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Missouri Supreme Court Rules that Lenders and Servicers are Subject to the MMPA

The Missouri Supreme Court recently issued two decisions (Conway v. Citi Mortgage, Inc. and Federal National Mortgage Association and Watson v. Wells Fargo Home Mortgage, Inc.) holding originators and servicers of mortgage loans may be subject to causes of action for unfair or deceptive practices under the Missouri Merchandise Practices Act (MMPA).

The plaintiffs in both cases alleged “fraud and deception” under the MMPA in the servicing of their loans, including the foreclosure process.  The Court found that loan origination is a covered “sale” under the provisions of the MMPA. The Court extended the coverage of the MMPA to loan servicers because servicing is an activity “in connection with” the “sale.”  Accordingly, the reasoning in these cases could extend the MMPA to all consumer loans.

In light of the extension of the MMPA to lenders and servicers, there may be additional risk that defaulting borrowers may assert claims under the MMPA in attempt to receive punitive damages and attorneys’ fees.   As a result, banks in Missouri must be increasingly mindful of their relationships with defaulted and otherwise dissatisfied borrowers.