A Hawaii court ruled that Deutsche Bank may have mishandled loan servicing before a foreclosure — and now the case is heading back to court
A foreclosure fight in Hawaii just put mortgage servicers on notice: skip steps or botch communication, and you might lose in court—even years later.
That’s the takeaway from a July 16 decision by the Intermediate Court of Appeals of Hawaii, which ruled that Deutsche Bank National Trust Company’s 2010 foreclosure on a Kaua‘i property could be legally challenged by the homeowner. The case is now headed back to the lower court, after a years-long battle over servicing conduct, foreclosure procedures, and borrower rights.
It all started when Deutsche Bank, as trustee for GSAMP Trust 2006-FM3, foreclosed nonjudicially on a property held in trust by Eileen Marie Winters and her husband, Dale Scott Winters. The bank bought the property at auction and, in 2011, sued the Winterses for ejectment. That lawsuit triggered a long court battle that escalated once Eileen, acting as trustee of her revocable living trust, filed counterclaims.
Winters claimed the foreclosure shouldn’t have happened at all. She alleged serious servicing failures by both the original lender, Fremont Investment & Loan, and later Litton Loan Servicing, which allegedly failed to process payments, miscommunicated loan ownership, and ignored her debt dispute and loan modification attempts. Her counterclaims included wrongful foreclosure, breach of contract, violations of the Truth in Lending Act (TILA), and the Real Estate Settlement Procedures Act (RESPA), as well as unfair and deceptive practices under Hawaii law.
According to the court’s opinion, Winters said she made her March and April 2008 payments by phone as instructed. In May, Fremont told her they were closing and wouldn’t accept further payments. Litton entered the picture in June but didn’t provide written instructions or confirm her requests for a payoff amount. She eventually entered a repayment plan and wired a $5,000 payment—but was told it was $100 short. Litton allegedly proceeded with foreclosure anyway.
She also claimed Litton forced insurance on the property despite her having coverage, and never responded to her written dispute in December 2008. In June 2009, she sent a rescission letter under TILA but said she never received a response. Deutsche Bank completed the nonjudicial foreclosure and recorded the deed in August 2010.
The trial court had dismissed most of Winters’ counterclaims and granted partial summary judgment in favor of Deutsche Bank. But the appellate court reversed that, ruling that her claims—supported by declarations and documentation—raised genuine issues that should be heard in court. It also found she had standing as trustee, since the property was held in her name through a revocable trust, and that the claims were timely under Hawaii law.
Notably, the court rejected the idea that Winters needed to tender full repayment of the mortgage in order to bring a quiet title claim. Because she was not seeking to erase the debt but to reinstate the loan, the judges ruled that the “tender rule” didn’t apply in this context.
For servicers and foreclosure attorneys, the ruling is a reminder that sloppy communication, unclear servicing handoffs, or missing notices can create long-term legal exposure—even in nonjudicial foreclosure states. The court made clear that if the facts support it, borrowers can pursue claims years later, especially when the foreclosure itself may have been avoidable.
With the decision now sending the case back to the lower court, the mortgage industry may want to look closely at its servicing and foreclosure protocols. In this case, a missed $100 and a few ignored letters might turn out to be very expensive.
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