Court Rejects Dismissal Bid in Mortgage Case

SAN FRANCISCO (CN) - A federal judge rejected loan servicer Aurora's motion to dismiss a class action claiming it gives home owners in mortgage trouble false hope, ordering both parties into settlement talks.

Mauder and Alice Chao, Deogenoso and Glorina Palugod, and Maritza Pinel sued Aurora Loan Service in 2011, saying they were offered "workout agreements" that gave them the opportunity to cure their defaults while adhering to a monthly payment plan.

They claimed they were actually misled into believing that they could avoid foreclosure and get their mortgage loans modified by adhering to the plan, but the payments under the workout agreements were too small to satisfy the money they owed and left them vulnerable to foreclosure.

U.S. District Judge Saundra Brown noted that in their amended complaint, the five homeowners' claims remain essentially the same.

"The new allegations that Aurora did not, and indeed, could not, process a loan modification request during the term of the Workout Agreement merely provide further factual support for the general proposition that Aurora did not allow nor did it have any intention of allowing plaintiffs to cure their defaults," she wrote. "From plaintiffs' perspective, the bottom line is that Aurora did not provide a loan modification-or any other workout option for borrowers to avoid foreclosure. Since the gravamen of plaintiffs' claims remains unchanged, the court finds that the underlying premise of Aurora's current motion to dismiss and strike is without merit."

While the homeowners can continue to pursue their case, Armstrong declined to entertain their motion for class certification, writing, "Before the court entertains such motion, which will require the further expenditure of judicial resources, the parties shall first make a good faith effort to resolve their dispute without the need for additional judicial intervention."

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