Facts: A homeowner obtains an adjustable rate mortgage (ARM) secured by a trust deed on their home. On origination, the lender verbally tells the homeowner the property will appreciate in value in the future, allowing the homeowner to sell the home or refinance the mortgage before having to make higher monthly payments when the ARM adjusts. Years later, the homeowner defaults and the lender begins foreclosure proceedings. Prior to foreclosure, the buyer discovers their home has depreciated in value.
Claim: The homeowner seeks compensation and termination of the foreclosure proceedings, claiming the lender committed fraud since it informed the homeowner the property would appreciate over time and it did not.
Counter claim: The lender claims it did not commit fraud since its statements about the future value of the homeowner’s property were speculative opinions and not meant to be relied on by the homeowner.
Holding: A California court of appeals dismissed the homeowner’s claim and held the lender did not commit fraud since the lender’s forecast of the home’s value was mere speculation, not a misrepresentation of known facts or reliable information intended to be used by the homeowner.[Graham v. Bank of America (May 23, 2014)_CA4th_]
Editor’s note — Use first tuesday’s Adjustable Rate Mortgage (ARM) Disclosure Worksheet as a checklist when assisting your buyer locate and compare adjustable rate mortgage (ARM) financing available for funding the purchase or refinance of a property offered by several mortgage lenders. [See first tuesday Form 320-1]