Boschma

I concur; plaintiffs stated facts sufficient to constitute causes of action. But I want to emphasize that, to prove they were damaged, plaintiffs must show more than the fact that, as a result of the negative amortization, their loan balances increased. This does *255 not constitute damages. For every dollar by which the loan balances increased, they were able to keep a dollar to be saved or spent as they pleased. To prove the alleged damages plaintiffs will have to present evidence that, because of the structure of the loans, they suffered actual damages beyond their loss of equity.

The defining feature of an option adjustable rate mortgage loan (Option ARM) with a discounted initial interest rate (i.e., a “teaser” rate) is that for a limited number of years, the borrower may (by paying the minimum amount required to avoid default on the loan) make a monthly payment that is insufficient to pay off the interest accming on the loan principal. Rather than amortizing the loan with each minimum monthly payment (as occurs with a standard mortgage loan), “negative amortization” occurs—a borrower who elects to make only the scheduled payment during the initial years of the Option ARM owes more to the lender than he or she did on the date the loan was made. After an initial period of several years in which negative amortization can occur, a borrower’s payment schedule then recasts to require a minimum monthly payment that amortizes the loan.

In this case, plaintiffs 1 sued defendant Home Loan Center, Inc., for (1) fraudulent omissions and (2) violations of Business and Professions Code section 17200 et seq. (section 17200). Plaintiffs, individual borrowers who entered into Option ARM’s with defendant, allege defendant’s loan documents failed to adequately…