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Mortgage Lender Failed|to Honor Agreements

OAKLAND (CN) - Mortgage lender Aurora Loan Services failed to honor its promise not to foreclose on homeowners who had opted into a program they believed would help them keep their homes.

Mauder and Alice Chao, Deogenoso and Glorina Palugod, and Maritza Pinel were all in danger of foreclosure when Aurora offered them "workout agreements" that gave them the opportunity to cure their defaults while adhering to a monthly payment plan. In a class action filed in November 2011, the five homeowners claimed Aurora misled them into believing that they could avoid foreclosure and eventually obtain loan modifications if they complied with the agreement, all the while Aurora continued to collect payments from them and still planned to foreclose.

U.S. District Judge Saundra Brown Armstrong denied Aurora's motion for judgment, rejecting its argument that the class' claims were preempted by the Home Owners' Loan Act.

"Notwithstanding plaintiffs' compliance with the terms of the Workout Agreements, Aurora lulled plaintiffs into a false sense of security that they were safe from foreclosure, which, in turn, effectively obviated their ability to avoid foreclosure by, inter alia, exercising their statutory right to reinstatement," Armstrong wrote. "In sum, the court finds that plaintiffs' claims for rescission and restitution are based on a general duty not to misrepresent material facts and do not purport to regulate Aurora's lending activity by imposing a new disclosure requirement. Accordingly, plaintiffs' first and second claims for rescission and restitution based on theories of fraudulent inducement and failure to consideration are not preempted by HOLA."

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