by Brian Mahany
“Can I sue for denial of a HAMP loan modification” is a question we frequently hear. Some lenders (Bank of America, Citi, Wells Fargo) seem to run borrowers through the ringer only to ultimately deny them a mortgage modification. That’s a shame since Congress authorized the Home Affordable Modification Program as part of the economic stimulus legislation. Luckily, it is often possible to sue your lender if wrongfully denied a modification. [Ed. Note – we can only provide general guidance and are not able to dispense legal advice by a blog post. The law on suing for modification denial changes weekly and varies from state to state and sometimes even within a state!]
HAMP was rolled out by the Treasury Department in 2008 as part of the larger federal stimulus package. That law, the Emergency Economic Stabilization Act of 2008, gave billions to Wall Street and big banks but did set aside something for struggling homeowners unable to keep up on mortgage payments. Congress wanted to “maximize assistance for homeowners” and to “minimize foreclosures.” $50 billion was set aside to induce lenders to lower interest rates or monthly payments.
On paper, the program seemed ideal. In reality, however, the program was and continues to be a disaster. Some homeowners who are down on their luck simply can’t make any payments. For them, a modification just isn’t going to work. For many, however, a small reduction or reprieve may make the difference in allowing a family to remain in their home.
Lenders are supposed to offer modifications to borrowers who qualify. Often those modifications require the homeowner to supply documentation to establish eligibility for the program and then to make a few trial payments to insure that they can make the minimum payments necessary to avoid foreclosure. The intended practice is far different from reality, however.
We are contacted daily by homeowners who try to make their trial payments only to have them refused, who make all the payments and are subsequently denied, who keep sending in their documents over and over only to be told they were not received and in a few instances, given telephone numbers to call that are either disconnected or never answered! We could write a book on the problems encountered by homeowners trying to get a modification.
It’s incredibly demoralizing considering the bank first holds out a carrot and then pulls it away for no reason.
People who are wrongfully denied a HAMP modification may be able to sue their lender, however. That’s a dirty little secret the banks don’t want you to know.
The only federal appeals court to consider the issue is the 7th Circuit which covers Wisconsin, Illinois and Indiana (Wigod v. Wells Fargo). The 7th Circuit Court of Appeals said that although Congress didn’t include a provision allowing lawsuits for denial of HAMP modifications, their intent was certainly clear in wanting to minimize foreclosures and promote maximum assistance. A subsequent Treasury directive also acknowledged state law. The court also said that state claims against lenders for breach of contract and deceptive business practices were not pre-empted by the federal law.
Not all courts agree with the 7th Circuit including courts in California where the mortgage crisis is particularly acute. Prior to the appeals court decision in Wigod, California courts had already decided there was no claim for denial of a modification but there is some evidence that suggests California courts are rethinking that pro-lender position. Just a few months ago a federal bankruptcy court judge refused to throw out a claim against CitiMortgage based on a HAMP denial.
In order to bring a case for denial of HAMP modification its important that you keep an accurate phone log and copies of all your correspondence. That includes any messages or letters you receive from the lender. Often these cases turn on who is the better record keeper and you shouldn’t assume that the bank will provide everything. After all, many of these claims are those brought by homeowners alleging that they sent requested documents to the banks three and four times only to be told they were denied for not sending in the requested documents (our record thus far is a whopping 42 times!)
Don’t be afraid to record conversations either. You should check local laws first, however. The Reporters Committee For Freedom Of The Press has a pretty comprehensive website for that. We don’t know how often they update that but they do have a state by state list.
In our opinion, many of the larger banks and servicers only pay lip service to the HAMP law. Unless you complain (and sometimes sue), you may find yourself with no modification and still facing foreclosure.
Our firm represents homeowners with claims against banks and lenders. We are not foreclosure defense lawyers (unless very close to one of our offices) but we do represent homeowners nationwide when they wish to sue their lender. If you believe you have been improperly locked out, denied a modification or have been abused by a lender or loan servicing company, contact us. We may be able to help.
All inquiries are kept in strict confidence. For more information contact attorney Anthony Dietz at We prefer emails but in an emergency you can contact attorney Brian Mahany at (414) 704-6731. Please note that in most emergencies we can only refer to the local bar association lawyer referral service. If you are facing an immediate foreclosure sale we cannot help you.
Mahany & Ert – Giving Homeowners A Voice. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine & Minneapolis, Minnesota. Legal services available in many jurisdictions. In some jurisdictions we may refer your case to another lawyer but only with your consent.