Financial institutions, lenders, and servicers should take note that the California Supreme Court affirmed a Court of Appeal decision confirming there is no duty for a lender to “process, review and respond carefully and completely to” a borrower’s submitted loan modification application. In doing so, California’s highest court resolved a split of authority at the appellate level. However, the Court specifically disclaimed consideration of negligent misrepresentation or promissory estoppel claims, noting that nothing in the opinion “should be understood to categorically preclude those claims in the mortgage modification context.”
In Sheen v. Wells Fargo Bank, N.A. (March 7, 2022), the California Supreme Court affirmed the decision of the Court of Appeal, which upheld the trial court’s decision sustaining defendant lender’s demurrer to plaintiff borrower’s negligence claim in a case involving a junior lien and a lender’s alleged negligence in failing to respond timely to the borrower’s request to modify a second position deed of trust.
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