Missouri’s UDAP statute covers creditors conduct following the transaction, provided it was done in practices in connection with the sale of the loan

The Supreme Court of Missouri in Conway v. CitiMortgage, Inc., SC93951 (Mo. Aug. 19, 2014) and Watson v. Wells Fargo Home Mortgage, Inc., SC93769 (Mo. Aug. 19, 2014) addressed whether the actions of a loan servicer who was not a party to the initial transaction are in connection with the initial sale of the loan for purposes of Missouri’s UDAP statute, section 407.020 of the Missouri Merchandising Practices Act (MMPA). In _Conway_, the mortgagors’ property was damaged by fire. The mortgage servicer escrowed the insurance payments and paid the contractors as the amounts became due, but held back $15,000 in escrow. The mortgagors went into default by approximately $9,0 but the servicer would not apply the $15,000 in escrow to the loan balance. Instead it foreclosed. The mortgagors filed a MMPA claim alleging that the servicer engaged in unfair practices in connection with the sale of the mortgage loan. The trial court dismissed finding that that the MMPA does not apply to post-sale … activity wholly unrelated to claims or representations made before or at the time of the transaction and that the alleged wrongful foreclosure was not in connection with the 2007 loan. _Conway_ held that when the operative transaction is the procurement of a loan, the sale is not complete when the lender extends the credit, but continues throughout the time the borrower is making payments on the loan. The enforcement of the loan’s terms is in connection with the sale of the loan because the sale continues for the life of the loan. Thus, in the context of an alleged wrongful foreclosure, the plaintiff was able to state a claim under the MMPA against the foreclosing entity, regardless of whether that entity was a party when the loan was first procured, because a party’s rights to collect a loan is part of that sale and, therefore, ‘in connection with’ the loan. In _Watson_, the mortgagors alleged that the loan servicer violated the MMPA by, _inter alia_, engaging in bad faith negotiations of a loan modification, even though there was no obligation to renegotiate under the terms of the original loan. _Watson_ held that loan modification negotiations were not in connection with the sale of this loan because that was not a service the lender agreed to sell or the borrower agreed to buy when the parties agreed to the loan. In engaging in loan modification negotiations, the servicer was not enforcing the terms of the loan but rather contemplating creating a new agreement. Its actions were thus not in connection with the sale of the original loan.

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