California residents who reside in the Sacramento metropolitan area may be interested to know an update in case-law that could potentially impact any home loan modification. The ongoing trend regarding litigation surrounding the Home Affordable Modification Program (HAMP) has been re-affirmed by a Washington D.C. Judge in Doreen Edwards et al v. Aurora Loan Servicers LLC. In Edwards, the Plaintiff argued that an individual borrower should have the right to sue because they were impacted by the HAMP agreement between Aurora , a private loan servicer and Fannie Mae.
All Plaintiffs in the case were eligible under HAMP for a home loan modification but were nonetheless denied by Aurora even though they were qualified under the program. The plaintiff’s cited “endless bureaucratic incompetence coupled with a lack of effective recourse for wrongful denials” as a basis for their against Aurora after having been denied a modified loan. The lawsuit alleged a violation by Aurora of its independent agreement with Fannie Mae: (1) that Aurora failed to act in good faith and fair dealing and (2) Aurora violated their right to Due Process. Aurora responded that the plaintiffs were not eligible to sue since they were not parties to the agreement with Fannie Mae and Aurora.
Judge Rothstein agreed with Aurora and held that the individual borrowers had no right to sue because they had no vested interest under the HAMP agreement. Judge Rothstein joined numerous other court decisions making similar findings. Judges in all District Courts of California have held this same decision including the Eastern District of California, which hears all cases brought in the Sacramento area. These courts have held in order for a person to have standing, the homeowner plaintiffs had to show that Fannie Mae and Aurora intended to include the borrowers, individually, to their HAMP agreement.
Essentially, this means that just because the homeowners had an interest in the performance of the contract between Fannie Mae and Aurora does automatically entitle them to participate in the HAMP program. Judge Rothstein also dismissed that plaintiff’s argument that Aurora had a duty of good faith and fair dealing. Since the borrowers never had an explicit contract with Aurora or Fannie Mae, the Judge ruled that Aurora did not have to give them the modification.
This situation would be analogous to having a person insist on receiving the same deal on a car purchase, bought at a car dealership, made by a separate party on a similar vehicle. While the dealership may want to offer a similar deal, the Judge Rothstein holds that the car dealership will not be forced to offer the same deal to separate parties if they are not inclined to do so.
As a Sacramento Bankruptcy Attorney I like to keep my clients updated on developments in the legal world that may affect their financial circumstances. If you or someone you know is considering filing Chapter 7 or Chapter 13 Bankruptcy you should have them contact a lawyer who is knowledgeable on these matters as soon as possible.