A debt collection company will not get a new trial or any reduction in a $2 million verdict it was ordered to pay to a woman who fended off a foreclosure action brought by the collector and who then sued the collector for improperly refusing to abide by a loan modification agreement the woman had negotiated with the FDIC before the collector purchased her debt.
On Dec. 3, U.S. District Judge Thomas M. Durkin denied requests for post-trial motions made by Fort Worth, Texas-based Residential Credit Solutions, which had asked the judge to launch a new trial or reduce the judgment award because the jury erred in finding for the plaintiff, Alena W. Hammer.
Durkin, however, said none of the rationales advanced by RCS was sufficient to support tossing out the verdict or reducing the amount required of RCS.
The case arose in 2013 after Hammer, of DuPage County, stopped two separate foreclosure actions brought against her by RCS.
Hammer had obtained a mortgage through AmTrust Bank. But the bank initiated foreclosure actions against her in August 2009, after she had defaulted on payments. That foreclosure action was stayed in December 2009, however, when AmTrust failed, lapsing into Federal Deposit Insurance Corporation receivership. The FDIC then offered Hammer a loan modification agreement, reducing her monthly payments and avoiding foreclosure.
In late June 2010, the FDIC sent Hammer a modification package with a cover letter indicating she had until June 25 to notify them of her intent to accept the modification. Hammer would later testify she did not receive that letter until after June 25. However, Hammer began making the new lower payments.
Two months later, court documents said Hammer was notified her loan had been transferred to RCS, and she should direct payments to that company.
RCS, however, told her it believed the loan modification was invalid, and instead demanded Hammer either enter into a loan modification agreement with them, or resume paying monthly installments more than double what she had agreed to pay under the FDIC modification agreement.
Hammer refused, and instead began sending RCS monthly payments for the amount she had agreed to pay under the FDIC modification. RCS would then return the checks, uncashed.
A DuPage County court then dismissed RCS’ first foreclosure action. After RCS filed a second foreclosure suit, Hammer sued the collector.
In April 2015, a Chicago federal jury found RCS had breached the loan modification agreement and violated the federal Real Estate Settlement Procedures Act and the Illinois Consumer Fraud and Deceptive Business Practices Act, awarding her $2 million.
Hammer was represented in the action by attorneys with the Sulaiman Law Group, of Oak Brook.
In post-trial motions, RCS argued the jury erred in finding for Hammer, in large part, because the loan modification agreement upon which Hammer based her action did not really exist, as Hammer never signed and returned the required forms by the deadline of June 25, 2010.
Durkin, however, said the evidence in the case - including repeated communications between Hammer and the FDIC assuming the existence of the modification agreement and the FDIC’s acceptance of Hammer’s new, lower monthly payments - pointed to the existence of such a loan modification agreement, even if Hammer did not sign the document by the deadline. He noted RCS’ arguments “overlook the nature of contracts and the governing principles of contract law.”
“The evidence was sufficient for a reasonable jury to have concluded that the FDIC and Hammer had concluded their negotiations and reached a modification agreement by the beginning of June 2010, notwithstanding that they had not yet memorialized that agreement in writing,” Durkin wrote.
The judge also chided the collector for deliberately misstating the reasons for Hammer’s lawsuit against them. While RCS had argued it was being punished for its actions to collect on a loan it presumed to be in default, the judge said Hammer’s lawsuit had much more to do with how RCS had behaved after its initial foreclosure suit was dismissed in DuPage County.
The judge pointed to internal communications at RCS showing the company knew the judge had ordered them to abide by the FDIC loan modification agreement, yet deliberately chose not to.
“In sum, RCS made a tactical decision to stand on technicalities regarding matters related to contract formation rather than acknowledge the overwhelming evidence that Hammer and the FDIC intended to enter into a loan modification agreement well before the loan was transferred to RCS,” Durkin wrote. “By making that choice, RCS took a serious risk.”
RCS was represented in the action by attorneys with the firms of Locke Lord LLP and Hinshaw & Culbertson, both of Chicago.