Earlier this year, an Illinois District Judge Thomas Durkin affirmed a
$2 million verdict against Residential Credit Solutions, Inc. (“RCS”)
based on two wrongful foreclosures and aggressive collection activities
initiated against an elderly homeowner in DuPage County, Illinois.
The verdict arose from allegations that in 2009, 63-year-old Alena Hammer
first defaulted on her mortgage payments and AmTrust Bank, the servicer
of Hammer’s home mortgage loan, initiated foreclosure proceedings
against her. Those proceedings were stayed in December 2009 after the
Federal Deposit Insurance Corporation (FDIC) took over as Hammer’s receiver.
The FDIC and Hammer worked together to create a loan modification to avoid
foreclosure. The official, written loan modification agreement was mailed
to Hammer in June 2010. At that time, Hammer noticed that the FDIC had
charged her $2,303.60 in fees and costs, increasing her loan’s principal
balance. Though Hammer began making payments at the higher-than-agreed-upon
monthly rate, she contested the charges with the FDIC and refused to sign
the modification agreement.
Before resolution of these fees or signing of the contract, Hammer’s
loan was transferred from the FDIC to RSC. Per the FDIC instructions,
Hammer crossed out the disputed costs, signed the modified agreement,
and mailed it to RCS. Refusing to accept the modification agreement, RCS
demanded that Hammer pay the full amount of her monthly payment per her
original loan with AmTrust. For two years, Hammer paid only the monthly
payments as required under the modification agreement with the FDIC, and
RCS continued to demand higher payments under the original agreement.
RCS argued that Hammer’s monthly payments were insufficient and she
continued to be in default under the original AmTrust loan agreement because
she was not making payments in the full amount. RCS initiated foreclosure
proceedings against Hammer.
Hammer then filed suit, claiming breach of contract along with Illinois
Consumer Fraud Act and Real Estate Settlement Procedures Act (“RESPA”)
violations. A federal jury found in Hammer’s favor on all claims
and awarded her $500,000 in compensatory damages and $1,500,000 in punitive damages.
In post-trial motions, RCS raised multiple contract formation issues. However,
Judge Durkin denied these motions and affirmed the $2 million award, stating
that RCS waived these arguments by failing to raise them in prior motions.
This ruling, with the massive punitive damages awarded, clearly indicates
an attempt to deter future lender misconduct under the Illinois Consumer
Fraud Act and RESPA. Further, this verdict evidences the fact that both
judges and juries are willing to hit defendants with outlandish punitive
damages awards in order to send a message to all lenders that federal
and state lending laws will be strictly enforced and that violators will
be punished to the full extent of the law.
Contact Geraci Law Firm at (949) 298-8050 today, or contact
Amy Martinez directly for more information.