Reported / Citable
Background
Mauricio Cristancho and Idali Melgar borrowed $317,559 from SWBC Mortgage Corporation in 2019 to buy a home in Dickinson, Texas. After losing their jobs during the COVID-19 pandemic, they entered a forbearance agreement. They later sought loss-mitigation relief, including a loan modification and a COVID-19 Recovery Standalone Partial Claim, but SWBC denied the modification and later denied the Partial Claim because required documents were not returned.
The borrowers stopped making mortgage payments in June 2020 and remained in default. When SWBC and current servicer Cenlar, FSB moved toward foreclosure in late 2023, the borrowers sued in Texas state court and obtained a temporary restraining order. After removal, they asserted wrongful foreclosure, contract, fraud, TDCA, FDCPA, and DTPA claims.
The Court’s Holding
Magistrate Judge Andrew M. Edison recommended granting summary judgment for SWBC and Cenlar on every claim. The judge first overruled the borrowers’ objections to the defendants’ business-record evidence, finding that Cenlar’s declaration adequately established the records’ admissibility.
The recommendation concluded that no wrongful-foreclosure claim could lie because no foreclosure sale occurred. The borrowers’ admitted payment default barred their contract claim; the economic-loss rule barred their fraud claim based on alleged post-contract loss-mitigation misrepresentations; and the alleged modification communications were not actionable debt collection under the TDCA. The FDCPA claim failed because the defendants were a mortgage lender and servicer, not debt collectors, and the DTPA claim failed because the borrowers were not consumers as to complaints arising from loan servicing and foreclosure activity.
Key Takeaways
- Texas does not recognize a claim for attempted wrongful foreclosure when no foreclosure sale has occurred.
- A borrower’s prior, admitted default may defeat a contract claim based on later alleged servicing failures.
- Loss-mitigation communications generally are not debt-collection conduct under the TDCA absent evidence they were used as a ruse to collect debt.
Why It Matters
The recommendation reinforces the narrow path for borrower claims based on unsuccessful pandemic-era loss-mitigation efforts. Alleged errors in processing modification or partial-claim requests do not, by themselves, convert a servicing dispute into actionable fraud or debt-collection misconduct.
Because this is a memorandum and recommendation, the parties had 14 days to object before the district judge makes the final ruling.