Lenders Acted Negligently after Failing to Properly Process a Loan Modification Application While Foreclosing.

Posted on: August 20, 2016

In the case Alvarez v. BAC Home Loans Servicing (2014) 228 Cal. App. 4th 941, the California Court of Appeal ruled that a previous judgment made by a court claiming that a lender acting negligently had no duty towards the borrower was to be reversed.
The borrower claimed the lenders were acting negligently in servicing loans because they failed to process the loan modification in a timely manner, continued to foreclose the home while processing the applications, and lost documents. Since the lenders allegedly agreed to consider the modification it weighed in favor of a duty towards the borrower considering that careful processing of the documents could lead to significant harm to the applicants.

While there was no guarantee the modification would be processed fully the mishandling completely removed the borrowers chance of having it occur. Since, the bank was the only entity with the duty of providing the service to the borrower the claim that they were guilty of dual tracking (foreclosing and processing modification forms simultaneously) significantly increased the blame they could be given.

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