Class Action Claims Ocwen/PHH Mortgage Provided ‘Misleading’ Default Notices Before Home Foreclosures

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A Massachusetts resident claims in a proposed class action that she received from PHH Mortgage/Ocwen Loan Servicing a misleading default/right to cure notice that resulted in a void foreclosure of her home.

According to the lawsuit, defendant Ocwen Loan Servicing, LLC (now known as PHH Mortgage Corporation) serviced the plaintiff’s mortgage for a Massachusetts property, while defendant HSBC Bank USA, NA was assigned as the trustee in March 2013.

Under the terms of the plaintiff’s mortgage, the defendants were required to send the woman a default notice, prior to acceleration and foreclosure, that informed her of her “right to reinstate after acceleration” and the date by which acceleration can be cured, the lawsuit says. The complaint claims the mortgage document the plaintiff received purportedly specified that reinstatement can occur only if the borrower paid all sums due to the lender “prior to the earliest of (a) five days before the sale of the Property pursuant to any power of sale contained in this Security Instrument; (b) such other period as Applicable Law might specify for the termination of Borrower’s right to reinstate; or (c) entry of judgment enforcing this Security Instrument.”

According to the case, the defendants sent the plaintiff a form default/right to cure letter prior to March 19, 2020 that stated “after [the right to cure date/acceleration date], you can still avoid foreclosure by paying the total past due amount before a foreclosure sale takes place . . . to avoid foreclosure.”

The lawsuit argues that the language in the form presented “an affirmative misstatement” as the terms of the plaintiff’s mortgage do not allow for reinstatement up to the time a foreclosure sale takes place. Since no applicable law specifies a termination of the plaintiff’s right to reinstate and no judgment has been entered enforcing the mortgage, the plaintiff’s right to reinstate the mortgage expired no later than five days before the foreclosure sale, the suit stresses.

“Therefore,” the complaint reads, “the default/ right to cure letter’s assertion that [the plaintiff] could pay the ‘total past due amount before a foreclosure sale take place…to avoid foreclosure’ is potentially misleading and deceptive because the letter omits the conditions of paragraph 19 of the mortgage.”

Still further, the case argues that the defendants failed to comply with the Massachusetts law requirement that the companies notify a borrower of the date by which they must cure the default to avoid foreclosure or another action to seize the home.

Alleging a breach of contract, the lawsuit claims the acceleration, foreclosure and sale of the plaintiff’s property in March 2020, as well as foreclosure actions taken against similarly situated mortgage borrowers, is rendered void due to the defendants’ failure to provide proper notice of default. 

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