MD District Court Rules for Lender in Escrow Interest Payment Action | Weiner Brodsky Kider PC
The U.S. District Court for the District of Maryland recently ruled in favor of a national mortgage lender in an alleged class action lawsuit alleging that the lender failed to pay interest on the escrow accounts of mortgage borrowers in violation of the law of l ‘State of Maryland. The court allowed the mortgage lender‘s motion for summary judgment on the four claims alleged in the complaint.
The plaintiff’s first claim was for breach of contract; she argued that the lender violated the terms of the trust deed, which specified that it would comply with applicable federal and state laws, when it did not pay interest on the plaintiff’s escrow account despite the law of the State of Maryland requiring it. The lender replied that because the plaintiff failed to comply with a notice and remedy provision also contained in the mortgage contract, the plaintiff failed to meet a precondition required and therefore was not entitled to ” take legal action. The court agreed with the lender, but noted that the plaintiff’s breach of the contractual prerequisite only precluded the plaintiff’s breach of contract claim, not its legal claims.
The first legal claim alleged by the plaintiff was a violation of a Maryland law requiring mortgage lenders to pay interest on escrow accounts to borrowers. The court concluded that the state law did not contain a private right of action, either expressly or implied, and therefore the plaintiff did not have the right to bring an action under the law.
The plaintiff also alleged that the lender violated the Maryland Consumer Protection Act, which prohibits unfair, abusive or deceptive business practices, by making various false statements or omissions in connection with the frozen interest payments. The court ruled in favor of the lender on this claim in part because the main alleged misrepresentation contained in the trust deed – which stated in the relevant part that the lender would not pay interest on the escrowed funds unless applicable law does not require it – was prohibited by the statute’s three-year limitation period. In addition, the court found that the escrow statements received within the three-year limitation period correctly reflected that the escrow account did not earn any interest and therefore did not contain any false statements or omissions.
Finally, the plaintiff claimed that the lender had enriched himself unfairly when he used the unpaid interest funds to generate “floating income”. The court noted that the plaintiff had presented no evidence to support its theory of unjust enrichment and also allowed the lender’s motion for summary judgment on this claim.