LENDER LIABILITY FOR FALSELY PROMISSING TO MODIFY A LOAN

October 1, 2012
Posted in: Alerts
By: Gerson

A California appellate court has held in a case involving a residential mortgage that a lender may be liable for intentional infliction of emotional distress when it has represented that it will modify a loan, but thereafter does not modify the loan, and proceeds with a foreclosure. Raglan v. U.S. Bank, N.A., 2012, Westlaw — (Cal.App.)

While the facts in this case clearly showed that the lender promised to make a loan modification and thereafter did not, this case leaves open the door for not only a new wave of lender liability cases on the residential loan front (and San Diego Superior Court already has one-third of its court calendars filled with such cases), but may open a new front of litigation by borrowers on commercial loans.