A class action suit has been filed against Saxon Mortgage, a servicing division of Morgan Stanley, claiming that the company uses the Home Affordable Modification Program to lure customers into making "trial" payments on loans it has no intention to modify on a permanent basis.
Filed in a Northern District of California federal court, the suit alleges a pattern of misconduct by Saxon of collecting trial payments, delaying the processing of loan modifications, and then denying the application altogether for demonstrably false reasons.
Morgan Stanley did not return a phone call asking for comment on the suit.
According to the suit, the lead plaintiff, the owner of a San Francisco bridal boutique named Marie Gaudin, asked Saxon to rework the loan on her underwater Daly City home. Gaudin provided extensive paperwork to document her financial condition to Saxon's Home Preservation Department, which assured her it was "committed to assisting you in any way we can to complete [the loan modification]. We want to help!"
The company, the suit maintains, sent her a written agreement that seemed to promise a permanent HAMP loan modification after she made three trial payments to prove she could handle the new terms.
The complaint further alleges that Saxon delayed the modification while urging the plaintiff to continue making trial payments. But after making numerous trial payments and fulfilling the rest of her obligations under the trial mod agreement, it says, Saxon denied a permanent modification, claiming that she had failed to make payments or comply with document requests.
According to Gaudin's attorneys - Peter Fredman of the Law Office of Peter Fredman, Berkeley, and Daniel Mulligan of Mulligan & Gabriel, San Francisco - Saxon's correspondence with their client shows a bizarre pattern of inaccurate and irresponsible behavior on the part of a major global bank. The company claimed that she did not make payments, while in the same letter actually acknowledged that she was current on all payments, the two lawyers said.
Saxon also claimed that the Treasury Department was involved in reviewing HAMP applications, according to plaintiff's counsel.
"Saxon and Morgan Stanley are taking advantage of the good faith and intentions of distressed borrowers," said Fredman. "If they don't want to give modifications, fine, they should face the political music and the flood of foreclosures that will result when all their underwater borrowers give up hope. But tricking them into wasting their time and money applying for a modification that Saxon has absolutely no intention of handing out is a deceptive debt collection practice plain and simple."
The class action, titled Gaudin v. Saxon Mortgage Services Inc., alleges that Saxon's breach of contract, rescission and restitution, and deceptive debt collection practices violated California's Rosenthal Fair Debt Collection Practices Act (the Rosenthal Act) and fraudulent, unlawful, and unfair business practices under California's unfair competition law.
