DC Judge Dismisses Class Action HAMP Lawsuit - Edwards v. Aurora Loan Servicers

June 20, 2011

As Rancho Cucamonga foreclosure defense attorneys, we know class-action lawsuits over the Home Affordable Modification Program have fared less well in courts than individual claims. So we were interested but not surprised to see another such decision, this time from a federal court in Washington, D.C. Doreen Edwards et al. v. Aurora Loan Servicers LLC argued that borrowers should have standing to sue because they were third-party beneficiaries to the HAMP agreement between Fannie Mae and Aurora, a private loan servicer. The judge disagreed, citing decisions from numerous other federal district courts, including all districts in California. In essence, she said, there was no right to sue because they had no rights under the HAMP agreement.

All of the plaintiffs were homeowners eligible for HAMP modifications but who had not received one, and had loans serviced by Aurora. They cited a string of "endless bureaucratic incompetence coupled with a lack of effective recourse for wrongful denials" -- the end result being that they were denied loan modifications. The proposed class action alleged violation by Aurora of its agreement with Fannie Mae; breach by Aurora of an implied covenant of good faith and fair dealing; and violation of the plaintiffs' rights to due process. Aurora argued that the plaintiffs had no standing to sue because they were not a party to the agreement.

The trial court agreed. In order to have standing, the judge wrote, the homeowner plaintiffs had to show that Fannie Mae and Aurora intended to make them third-party beneficiaries to their HAMP agreement. They cannot do that merely by showing that they had an interest in the performance of the contract, she wrote; their right to enforce the contract would have to be made explicit. That was not done here, the judge wrote. She likewise dismissed the argument that Aurora owes the homeowners a duty of good faith and fair dealing. That right exists only within contracts, she wrote, and again, the homeowners had no right under this contract. Finally, she dismissed the due process claim, saying the law gives the government discretion on whether to grand a loan workout, rather than requiring it.

Our Anaheim foreclosure defense lawyers know that this follows numerous other cases that make similar arguments, so it's not surprising that this one did not succeed. But it's important to realize that much of this case is based on the argument that borrowers have rights built into the contract between the servicer and the federal government. Many other borrowers have successfully sued on grounds relating to their own rights in dealing with the servicer, including the servicer's violations of HAMP rules as well as violations of state laws. That's why we urge borrowers to continue to explore their legal options, especially if foreclosure is imminent or the legal violations are clear.

Howard Law PC has represented clients fighting loan servicers for their property rights since the beginning of the housing crisis. In that time, we've come to believe that servicers are not making loan modifications because they can make more money in a foreclosure. Servicers don't have the right to the property -- but they do have the right to collect fees for late payments, foreclosure and more. That's why it makes financial sense for them to draw out the process as long as possible. Our Carson foreclosure defense attorneys help clients get their cases out of the hands of their loan servicers and into the hands of an impartial judge. If you're sick of calling and calling your servicer and making no progress for months, we can help. For a free, confidential case evaluation, call us today at 1-800872-5925 or send us a message online.

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