Recently, the Supreme Court of Montana was called to address an action by a pair of homeowners against their mortgage loan servicer, Bayview Loan Servicing, LLC. The homeowners not only sought to prevent the foreclosure of their home, they also sought monetary damages against Bayview for its conduct in connection with the servicing of their loan—including representations Bayview made for a supposed loan modification—and for its communications and notifications pertaining to its foreclosure efforts.
According to the court’s opinion, in March 2009, the loan servicing duties on the homeowners’ $391,400 mortgage securing their Montana home were transferred from the original lender and servicer to Bayview. However, from March 2009 to July 2012, Bayview sent the homeowners legally deficient notices, transmitted faulty written communications about their mortgage loan default and impending foreclosure, or omitted to send them required notices and communications. Moreover, on several occasions, Bayview’s written or oral communications did not conform to the requirements of the homeowners’ promissory note or trust indenture securing the loan.
To compound matters, as a result of a series of purported assignments and legal constructs during 2010, Bayview made certain representations to the homeowners that simply were not true because Bayview did not actually possess the required authority to make the representations. On a separate but parallel track, a Bayview representative told the homeowners to “stop making payments on their loan” so that they might better qualify for a loan modification. Eventually, in September 2009, Bayview informed the homeowners that they did not qualify for a loan modification under the federal Home Affordable Modification Program “even though the [homeowners] were never given an application for modification under the program.”
After the homeowners complained to the Better Business Bureau and a U.S. senator about the matter, Bayview offered terms for a loan modification that would also dismiss its foreclosure action. Although the homeowners accepted the proposed loan modification, Bayview “refused to put the offer in writing.” As a result, “no agreement was finalized between the parties,” the court noted.
FDCPA claim. At the outset, the Montana Supreme Court rejected Bayview’s arguments that it was not subject to the FDCPA under the facts of the case. Among other things, the court pointed out that, as part of the ongoing foreclosure proceeding, Bayview had filed a “Notice of Trustee’s Sale” containing a statement in bold letters that the notice constituted “an attempt to collect a debt.”
In affirming the trial court’s determination that Bayview committed multiple FDCPA violations, the court emphasized that the trial court based its rulings on substantial and reliable evidence. Accordingly, the court concluded that:
- Bayview’s false representations regarding the loan modification were materially misleading in violation of the FDCPA;
- Bayview’s false representations about the homeowners’ legal rights violated the FDCPA prohibition against the use of any false representation or deceptive means to collect or attempt to collect any debt and violated the FDCPA prohibition against unfair practices;
- since Bayview made false and unsubstantiated assignments and was never a “beneficiary” on the homeowners’ loan, the “least sophisticated consumer” would “clearly have difficulty ascertaining who owns the loan, and who can foreclose or resolve the loan”; consequently, Bayview made material misrepresentations and engaged in deceptive practices in violation of the FDCPA; and
- even though Bayview knew that the homeowners were represented by counsel, the loan servicer improperly contacted the homeowners on several occasions in violation of the FDCPA.
MCPA claim. Turning to the homeowners’ state-law claim, the court observed that, under the applicable provision of the MCPA, “unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce are unlawful.”
Reviewing Montana case law on the issue, the court concluded that the trial court’s findings with regard to Bayview’s FDCPA violations also established state-law grounds for violations of the MCPA provision. Stressing that Bayview told the homeowners “not to make payments, while at the same time commencing foreclosure,” the court determined that Bayview not only violated the MCPA, the loan servicer violated various provisions of the trust indenture as well.
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