Skip to main content

Class action suit filed against Aurora Loan Services

Aug 20, 2010

A group of homeowners has filed a class-action lawsuit against Aurora Loan Services LLC, claiming the mortgage company duped them into paying tens of thousands of dollars each to have troubled mortgages reviewed by the company with promises of loan modifications, only to have their property foreclosed with little or no notice. The suit states that Aurora reaped more than $100 million in what the court documents call "illicit profits" from the alleged scheme. Filed in the U.S. District Court for the Northern District of California in San Jose, the suit seeks to represent homeowners who paid the Littleton, Colo.-based company money in exchange for the company's help in 'curing' delinquent home mortgages. In exchange for between three and six large monthly payments, Aurora said it would halt the foreclosure process and work with homeowners to restructure, modify or resell the loan, allowing homeowners a chance to keep their homes, the suit states. "We intend to prove that Aurora's workout plan was nothing more than a cynical ploy to take advantage of homeowners desperate to hold on to their homes," said Steve Berman, managing partner of Seattle-based Hagens Berman Sobol Shapiro LLP and the attorney representing the proposed class. The suit contends that, after a period of months, Aurora foreclosed on the homes without giving the borrowers any notice that their requests for loan modification were denied and without allowing borrowers access to any method for ending their loan deficiency, despite the provisions of the workout agreements. The suit states that the workout agreements provided for four methods for ending loan deficiency: bringing the loan current, refinancing with another lender, modification of the terms of the loan at the discretion of Aurora and another workout option at the company's discretion. "The past three years have been tough enough on homeowners without them having to worry about being preyed upon by unscrupulous loan services," Berman said. The complaint outlines the stories of two married couples who engaged Aurora in an attempt to forestall foreclosure. The first couple, from San Jose, refinanced their home with a mortgage company in early 2006. Two years later, the couple suffered economic setbacks in the form of poorly performing investments and a temporary loss of work. In late 2009, the couple contacted Aurora and signed one of the so-called workout agreements. Over the next several months, the couple paid a total of $33,500 in return for Aurora's promise to work on modifying the terms of the loan, among other possible outcomes. In May 2010, the family was served with a Notice to Vacate, indicating their home had been sold in foreclosure. The family had received no prior notice that the foreclosure process had been completed. In addition, Aurora did not notify the family that it had been denied a loan modification, according to the complaint. In another instance, a second San Jose couple refinanced their home in mid-2007. Two years later, the couple suffered financial hardship as a result of an illness and the death of a parent, which led to increased expenses and loss of income. In early 2009, the couple contacted Aurora and signed one of the company's workout agreements, the complaint alleges. Over the next several months, the family paid a total of $23,700 in return for Aurora's promise to work on modifying the terms of their loan. Like the first couple, the family was served with a Notice to Vacate in late June 2010, signaling their home had been sold in foreclosure. The family was not told prior to receiving the notice that the foreclosure process on their home had begun, according to the complaint. "We've heard of cases like this a lot over the last few years," Berman said. "We'd like to bring struggling homeowners some sense of relief." The complaint, which can be found at www.hbsslaw.com/cases-and-investigations/aurora, accuses Aurora of negligent misrepresentation, unjust enrichment, breach of the implied covenant of good faith and fair dealing, violation of the California Unfair Business Practices Act and other violations of California law. Hagens Berman believes the workout agreements were fraudulent in nature and seeks to have the agreements declared void. The firm also seeks an injunction against Aurora forbidding the company from continued offering of its deceptive workout agreements, restitution to be determined at trial, damages to be determined at trial and trial and attorneys' fees.
About the author
Published
Aug 20, 2010
Fed Rate Could Be Down To 4.6% By Year's End

Inflation must hit its 2% goal for Fed to reduce rates.

New Compliance Requirements Add Challenges

Latest changes arrive at an already disruptive time in the mortgage industry

Changes Coming For Investment Properties

Using leases to qualify will require Proof

FCC Adopts New Rules To Close The 'Lead Generator Loophole'

Mortgage lead providers respond, saying this will "wipe out" several small and mid-tier businesses

Trade Associations & Lenders Stand Behind Trigger Leads Bill

Major trade associations like The MBA, NAMB, and BAC, urge action on S. 3502.

Supply And Demand Are Still Alive And Well

Treasury auctions may face weaker demand but they’re still getting done