Resurgence Of 'Negligent Loan Servicing' Theory In Calif.

Law360, New York (September 17, 2014, 10:32 AM EDT) -- As attorneys who represent banks or loan servicers well know, the general rule in California has long been that a lender owes no duty of care to a borrower if the lender does not exceed its “conventional role as a lender of money.”[1] That is, as long as the lender does not “actively participate” in the financed enterprise, and acts solely to protect its own security interest, it owes no duty beyond the loan’s terms and cannot be held liable under a negligence theory.

In the last few years, the same “conventional role” analysis has often been applied to mortgage loan...

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