In a surprise victory for mortgage servicer PHH Corp., a California judge overturned a $16.2 million jury verdict awarded to a California homeowner in July for a botched loan modification.

Yuba County Superior Court Judge Stephen Berrier issued a seven-page ruling late Monday, throwing out all claims for negligence, intentional misrepresentation, interference and infliction of emotional distress. A jury had awarded homeowner Phillip Linza $513,000 in compensatory damages and $15.7 million in punitive damages following a 17-day trial in July.

But Berrier wrote that "there is no substantial evidence," in support of $355,000 in compensatory damages or any punitive damages. He let stand breach of contract and good faith claims totaling $158,902.40.

A PHH statement said the Mount Laurel, N.J.-based company is "pleased" with the judge's ruling.

"The trial court has confirmed our belief that the previous verdict was not supported by the facts presented in this case or by applicable law," PHH spokesperson Dico Akseraylian said in a written statement. "We take our responsibilities to borrowers seriously and remain committed to meeting all of our obligations as a servicer."

Stephen Foondos, the managing partner at Roseville, Calif.-based United Law Center, which represented Linza, said the jury verdict was the first of its kind by a borrower who had sued for abuses of a loan modification.

"This is a very positive outcome for California homeowners," Foondos said in an interview with National Mortgage News. "The jury awarded $16 million but the judge still awarded $160,000 to someone who was not foreclosed on and that's significant."

Foondos said he plans to appeal Berrier's ruling. United Law Center is one of the largest foreclosure defense law firms in California, with 25 cases on appeal currently and 120 cases being litigated.

The judge did acknowledge that PHH had acted as a "bad party" to the loan modification contract. PHH made "inconsistent demands for payment arguably repudiating the modification contract, threatened [Linza] with foreclosure, refused to return his many calls or to apologize for or correct its errors, refused to enter into a new agreement and even ridiculed his plight."

Regardless, Judge Berrier said there was no evidence to support claims of negligence or fraud.

"As a general rule, a financial institution owes no duty of care to a borrower when the institution's involvement in the loan transaction does not exceed the scope of its conventional role as a mere lender of money," the judge wrote.

PHH is a third-party servicer of the loan, which is owned by investors in a private-label mortgage-backed security trust.

Linza, a salesman from Plumas Lakes, Calif., about 30 miles north of Sacramento, had entered into a loan modification contract with PHH in 2010. He bought his home in 2006 for roughly $280,000 and had paid $80,000 in a down payment.

The loan modification reduced his monthly mortgage to $1,543 from $2,100, and he made three consecutive payments. But then PHH claimed his payments were short by $809 a month and kept changing the payment amount. Linza was unsuccessful in resolving the discrepancies, stopped making payments and when PHH initiated foreclosure in 2012, he sued to block it.

The ruling overturning the jury's verdict comes the same week that the Consumer Financial Protection Bureau released a report claiming its examination of servicer activities found that an undisclosed number of firms didn't convert trial mortgage modifications into permanent ones in a timely fashion, even after a series of new regulations took effect at the beginning of 2014.

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