The on-going battle over property inspections for defaulted mortgages recently took an interesting turn. This latest skirmish pitted mortgage servicing giant Ocwen Loan Servicing against the famed plaintiffs’ law firm of Baron & Budd, P.C., which according to a federal court in Los Angeles, “specializes in suing large banking institutions for imposing unnecessary property inspection fees.” Ocwen was able to get the complaint dismissed on legal grounds, but the court ultimately threw the plaintiff a lifeline—which she promptly seized.
The background facts were not unlike those from other property-inspection cases around the country: the consumer, Mary Lou Vega, defaulted on her home mortgage, which Ocwen was servicing, and then she kept living there for free. Based on a computer algorithm, Ocwen had monthly inspections done of her property and billed her for those costs. (She never paid those bills, nor did she do anything to cure her mortgage delinquency.) But ignoring her mortgage obligations was not enough for Vega. No, she decided to sue—and not just on behalf of herself, but also on behalf of a whole class of mortgage cheats.
Vega argued that the property inspections were unnecessary, and therefore improper, because she stayed in contact with Ocwen and because she continued to occupy the house. She also claimed that Ocwen’s invoices were misleading because the company did not tell her that the inspections were unnecessary.
The court disagreed. It found that the many other cases that dealt with allegedly unnecessary property inspections had language in the mortgages that directly supported the claims. But here, no similar wording existed, the court held. That omission was supposedly explained by the fact that Vega’s lawyer “decided to reuse a previously filed complaint,” which contained different language, and he never bothered to modify his canned pleading. Also, there was no precedent holding that a company breaches a contract or is otherwise in the wrong if it sends a bill but does not admit to violating the underlying agreement, the court noted. The court then dismissed all the remaining claims, each of which relied on those flawed premises.
One possibly viable cause of action, not yet pleaded, remained. The court pointed out that Vega’s mortgage permitted charging her for “reasonable” steps to secure the property. Whether the automated ordering of inspections was reasonable is, according to the court, a plausible breach-of-contract question. The court then granted Vega 10 days to file an amended complaint along those lines, which she timely did. We’ll see if Ocwen can continue its successful run against the new complaint.