Appellate Court Allows Borrower to Pursue Claim Against His

Lender Arising Out of a Denial of a Loan Modification

In Berman v. HSBC Bank, USA, N.A., a California Appellate Court recently reversed the dismissal of a claim against a lender arising out of a denial of a loan modification.  In Berman, plaintiff applied for a loan modification with defendant, his lender.  Defendant denied the application, but advised him in a letter that he had fifteen (15) days to appeal the denial.  Under the law, however, plaintiff had thirty (30) days to appeal.  Plaintiff sued the lender for injunctive relief on the theory that the denial letter was a material violation of the Civil Code because of the misrepresentation regarding the time to appeal.  Defendant filed a demurrer asking that the Court dismiss the matter without leave to amend based on the conclusion that there was no violation of the law.  The trial court agreed and dismissed the complaint.  On appeal, a California appellate court held that the denial letter constituted a material violation, because it substantially misstated the time that the plaintiff was allowed to appeal the denial of the application of the loan modification.

Shannon B. Jones, Partner sbj@sbj-law.com