Hundreds of thousands of California homeowners have faced foreclosure in the recent years. To remedy this, nearly all fifty states have sued the largest financial institutions leading to National Mortgage Settlements. The federal government has even had to step in and created the Making Home Affordable Program, otherwise known as HAMP.
HAMP has led to numerous saved homes. However, banks have still botched loan modification efforts though they receive billions in federal funds.
Fry Law Corporation sees one particular fact pattern all too often. That is, a botched trial period plan modification (“TPP”).
A TPP is a loan modification approval wherein the bank offers a permanent loan modification (or a review) if the borrower makes three trial period payments. If the three payments are made, the bank offers the borrower a permanent loan modification. Well…that’s what they are supposed to do.
The problem with the banks is, they can’t seem to keep track of the TPP database. Fry Law Corporation sees botched TPP modifications primarily in the following ways: 1) a borrower has made all three trial payments but never received the permanent modification; 2) a borrower is in the middle of making the three trial payments and the loan is transferred from one servicer to another; and 3) a borrower makes all three trial period payments but is subsequently denied a permanent modification.
TPP lawsuits are based primarily on contract. When a party gets another party to act (or not act) in reliance on a promise, if the person who acted (i.e. made the trial payments), the promise has to be honored by the other side.
This is applicable because the banks are getting borrowers to pay trial payments in reliance on a promise to save the home. The borrower should be afforded an opportunity to keep the home if they hold up their end of the bargain!
The first published case on point is West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780. In West, the Court found that a “trial period plan” is a promise to review the borrowers and approve them for a HAMP sponsored loan modification if they made no misrepresentations about their financial position. (Ibid. at 798) The West panel came to this conclusion because the defendant in that case received federal funds to aid borrowers in default. At 786, a lengthy discussion of the HAMP program ensues and defines a trial period plan as the first stage of the modification process.
West has been followed by several other cases including a great recent opinion in Daniels v. Select Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1150. These cases have applicability to any bank subject to HAMP. Including but not limited to; Wells Fargo Bank, N.A. and Bank of America, N.A.
Courts are requiring that the banks honor the agreement and offer a modification if the home has not been sold. If the home has been sold, the banks are required to pay damages if a borrower prevails.
If you have had a botched TPP modification, you need an attorney who has an extensive knowledge of the law surrounding them. Fry Law Corporation is happy to help.