Alert April 29, 2014

Borrowers File Petition for Writ of Certiorari Related to Permanent Loan Modification Under HAMP

Citing a circuit split among the Seventh, Ninth and Eleventh circuits and the “great importance” of settling the question, the borrowers filed a petition writ of certiorari in the Supreme Court asking the Court to determine whether a private cause of action exists under HAMP for a servicer’s refusal to permanently modify a home loan when the borrowers have made all the required trial payments and have otherwise shown the continuing financial ability to make those same trial payments on a permanent monthly basis. Initially brought in district court, the district court granted summary judgment for defendant on the grounds that there was no private right of action under HAMP to challenge the denial of a permanent loan modification. On appeal, the Eleventh Circuit affirmed the district court’s decision on grounds that neither the Emergency Economic Stabilization Act of 2008 nor HAMP “expressly create a private right of action for borrowers against loan servicers.” The Eleventh Circuit also held that there was no implied right of action under HAMP, using the factors articulated in Hempispherx Biopharma, Inc. v. Johannesburg Consol. Inves., 553 F.3d 1351, 1362 n. 14 (11th Cir. 2008) (see May 1, 2012 Alert). The borrowers also asked the Supreme Court to determine whether a borrower who participates in HAMP, but fails to receive a written document from the lender memorializing the homeowners’ participation in the HAMP trial, is precluded from seeking relief under the doctrines of promissory estoppel and negligent misrepresentation.