Mortgage Litigation: New California Case (Boschman v. Home Loan Center) Holds That Plaintiffs Sufficiently Alleged a Claim

Mortgage Litigation: New California Case (Boschman v. Home Loan Center) Holds That Plaintiffs Sufficiently Alleged a Claim

In Boschman v. Home Loan Center, Inc. (California Court of Appeals, Fourth District) on a demurrer by the Defendant the court reversed the holding at the trial court level and has held that the borrowers who took option adjustable rate mortgage loans adequately alleged in their Complaint that the lender fraudulently failed to disclose that they would suffer negative amortization if they made only the minimum monthly payments.  The borrowers sued Home Loan Center for alleged fraudulent omissions and for violations of California Business & Professions Code §17200 (unfair competition), the disclosures required under the federal Truth In Lending Act, and other claims.  They alleged that HLC failed to adequately and accurately disclose the essential terms of the loans, namely that they would suffer negative amortization if they made monthly payments according to the only payment schedule that was provided to them prior to the closing of the loan.  Borrowers alleged that they would not have taken the loan if adequate disclosures were made.

In Boschman the court made considerable effort to review the disclosures in the loan document, ultimately finding that they were inadequate.  The holding is important reading for both plaintiff and defendant counsel in these cases.  Of course, the demurrer is only a pleading stage decision, but it does allow the case to go forward.

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