Mazzone-Urie v. OneWest Bank FSB

Background

Florentina Mazzone-Urie brought a foreclosure-related lawsuit concerning property in Pacifica, California. Her husband and his daughter originally took out a $600,000 loan secured by a deed of trust on the property. The husband later became the sole owner, applied for a loan modification in 2009, and died in March 2012. Mazzone-Urie was the beneficiary of his estate.

The complaint alleged that OneWest became the loan servicer in 2008, Ocwen later became the servicer, and PHH took over servicing in 2019. Mazzone-Urie alleged that PHH required her to restart the loan-modification process, received supporting documents in June 2019, and told her to continue withholding payments while the application was under review. She alleged that she received changing explanations about the application’s status and was eventually told on July 8, 2021, that the application was denied because the loan had to be current for her to assume it.

A trustee’s sale was scheduled and postponed, but no foreclosure sale had occurred when the court issued its order. Mazzone-Urie filed this action in August 2021. Her lawyer later withdrew for medical reasons, and she continued without a lawyer. The court also discussed her unsuccessful settlement efforts and the dismissal of her bankruptcy case.

Motion and claims

PHH moved to dismiss. Its motion stated that PHH was the successor by merger to Ocwen Loan Servicing, LLC and that it had been sued under the names of Ocwen and PHH erroneously. The court found nothing indicating otherwise.

Mazzone-Urie asserted seven causes of action against the defendants, including PHH:

Mazzone-Urie did not oppose the motion despite receiving two opportunities to do so. The court nevertheless considered PHH’s arguments on the merits.

Court’s analysis

Federal loss-mitigation regulations. The court rejected PHH’s argument that the federal regulations could not apply because the husband first sought modification in 2009; the complaint also alleged that Mazzone-Urie applied in 2019. But the court held that the complaint did not state a claim under the regulations. It found no indication that PHH failed to evaluate Mazzone-Urie for all available loss-mitigation options, and PHH had given written notice that it was not offering a loss-mitigation option. The court also stated that the earlier foreclosure activity was moot. As to the restriction on foreclosure while an application is pending, the court noted that Mazzone-Urie had been told she was not eligible, there was no indication that she appealed, and no foreclosure sale ultimately occurred.

Dual tracking. The court discussed PHH’s argument that Mazzone-Urie was not a statutory “borrower” because her husband was the borrower. The court also addressed the repeal of California Civil Code § 2920.7, which had previously provided certain rights to successors in interest. The court concluded that repeal precluded Mazzone-Urie’s dual-tracking claim. It separately held that the complaint did not show a material violation because the loan-modification application had been rejected and was no longer pending.

Single point of contact. The court held that this claim also lacked merit because the rights of a successor in interest under the former statute had been repealed. In addition, even assuming PHH failed to appoint a single point of contact, the complaint did not show a material violation, and it was unclear whether the alleged delays resulted from that failure.

Negligence. The court held that the complaint did not establish a duty of care. It relied on a California Supreme Court decision holding that a lender does not owe a borrower a tort duty to process, review, and respond carefully and completely to a loan-modification application to prevent purely financial loss. The court also rejected using a negligence claim as a way around the failure of the direct claims under the California Homeowner Bill of Rights.

Breach of contract. The court stated that Mazzone-Urie did not appear to have been a party to the deed of trust or another contract with the defendants. Although the deed of trust permitted a successor in interest who assumed the borrower’s obligations in writing and received the lender’s approval to obtain the borrower’s rights and benefits, the complaint did not establish that those conditions applied. The court also found that Mazzone-Urie did not identify how PHH breached the deed of trust. Violating the Homeowner Bill of Rights would not itself constitute a breach of contract.

Elder financial abuse. The court held that this claim was not viable because nothing had yet been taken from Mazzone-Urie; the foreclosure had not occurred. The court also found no clear indication of an intent by PHH to defraud. It stated that the wrongful-use theory was not tenable based on the alleged long-term default and the substantial amount owed.

Unfair business practices. The court treated the claim under California Business and Professions Code § 17200 as derivative of the other claims. Because the other claims failed as pleaded, the § 17200 claim also failed.

Disposition

The court granted PHH’s motion to dismiss in its entirety. It gave Mazzone-Urie leave to amend because it was not clear that amendment would be futile. The amended complaint was due by January 3, 2025, and PHH’s response was due by January 31, 2025. The court stated that if Mazzone-Urie did not file an amended complaint by the deadline, her case would be dismissed with prejudice. The order disposed of Docket No. 65.