar has offered at least eight different (and conflicting) justifications for their actions (most were unsupported).

There was no actual evidence as to why Cenlar was demanding a higher payment. None.

In September 2014, the Court issued an order finding that Lucero had plausibly alleged a contract and outrage claim based on the attorney’s fee charges imposed on her account. Cenlar stopped adding fees to the “amount due,” but continued to note the fees that had been charged during the preceding month. In court, Cenlar’s witness testified the loan history shows Cenlar removed $40,000 in fees and costs from Lucero’s account and designated them nonrecoverable; however Lucero was never notified this had been done. Her loan was transferred to NationStar and with this transfer she discovered there were over $26,000 in fees. She then realized the charges were never going away and lodged her suit.

Lucero asked for the following losses/damages:

  • $26, 724 in charges to her account with NationStar
  • $1,950 (6.5 hours x $300/hour) in attorney’s fees for drafting and sending requests for information to Cenlar
  • $208 (6.5 hours x $32/hour)in time spent reviewing documents regarding charges imposed on her mortgage account
  • $30 in gas traveling to and from her attorney’s office
  • $12 in copying and postage expenses related to the requests for information
  • $2,700 in counseling expenses (as Lucero experienced a nervous breakdown from the prolonged stress)
  • $21,504 ($32/hour x 40 hours/week x 4.2 weeks/month x 4 months) in lost wages
  • $13, 760 in reduced wages (same model as above)
  • $55,000 ($500/day for 110 days) in emotional distress damages from December 4, 2013 to June 18, 2014
  • $42,500 ($500/day for 85 days) in emotional distress damages from March 25, 2014 to June 18, 2014
  • $49, 500 ($100/day for 495) in emotional distress damages from June 19, 2014 to October 27, 2015 (end of trial)

For a total of $213,888 in damages, of which the Court awarded them all.

Groundbreaking case for homeowners

The Court found that Cenlar violated § 2605(e)(2) of RESPA when they failed to timely and fully respond to her March 25, 2014, requests for information regarding the nature of and justification for the fees that were appearing on her monthly statements. The Court also found Cenlar guilty of breach of contract and breach of implied duty of good faith and fair dealing. They were also found guilty of tort outrage. The Court found that Cenlar forced Lucero to “abandon litigation, adopted a strained and unprincipled analysis of the Deed of Trust to justify the imposition of unpredictable and enormous charges directly onto Lucero’s mortgage statements as ‘Amounts Due.’” The Court stated Cenlar’s message to Lucero was clear: continue this litigation and we will take your home and such conduct is beyond the bounds of decency and is “utterly intolerable.”

This could prove to be a groundbreaking case for homeowners in similar situation. It should also serve as a warning to mortgage holders: homeowners are on to you and are becoming more informed about their options, so you had best be playing by the rules.

#CenlarVsLucero

Jennifer Walpole is a Senior Staff Writer at The American Genius and holds a Master's degree in English from the University of Oklahoma. She is a science fiction fanatic and enjoys writing way more than she should. She dreams of being a screenwriter and seeing her work on the big screen in Hollywood one day.

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