May a foreclosed borrower pursue money damages against a lender when the borrower is unable to reinstate the loan due to fees erroneously charged by the lender?

Facts: A borrower refinanced their mortgage. After closing, the borrower discovered a lender’s representative had forged the borrower’s signature on multiple loan documents. The borrower informed the lender of the forgeries, and the lender began investigating the loan documents. The lender informed the borrower it was not accepting payments while the forgery was being reviewed. Later, the lender served the borrower with a notice of default. The borrower attempted to make payments after the notice of default, but the lender returned all attempted payments. The borrower was ultimately unable to bring the mortgage current and pay the late fees to reinstate the mortgage. The lender foreclosed.

Claim: The borrower sought money losses from the lender, claiming the lender committed negligent misrepresentation since the lender prevented the borrower from making mortgage payments and charged late fees, causing the borrower to be unable to reinstate the mortgage.

Counterclaim: The lender claimed the borrower was not entitled to money losses since the borrower was unable to repay the required amount to reinstate the mortgage.

Holding: A California court of appeals held the lender had committed negligent misrepresentation and the borrower was entitled to money losses from the lender since the lender prevented the borrower from making mortgage payments and charged late fees, causing the borrower to be unable to reinstate the mortgage. [Ragland v. US Bank National Association (2012) 209 CA4th 182]