CASE STUDY 8

Miller v. Bank of Am. Home Loan Servicing, L.P., 439 N.J. Super. 540, 110 A.3d 137 (Super. Ct. App. Div. 2015) March 5, 2015, Decided  

 

 Plaintiffs argue the judge erroneously concluded their action was filed under HAMP, when in fact it presented state law challenges based on defendant's conduct  [**142]  and breach of the TPP. Plaintiffs do not dispute the legal principle that HN4 borrowers have no private cause of action under HAMP. See Wigod, supra, 673 F.3d at 559 n.4; Nelson v. Bank of Am., N.A., 446 Fed. Appx. 158, 159 (11th Cir.2011) (citing and agreeing with various district courts "that nothing express or implied in HAMP gives borrowers a private right of action"); Speleos v. BAC Home Loans Servicing, L.P., 755 F. Supp. 2d 304, 308 (D.Mass.2010) ("Neither the HAMP Guidelines nor the Servicer Agreement states any intent to give borrowers a right to enforce a servicer's obligations under the  [*548]  HAMP Guidelines."); In re O'Biso, 462 B.R. 147, 150 (Bankr.D.N.J.2011) ("[T]here can be no private cause of action (i.e., a breach of contract claim) under HAMP."); Arias, supra, 439 N.J. Super. at 276, 108 A.3d 21, 2015 N.J. Super. LEXIS 13, at *3(recognizing no private cause of action under HAMP). Rather, plaintiffs maintain they have a right to assert state contractual and other causes of action regarding the failure to comply with terms of the TPP. 

Prior unreported opinions by the United States District Court for the District of New Jersey have discussed HAMP's bar of a private cause of action as precluding suits alleging a state contract law theory of liability. 

More recent reported opinions from HN5 federal courts of appeals have held there is no preemption from filing common law claims related to a contractual agreement arising under a HAMP transaction. In Wigod, the Seventh Circuit concluded "HAMP and its enabling statute do not contain a federal right of action, but neither do they preempt otherwise viable state-law claims." Wigod, supra, 673 F.3d at 555, 576. Also, in Young, the First Circuit noted "'[t]he standard-form TPP represents to borrowers that they will obtain a permanent modification at the end of the trial period if they comply with the terms of the agreement.'" Young, supra, 717 F.3d at 229 (quoting Markle v. HSBC Mortg. Corp. (USA), 844 F. Supp. 2d 172, 177 (D.Mass.2011)). The court of appeals accepted the premise that a reasonable person would read the TPP as an offer to provide a permanent modification if all conditions were met. Young, supra, 717 F.3d at 234 (citing [***11]  Wigod, supra, 673 F.3d 562). 

 [*549]  Recently, this court undertook review of these issues, addressing the summary judgment dismissal of a complaint filed by the aggrieved plaintiffs determined not qualified for a modification agreement under HAMP following participation in a TPP. Arias, supra, 439 N.J. Super. at 275-76, 108 A.3d 21, 2015 N.J. Super. LEXIS 13, at *2. The panel adopted the view a TPP was "a unilateral offer," pursuant to which the bank promised to give plaintiffs a loan modification, if and only if plaintiffs complied fully and timely with their obligations under the TPP, including making all payments timely and providing documentation establishing that the financial representations they made to the bank in applying for the TPP were accurate when made and continued to be accurate. 

[Id. at 279, 108 A.3d 21, 2015 N.J. Super. LEXIS 13, at *3-4) (quoting Wigod, supra, 673 F.3d at 562). See also Young, supra, 717 F.3d at 234.] 

 [**143]  Nevertheless, the panel found the plaintiffs had not fulfilled their obligations under the TPP, requiring defendant's entitlement to judgment be affirmed. Arias, supra, 439 N.J. Super. at 280-81, 108 A.3d 21, 2015 N.J. Super. LEXIS 13, at *11). 

We agree with our Appellate Division colleagues and adopt the methodology outlined in Arias. We accept the holding and conclude HAMP's preclusion of a private right of action does not preempt pursuit of valid state law claims arising between the parties to a TPP. Although a borrower may not sue when a lender denies a loan modification [***12]  because the borrower failed to meet HAMP's guidelines, which include the lender's evaluation of the borrower's financial stability, Id. at 279-80, 108 A.3d 21, 2015 N.J. Super. LEXIS 13, *9) (citing Wigod, supra, 673 F.3d at 562; Young, supra, 717 F.3d at 234), we hold borrowers should not be denied the opportunity to assert claims alleging a lender failed to comply with its stated obligations under the TPP. Consequently, when the issuance of a loan modification agreement is explicitly made contingent upon the evaluation and satisfaction of all prescribed conditions precedent within a TPP, including the evaluation and timely satisfaction of all financial disclosures and obligations, the declination of a lender to present a loan modification agreement may be actionable. See id. at 276, 108 A.3d 21, 2015 N.J. Super. LEXIS 13, at *4. In this regard, the specific terms of the TPP govern the parties' agreement. 

 

Similarly, we later held in Miller v. Bank of Am. Home Loan Servicing, L.P., 439 N.J. Super. 540, 543, 110 A.3d 137 (App. Div. 2015), certif. denied, 221 N.J. 567, 115 A.3d 834 (2015), that "HAMP's preclusion of private causes of action would not prevent a borrower from pursuing state law claims arising from the breach of an underlying temporary contractual arrangement pending the lender's review under the HAMP guidelines." Further, "[i]f the borrower complies with the TPP's terms, including making required monthly payments, providing the necessary supporting documentation, and maintaining eligibility, the guidelines state that the servicer should offer the borrower a permanent loan modification." Id. at 545 (citing Young, supra, 717 F.3d at 229). Importantly, we concluded that: 
 

HAMP's preclusion of a private right of action does not preempt pursuit of valid state law claims arising between the parties to a TPP. Although a borrower may not sue when a lender denies a loan modification because the borrower failed to meet [*8]  HAMP's guidelines, which include the lender's evaluation of the borrower's financial stability, we hold borrowers should not be denied the opportunity to assert claims alleging a lender failed to comply with its stated obligations under the TPP. Consequently, when the issuance of a loan modification agreement is explicitly made contingent upon the evaluation and satisfaction of all prescribed conditions precedent within a TPP, including the evaluation and timely satisfaction of all financial disclosures and obligations, the declination of a lender to present a loan modification agreement may be actionable. In this regard, the specific terms of the TPP govern the parties' agreement. 

[Id. at 549-50 (internal citations omitted) (emphasis added).] 
 

However, importantly, we noted that the holding "does not suggest [that] the temporary payment under any TPP will necessarily become the adjusted rate in a modification agreement," and "when the lender determines the actual loan modification amount, that amount may, depending on the specific facts and circumstances, differ from the sums calculated as [] temporary payments under the TPP." Id. at 549 n.7. 
 

Thus, both Arias and Miller make it evident that a common-law breach [*9]  of contract action based upon a trial period plan is permissible. As such, general contract principles govern whether summary judgment is appropriate. There is no dispute that plaintiffs made the payments required and otherwise fulfilled the terms of the TPP. The agreement to provide information and submit to credit counseling if requested are valid consideration. See Arias, supra, 439 N.J. Super. at 277. The terms in the TPP nevertheless support the denial of plaintiff's summary judgment motion; specifically, the notice that the monthly payment amount was an estimate and not a final figure. It is notable that the TPP states that the payment was "an estimate of the payment that will be required under the modified loan terms." The TPP specifically states that the loan modification payment would be calculated after defendant determined "the final amounts of unpaid interest and any other delinquent amounts (except late charges) to be added to [the] loan balance." It is certainly arguable that the loan modification amount ultimately offered to plaintiffs was not based upon this calculation. In fact, based on defendant's submissions opposing plaintiffs' motion for summary judgment, the initial loan modification contemplated [*10]  in the TPP was rejected because the loan generation date was too late, so whatever calculation underlay the subsequent modification offer was unlikely to be the same as the calculation underlying the initial payment amount in the TPP. On the record before us, however, we cannot determine that plaintiff was entitled to judgment as a matter of law. 



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