Matt Furman Provides Commentary to MA Lawyers Weekly on BLS’s Recent Mortgage Pre-approval Decision on Misrepresentation, Chapter 93A
Matt Furman recently provided commentary in Massachusetts Lawyers Weekly regarding a significant decision from the Business Litigation Session ruling addressing lender liability tied to mortgage pre-approval letters.
In Bokhari v. North Easton Savings Bank, Kenneth W. Salinger denied the bank’s motion for summary judgment in a lawsuit brought by a property owner alleging fraud, negligent misrepresentation, and violations of Massachusetts General Laws Chapter 93A after a home sale collapsed following the issuance of a mortgage pre-approval letter to the bank’s customer, a potential buyer. The plaintiffs alleged damages caused by the lender’s issuance of a pre-approval without verifying the buyer’s assets, income, or credit profile, despite representing that such diligence had occurred.
Commenting on the decision, Furman described it as a “total headache” for lenders and their loan officers who, in attempting to provide good customer service, work to get pre-approval letters out quickly to their customers.
“The issue here is that the lender did not feel it could argue that the representations in the letter about its diligence were true,” Furman was quoted as saying. “Truth is a defense to a fraud claim. If the representations were true, you can’t sue somebody for fraud. Here, they didn’t feel they could make that argument. That’s troubling given what they put in the pre-approval letter about the diligence they had done.”
Another defense to fraud and misrepresentation claims Furman highlighted in the article is that one cannot be sued for a statement that is an estimate, an opinion or a judgment. “[The lender here] needed to more clearly state that pre-approval is an estimate, opinion or a judgment.”
As explained, Furman also found it notable that the judge did not grant the defendant summary judgment on the ground that there was no business relationship between the parties. “Lenders would be pretty surprised to know they are considered to have a commercial relationship with [home] sellers for 93A purposes,” he said. “Sellers and buyers’ lenders are generally total strangers. They rarely interact with one another. The letters are addressed to the borrower. [This decision] goes to show the broad reach of 93A in that there’s no privity being required.”
Link to article: masslawyersweekly.com/massachusetts-mortgage-preapproval-fraud-chapter-93a