New York’s Second Department Appellate Division recently affirmed that a borrower who was part of a class action settlement with a lender relating to the lender’s marketing of its loans was barred from raising those same claims against the lender in opposition to the lender’s foreclosure action.  See Wachovia Mortg. FSB v. Macwhinnie, 175 A.D.3d 1587 (2d Dept. 2019).  In the case, the plaintiff lender brought a foreclosure action against the defendant borrower.  The borrower filed an answer and counterclaims, and the lender later filed an untimely reply to the counterclaims.  The defendant rejected the untimely reply and filed a motion for leave to enter a default judgment on his counterclaims, which included alleged violations of TILA and state law deceptive practices statutes arising from plaintiff’s “Pick-A-Payment” loan program.  Plaintiff cross-moved to compel defendant to accept its reply, to dismiss defendant’s counterclaims, and for summary judgment on its complaint.  The Court granted plaintiff’s motion, dismissed defendant’s answer and counterclaims, and directed the sale of the premises.

On appeal the Court affirmed.  The Court found that, as one of the exhibits to his motion for default judgment, defendant had submitted proof that he was a member of a 2011 federal class action settlement involving plaintiff’s marketing of its “Pick-A-Payment” loan program.  As part of the settlement, all class members released plaintiff from claims that plaintiff violated “‘TILA, state unfair competition laws, state unfair and deceptive trade practices statutes, and state consumer protection laws,’ as well as all claims that the plaintiff ‘breached the terms of the [loan] contracts; engaged in fraudulent misrepresentations or omissions; and breach the implied duty of good faith and fair dealing in connection with the . . . Pick-a-Payment mortgage loans.’”  Additionally, defendant’s exhibit included a check in the amount of $178.04 from the settlement administrator, indicating that defendant did not opt out of this settlement.  Accordingly, defendant had waived the claims in its counterclaims, and the Court affirmed the decision granting plaintiff summary judgment.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com or Anthony Lombardo at alombardo@riker.com.