Posts Tagged ‘mortgage servicers’

New Class Action Suits Could Create Precedent To Enforce HAMP Modification Agreements

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By most measures, the Making Home Affordable Modification Program has had lackluster results in permanently averting foreclosures and dampening the effects of the foreclosure crisis. The main reason HAMP has been so ineffective is the fact that at its core, it remains a voluntary program on the part of mortgage loan servicers and lenders. In other words, HAMP has no teeth.  Servicers may choose to participate or not and even if they choose to participate,  nothing in the program language states that they must modify any loans.

Therefore, we have a situation where homeowners enter into trial modification agreements and comply with each and every condition of the agreement, only to have the servicer delay responding or continue to ask for more documents. All the while, the homeowner continues to make his or her trial payments. Worse, it is all too common for the borrower’s home to be foreclosed upon while the trial modification is pending, even though HAMP prohibits any foreclosure sale while the borrower is in a trial period plan.

Four class action suits, filed  by the Boston based non-profit  National Consumer Law Center, in the state of Massachusetts aim to give HAMP teeth it lacks. The lawsuits  claim that the trial plan is a contract that the servicers have breached by failing to modify the loan once all conditions have been met. The complaints go even further by suggesting that the signed agreement the servicers have with the U.S. Treasury represents a contract to mitigate the foreclosure crisis by offering assistance to homeowners at risk, and that by failing to modify enough loans, the servicers have breached that contract as well.

Should a judge rule in favor of the plaintiffs in these cases, a precedent will be established that renders both the trial plan and the agreement to join the HAMP program enforceable contracts.  This would mean that servicers would be required to give permanent modifications to those homeowners who comply with the terms of the trial plan, and furthermore,  be required to actually render assistance and prevent foreclosures per the HAMP agreement.

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