Tuesday, March 13, 2012

7th Circuit: HAMP Violations May Be Actionable By Homeowners Under State Laws Prohibiting Consumer Fraud, Deceptive & Unfair Practices

From a recent ruling from the U.S. Court of Appeals for the 7th Circuit:

  • We are asked in this appeal to determine whether Lori Wigod has stated claims under Illinois law against her home mortgage servicer for refusing to modify her loan pursuant to the federal Home Affordable Mortgage Program (HAMP). The U.S. Department of the Treasury implemented HAMP to help homeowners avoid foreclosure amidst the sharp decline in the nation’s housing market in 2008. In 2009, Wells Fargo issued Wigod a four-month “trial” loan modification, under which it agreed to permanently modify the loan if she qualified under HAMP guidelines.

  • Wigod alleges that she did qualify and that Wells Fargo refused to grant her a permanent modification. She brought this putative class action alleging violations of Illinois law under common-law contract and tort theories and under the Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA).

  • The district court dismissed the complaint in its entirety under Rule 12(b)(6) of the Federal Rules of Civil Procedure. Wigod v. Wells Fargo Bank, N.A., No. 10 CV 2348, 2011 WL 250501 (N.D. Ill. Jan. 25, 2011).

  • The court reasoned that Wigod’s claims were premised on Wells Fargo’s obligations under HAMP, which does not confer a private federal right of action on borrowers to enforce its requirements.

  • This appeal followed, and it presents two sets of issues. The first set of issues concerns whether Wigod has stated viable claims under Illinois common law and the ICFA. We conclude that she has on four counts.

  • Wigod alleges that Wells Fargo agreed to permanently modify her home loan, deliberately misled her into believing it would do so, and then refused to make good on its promise. These allegations support garden-variety claims for breach of contract or promissory estoppel.

  • She has also plausibly alleged that Wells Fargo committed fraud under Illinois common law and engaged in unfair or deceptive business practices in violation of the ICFA.


  • The second set of issues concerns whether these state-law claims are preempted or otherwise barred by federal law. We hold that they are not. HAMP and its enabling statute do not contain a federal right of action, but neither do they preempt otherwise viable state law claims.

  • We accordingly reverse the judgment of the district court on the contract, promissory estoppel, fraudulent misrepresentation, and ICFA claims, and affirm its judgment on the negligence claims and fraudulent concealment claim.(1)

For the entire ruling, and the court's reasoning, see Wigod v. Wells Fargo Bank, N.A., No. 11-1423 (7th Cir. March 7, 2012). (If link expires, TRY HERE).

Thanks to Deontos for the heads-up on this court ruling.

(1) Unless ultimately reversed by the U.S. Supreme Court, this ruling supports the proposition that bankster violations of HAMP and its enabling statute, while not actionable by homeowners under Federal law, may be actionable under an applicable state consumer fraud, or unfair/deceptive trade practices statute.

See National Consumer Law Center: CONSUMER PROTECTION IN THE STATES: A 50-State Report on Unfair and Deceptive Acts and Practices Statutes for an overview of state consumer fraud, unfair/deceptive trade practices statutes throughout the states.

No comments: