$16.2 million Yuba County mortgage modification verdict mostly tossed out by judge

The case was something of a shocker: A Yuba County jury awarded $16.2million in damages to a Plumas Lake homeowner who nearly lost his home to foreclosure after his loan servicer mishandled his mortgage modification.

But the presiding judge has decided the jury got it mostly wrong.

Yuba Superior Court Judge Stephen Berrier has tossed out the vast majority of damages against New Jersey-based loan servicer PHH Mortgage Services. Homeowner Phillip Linza is entitled to only $159,000 in damages, the judge said.

The original verdict, in July, had represented a huge victory for Linza and his lawyers at the United Law Center in Roseville. The attorneys said it was one of the biggest jury awards they’d seen representing homeowners in mortgage-related cases.

The case stemmed from Linza’s personal financial troubles after he bought a home in Plumas Lake in 2006 for $280,000. The salesman filed for bankruptcy protection in 2009, and a year later he got a loan modification from PHH that was supposed to reduce his monthly payments to $1,543 from $2,100. But before long, he was receiving letters claiming he wasn’t paying enough, and within a few months he got a letter demanding $7,056, according to court records.

After months of phone calls and letters back and forth, Linza was unable to resolve the problem and stopped making payments altogether, his laywers said. PHH initiated foreclosure proceedings but stopped after Linza filed suit. He still lives in his home.

The jury awarded $514,000 in compensatory damages and $15.7million in punitive damages. The judge decided the award was vastly overblown. In a written opinion, Berrier said, “There was no evidence that the errors made were intentional or made in reckless disregard of causing emotional distress.”

PHH released a statement saying it was pleased with the judge’s decision. “We take our responsibilities to borrowers seriously and remain committed to meeting all of our obligations as a servicer,” the company said.

Linza’s lawyer, Stephen Foondos, said he was still pleased with the decision, even if most of the monetary damages were thrown out. “The decision was ... a great victory for California homeowners who have had difficulty with their bank or loan servicer,” he said. “You now have rights to sue your bank for being mistreated during the modification procress.”

Call The Bee’s Dale Kasler, (916)321-1066. Follow him on Twitter @dakasler.