Monday, February 20, 2012

Court Rulings Lean Heavily Against Screwed Over Homeowners Seeking To Sue For Banksters' HAMP Violations

Lexology reports:

  • The Home Affordable Modification Program (HAMP) is designed to help homeowners avoid foreclosure by modifying qualifying loans to a level that is both affordable and sustainable. The program is intended to provide clear and consistent loan modification guidelines for the mortgage industry and to incentivize loan modifications for borrowers, servicers and investors.

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  • While HAMP does not mandate that any particular loan be modified (instead providing a framework for determining eligibility), the structure of the program has at least one undesirable side-effect: persuading borrowers who were either ineligible or unsuccessful in the program that their inalienable rights have been violated and that they should sue their servicer and investor for the failure to modify their loan.


  • Most of these lawsuits are subject to a motion to dismiss for failure to state a claim, because the vast majority of courts around the country have concluded that neither HAMP nor the Emergency Economic Stabilization Act of 2008 (EESA), under which the HAMP program was crafted, provide borrowers with a private right of action. According to a recent review, in 75 cases courts have found that there is no private right of action under HAMP.(1)


  • There have been two cases in which the opposite result was reached, both in the Southern District Court of California. A third trial court decision finding a private right of action is on appeal in Tennessee. These figures are not intended to be comprehensive, but to provide a broad view of the current status of this issue, and there may be other recently decided cases that were not included in the review.

For more, and a list of recent HAMP decisions, see No private right of action under HAMP: the growing consensus (may require subscription; if no subscription, GO HERE; or TRY HERE - then click the appropriate link).

(1) A possible 'work-around' to the obstacle that consumers have no private right of action under HAMP, at least in those states that have strong statutes prohibiting unfair and/or deceptive trade practices, is to bring an action under state law asserting that loan servicer conduct that violates HAMP constitutes a "per se" violation of the applicable state statute prohibiting unfair and deceptive trade practices. See, generally, National Consumer Law Center: CONSUMER PROTECTION IN THE STATES: A 50-State Report on Unfair and Deceptive Acts and Practices Statutes.

For those in Florida looking for a helpful reference on this point, see The Florida Bar:

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