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Dismissal of Homeowners’ Complaint Based on Mortgage Servicer’s Denial of “HAMP” Mortgage Modification Request Is Affirmed

Spaulding v. Wells Fargo Bank, N.A.
No. 12-1973 (U.S. Court of Appeals for the Fourth Circuit, April 19, 2013)

by Colleen K. O’Brien, Associate
Semmes, Bowen & Semmes (

This case involves state law claims advanced by Plaintiffs against their mortgage servicer company, Wells Fargo, based on Wells Fargo’s denial of a mortgage modification request by the homeowners. The District Court granted Wells Fargo’s Rule 12(b)(6) Motion to Dismiss for failure to state a claim upon which relief could be granted, and the Fourth Circuit affirmed.

Factually, Plaintiffs applied to Wells Fargo for a mortgage modification under the Home Affordable Modification Program (“HAMP”), enacted in response to the mortgage crisis in the fall of 2008, and codified at 12 U.S.C. § 5201 et seq. The homeowners claimed financial hardship and the inability to make their full monthly mortgage payments. In the initial application, Plaintiffs sent Wells Fargo two (2) weeks’ worth of pay stubs. Wells Fargo requested additional income information from the Plaintiffs, and stated that if the information was not provided by a date certain, that the modification request would be cancelled. Plaintiffs belatedly provided the requested income information, and their mortgage modification request was ultimately denied. Feeling aggrieved by Wells Fargo’s actions, the homeowners filed suit, alleging five (5) state law claims: 1) breach of implied-in-fact contract; 2) negligence; 3) violations of the Maryland Consumer Protection Act (MCPA); 4) negligent misrepresentation; and, 5) common law fraud. The jist of every cause of action was an accusation that Wells Fargo failed to follow the HAMP guidelines.

The District Court granted Wells Fargo’s Motion to Dismiss. On appeal, the Fourth Circuit affirmed. As to the implied-in-fact contract claim, the Court held that none of the parties’ conduct was sufficient to constitute a meeting of the minds, evidencing either an express or implied contract. The Court held that Wells Fargo had no duty to the Plaintiffs, so the negligence claim also failed. The MCPA claim failed because Wells Fargo made no false statement in connection with the mortgage modification rejection, and moreover, Plaintiffs’ did not comply with the heightened pleading requirements for MCPA claims. Plaintiffs’ negligent misrepresentation claim failed because Wells Fargo never made any false statement to Plaintiffs, and further, owed no duty of care to them. In addition, there was no plausible claim of justifiable action in reliance on Wells Fargo’s allegedly false statement, or damages proximately caused by the statement. Finally, Plaintiffs’ common law fraud claim failed because there was no plausible claim of false representation by Wells Fargo, for the purpose of defrauding Plaintiffs, or that Plaintiffs relied upon the representations and suffered damages as a result. Moreover, the common law fraud claim failed to adhere to the heightened pleading standards required as well. The Fourth Circuit agreed with the District Court that the Plaintiffs’ Complaint, in its entirety, must be dismissed.