An Overview of HAMP and HAMP Litigation
What is HAMP?
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Home Affordable Modification Program (HAMP) is the loan modification component of the U.S.
Making Home Affordable Program
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Voluntary, incentive-based plan: for non-GSE loans, servicers decide whether to participate or not; mandatory for all Fannie Mae and Freddie Mac insured loans; VA and FHA have their own
HAMP programs
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Participating servicers are supposed to screen everyone, except when an investor limits
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Standard modification reduces payment (PITIA) to 31% of borrower’s gross income, through waterfall; NPV test run
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Eligible borrowers offered a trial plan (TPP) followed by a permanent modification; denials must be issued in writing; some denials can be appealed
Where can I find out more about HAMP?
 www.makinghomeaffordable.gov
: loan look up, participating servicers
 www.hmpadmin.com
: MHA handbook (non-GSE loans), supplemental directives, model documents
 www.financialstability.gov
: Servicer participation agreements (SPA)
 www.efannie.com
: Fannie Mae Announcements
 homeloans.va.gov/valeri.html: VA Circulars
 hud.gov/offices/adm/hudclips/letters/mortgagee/index.cfm: FHA Mortgagee Letters
 www.checkmynpv.com
: run an npv test on borrower
Illinois HAMP cases
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Wigod v. Wells Fargo Bank N.A., 2011 WL 250501, 2011 U.S. Dist. LEXIS 7314 (N.D. Ill. Jan. 25,
2011) (currently on appeal to 7 th Cir.; argument likely in spring 2012) o Borrower had TPP, denied permanent mod. (Borrower may have been unsympathetic.
Loan was for $728, 500; no mention of hardship.) Claims based on language in TPP 1 — breach of TPP; promissory estoppel; breach of SPA 2 ; negligent hiring and supervision; fraudulent misrepresentation or concealment; ICFA 3 . Too much reliance on HAMP, which has no private right of action, in all claims and therefore all claims were dismissed with prejudice. Relied heavily on a bad OR case.
1 TPP—trial period plan. A borrower is extended a 3-month trial period plan before getting a permanent HAMP modification.
2 SPA—servicer participation agreement. A contract signed by a servicer with the U.S. Treasury to participate in
HAMP and receive financial incentives.)
3 ICFA—Illinois Consumer Fraud and Deceptive Businesses Practices Act, 815 ILCS 505/1 et seq.
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Boyd v. U.S. Bank N.A., Wilshire Credit, 2011 WL 1374986, 2011 U.S. Dist. LEXIS 39609 (N.D. Ill.
E.D. April 12, 2011) o Foreclosure filed against Boyd in 2009. He contacted Wilshire Credit, servicer, to request
HAMP modification and was left with impression that they would soon inform him about eligibility. Instead, Wilshire sent someone to break into his home and padlock his front door. C brought ICFA claims for failure to consider for HAMP in violation of HAMP guidance and IMFA (both were upheld; it doesn’t matter that HAMP has no private right of action—ICFA allows people to sue for violations of statutes where no private right of action if there’s unfairness or deception. HAMP noncompliance is actionable under
ICFA); ECOA claim stands—failure to inform Boyd in writing why he was denied a HAMP modification.
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Fletcher v. OneWest Bank, FSB, 2011 WL 2648606, 2011 U.S. Dist. 72562 (N.D. Ill. June 30, 2011)
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Fletcher contacted her servicer for a modification. They told her she was ineligible unless she missed payments. In reliance, she missed two and applied for a HAMP mod. They gave her a TPP, but after several months, failed to convert it to a permanent mod (no denial of
HAMP permanent mod or conversion). Sued for breach of contract, promissory estoppel, and ICFA. The Ct explicitly rejects Wigod’s holding that b/c HAMP has no private right of action, there are no claims available for violations of HAMP. State law claims can proceed. A pretty nuanced discussion of consideration, promises, damages,etc.
National HAMP Cases (Good ones—there are plenty of good and bad ones not listed here)
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Bosque v. Wells Fargo Bank, N.A., 762 F.Supp.2d 342 (D. Mass 2011); Durmic v. J.P. Morgan
Chase, 2010 WL 4825632 (D. Mass. Nov. 24, 2010); Belyea v. Litton Loan Servicing, LLP, 2011 WL
2884964; 2011 U.S. Dist. LEXIS 77734 (D. Mass. July 15, 2011) (cases co-counseled by NCLC) o All cases brought by homeowners who received a TPP and then were either denied a permanent modification erroneously or their TPP failed to convert into a permanent mod. State law claims brought (some combo of): breach of contract, breach of the covenant of good faith and fair dealing; promissory estoppel (alt. theory of recovery);
Mass. Consumer Fraud Act. All claims were upheld (promissory estoppel never reached b/c cts found contracts). The courts in all found the TPP to be an offer, and borrower’s signature and payments to be a contract. Consideration was adequately pled
(establishing an escrow account, providing documentation of income, info about personal circumstances, and credit counseling, none of which had been required by the existing mortgage).
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In re Bank of America HAMP Contract Litigation, 2011 WL 2637222, 2011 U.S. Dist. LEXIS 72079
(D. Mass. July 6, 2011) (class action consolidating 26 cases in 19 states, including IL) (MTD) o Divided into two classes: SPA class and TPP class. SPA class claims dismissed b/c not third party beneficiaries of SPA. TPP class brought claims under breach of contract; breach of duty of good faith and fair dealing (willfully failed to modify loans, supervise employees); promissory estoppel; consumer fraud (misrepresenting eligibility for permanent mod); ECOA. ECOA claim dismissed; all others remain for TPP class.
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Practice Pointers gleaned from HAMP Litigation
 most litigation is at the MTD, MSJ stage; none of these cases are trials
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HAMP claims may be stronger as a defense to foreclosure, rather than affirmative litigation, particularly in light of these cases, changes to the IMFA
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If you bring affirmative litigation in state court, it will likely be removed to federal court— certainly if you sue Fannie or Freddie
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Redress for HAMP violations should be based state law claims, rather than any theory of third party beneficiary based upon the servicer participation agreement (SPA) or implied private right of action based on SPA. Possible claims/defenses: breach of contract, promissory estoppel, violations of ICFA.
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In particular, breach of contract claims should focus on the trial period plan (TPP) extended to a borrower, rather than any theory of third party beneficiary based upon the servicer participation agreement (SPA) or implied private right of action based on SPA. Referencing
Supplemental Directives is helpful.
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Breach of Contract: TPP=offer; client returning signed copy, making payments=acceptance
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In any contract claim, you MUST plead that your client gave consideration. The lender/servicer will allege NO consideration b/c borrowers already have a duty to make payments pursuant to the mortgage. Consideration that courts have found to be persuasive: establishing an escrow account, disclosure of new financial info by the borrower, having to undergo credit counseling.
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For the most part, courts are unwilling to find any private right of action or implied private right of action under HAMP.
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Turbeville v. J.P. Morgan Chase, 2011 U.S. Dist. LEXIS 42290 (C.D. Cal. Apr. 4, 2011) (class action, including IL) (MTD) o Class action on behalf of borrowers with TPP. Breach of contract and promissory estoppel claims upheld. Third party beneficiary to SPA claim dismissed w/ prejudice.
ICFA claim dismissed, citing Avery v. State Farm Mutual Ins. Co., 216 Ill.2d 100 (2005), which held that something that is simply a breach of contract without more can’t be addressed by ICFA. Ct agreed w/ Defendant that Plaintiffs’ allegation of misrepresenting the TPP is nothing more than “’their breach of contract claim in IFCA clothing’” and dismissed it.
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Ansanelli v. J.P. Morgan Chase, 2011 WL 1134451 (N.D. Cal. Mar. 28, 2011) o Other cases have relied heavily on language in the TPP in finding a contract. In this instance, Plaintiffs were offered two oral TPPs, which they accepted. Ct still declared the
TPPs contracts (resisting Defendant’s arguments of statute of frauds and lack of specificity), and found consideration in Plaintiff expending time and energy and making financial disclosures, as well as Defendant’s financial incentives under HAMP. Ct also denied dismissal of negligence claim, stating Defendant did owe a duty of care to
Plaintiff when it “actively participated in the financed enterprise beyond the domain of a usual money lender” by offering a loan modification and engaging them concerning a
TPP.

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Plead fraud, negligent misrepresentation, etc. with particularity! Show reliance and damages.
Harm/Damages that can be alleged that might not seem obvious: o foregoing other remedies that might be pursued to save the home, such as refinancing, borrowing money, restructuring the debt under the bankruptcy code, or pursuing other strategies such as selling the home. o In addition to the lost opportunity cost of pursuing other means to deal with a potential default, when a permanent modification is not offered at the close of the three month
TPP, the permanent modification terms may be adversely affected and additional fees and charges may be applied. o foreclosure filed against the home. o failure to provide a permanent HAMP modification in a timely fashion, means that the homeowner is now in further arrears than she would have otherwise have been. o an adverse report against the credit profile. o living in a state of anxiety because of the limbo in which the servicer placed the borrower
Other resources
“Enforcing Home Affordable Modification Program Through the Courts,” Sarah Parady and Rebekah
Cook-Mack, Clearinghouse Review, Nov/December 2010, Vol. 44, Numbers 7-8.
“Advocates Using Several Claims to Challenge Violations of the Home Affordable Modification Program,”
Rachel Baum, Housing Law Bulletin, Vol. 41, September 2011. http://www.nclc.org/issues/loan-modification-programs.html
: links to cases, pleadings, administrative guidance, practice aids, etc.
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