In companion opinions issued on August 19, 2014, the Supreme Court of Missouri held that unfair practices associated with residential foreclosures occur “in connection with” the original sale of a mortgage loan and therefore fall within the scope of the Missouri Merchandising Practices Act (“MMPA”).  See Conway v. CitiMortgage, Inc., — S.W.3d —-, No. SC 93951, 2014 WL 4086671 (Mo. banc Aug. 19, 2014); Watson v. Wells Fargo Home Mortg., Inc., — S.W.3d —-, No. SC 93769, 2014 WL 4086486 (Mo. banc Aug. 19, 2014).  In Watson, however, the court also held that unfair practices associated with loan modification negotiations between a lender and borrower do not occur “in connection with” the original sale and cannot form the basis for an MMPA claim.

The MMPA is a consumer fraud statute that provides both the Missouri Attorney General and consumers the right to bring actions against individuals who engage in unfair or deceptive practices “in connection with” the sale or advertisement of merchandise.  See R.S. Mo. § 407.010, et seq.  The statute permits consumers to recover damages for “ascertainable losses,” as well as punitive damages and attorneys’ fees.

In Conway and Watson, the Supreme Court of Missouri considered whether mortgage lenders may violate the MMPA by virtue of either: (1) their foreclosure-related practices, or (2) their loan modification negotiations with borrowers.  In Conway, the court concluded that, with respect to mortgage loans, the original “sale” continues throughout the life of the loan by virtue of the long-term relationship between the parties and the duties imposed upon each party by the loan documents.  As a result, the court held that any unfair practices associated with residential foreclosures occur “in connection with” the original sale even when the foreclosure occurs years afterward.  Furthermore, the court held that third parties who did not originate the loan, but only acquired the loan years later, could still be held liable under the MMPA.

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