Alvarez v. BAC Home Loans Servicing, LP

In Alvarez v. BAC Home Loans Servicing, LP (2014) 228 Cal.App.4th 941, the plaintiffs alleged that defendants breached this duty by (1) failing to consider their application in a timely manner, (2) foreclosing while plaintiffs were under consideration for a modification, and (3) mishandling their application by relying on incorrect salary information and apparently misplacing application documents. (Ibid.) The Alvarez court reaffirmed that "As a general rule, a financial institution owes no duty of care to a borrower when the institution's involvement in the loan transaction does not exceed the scope of its conventional role as a mere lender of money." (Id. at p. 945.) Nonetheless, the court held that on the facts of that case, the lender owed the borrower a duty of care. (Id. at p. 949.) The Alvarez court also noted that the plaintiff's allegation in the complaint that defendants engaged in "dual tracking," a practice now prohibited by Civil Code sections 2923.6, and 2924.18, increased the defendants' blameworthiness. The court added: "Much of the conduct that plaintiffs allege breached a duty of care in this case--failing to process the applications in a timely manner, dual tracking and losing documents--is conduct now regulated by the Home Owner's Bill of Rights. While the explicit articulation of the lender's duties was not available when plaintiffs applied for loan modification, these obligations fall well within the duty to use reasonable care in the processing of a loan modification. Recognizing this general duty will not place an undue burden on mortgage banks and servicers, nor will it have a chilling effect on borrowers' ability to obtain loan modifications." (Alvarez, supra, 228 Cal.App.4th at p. 951.)