Court rejects class certification in Bank of America loan modification case

Posted on: October 31st, 2013 by Steve Larson

House key ring vectorA Massachusetts federal judge on Wednesday refused to certify 26 classes of homeowners who allege Bank of America Corp. mismanaged their requests for loan modifications, saying that, while the plaintiffs adequately pleaded their claims, class treatment is inappropriate because there are too many differences among individual plaintiffs. 

U.S. District Judge Rya W. Zobel agreed with Bank of America that the situations of potential class members who allege they were harmed by the bank’s handling of their Homeowner Affordable Modification Plan applications are too wildly varied to be resolved through classwide litigation. HAMP was established by the U.S. Department of the Treasury in 2009 to help make mortgage payments more affordable for homeowners at risk of foreclosure.

“Plaintiffs’ claims may well be meritorious, but they rest on so many individual factual questions that they cannot sensibly be adjudicated on a classwide basis,” the judge wrote in the order.

Eight proposed putative class actions alleging Bank of America violated its obligations under HAMP were merged into a multidistrict litigation in Massachusetts in October 2010. The plaintiffs, who filed HAMP applications in 2009 and early 2010, claimed the bank devastated their finances — including forcing some into foreclosure — by not timely approving their permanent loan modifications or, alternately, sending prompt rejection letters. They sought to certify 26 classes, one for each state in which a named plaintiff resides.

In Wednesday’s order, Judge Zobel said the plaintiffs plausibly alleged Bank of America failed to administer HAMP modifications in a timely, efficient manner and identified a common question of whether the bank fulfilled its obligations under the program. 

However, Judge Zobel wrote, factual questions regarding each individual plaintiff’s conduct pose difficulty when it comes to class certification. The judge said the court would have to ask a “nearly endless series of questions” to decide whether each plaintiff fulfilled his obligations during the loan modification trial period. While all potential class members theoretically have to have made their trial payments in a timely fashion to participate in the litigation, questions have already arisen as to whether several named plaintiffs failed to do so, according to the order.

Because each plaintiff’s individual situation must be assessed to establish Bank of America’s liability for breaches of contract, implied covenant and good faith and fair dealing, class treatment is not appropriate in the instant case, the judge wrote.

“The present record shows that the individual questions presented in this case are not susceptible to simple, routine resolution,” the order said. “They will instead require separate factual inquiries that will overwhelm any common questions.”

The case is In re: Bank of America Home Affordable Modification Program (HAMP) Contract Litigation, case No. 1:10-md-02193, in the U.S. District Court for the District of Massachusetts.