Vincent Howard and our San Bernardino foreclosure defense attorneys have written here several times before about the prospects of lawsuits based on an unfair rejection from the federal Home Affordable Modification Program. Federal courts have fairly consistently ruled that there's no private right of action created by federal law or HAMP rules, but a Seventh Circuit ruling from early March found a state right of action in Illinois. So we were interested to see another ruling in this still-evolving area of the law from the Eleventh U.S. Circuit Court of Appeals, in Miller v. Chase Home Finance. Jason Miller of Georgia sued Chase Home Finance for failing to offer him a loan modification despite his meeting all the qualifications. The district court found no private right of action under HAMP and that any independent claims failed; the Eleventh Circuit affirmed.
Miller owned property in Hiawassee, Georgia, and contacted Chase in 2009 seeking a loan modification because of financial problems. Chase offered Miller a temporary loan modification under HAMP. However, once Miller's three-month trial period was finished, with Miller meeting all of his obligations under the HAMP agreement, Chase declined to make the loan modification permanent. The opinion did not go into whether Miller's claims included a claim that he had no change of income or another typical factor lenders cite for failing to make modifications permanent. His subsequent lawsuit alleged breach of contract; breach of implied covenant of good faith and fair dealing; and promissory estoppel. The Georgia district court ultimately dismissed the case for failure to state a claim, finding no private right of action under HAMP, and that even if the claims were independent of HAMP, that they failed as a matter of law. It denied Miller leave to amend, finding HAMP owed him no duty that would support a negligence claim.
On appeal, the Eleventh Circuit agreed on all counts. It started by stating that neither HAMP nor the law that helped create it, the Emergency Economic Stabilization Act of 2008, creates an express private right of action. The Eleventh looked at whether it could find an implied private right of action, and concluded it could not. Applying a four part test, it first found that the laws were not passed for the "especial benefit" of homeowners like Miller; they were created to stabilize the country's financial system. Second, it found no legislative intent to create a private right of action; the only express enforcement provision flows through the Secretary of the Treasury. Third, the court found that a remedy for borrowers like Miller wouldn't be consistent with the laws' underlying purposes; in fact, it found that such a right would frustrate HAMP's purpose by "chilling" participation due to lawsuit fears. Finally, the court found that the causes of action involved are typically state-law issues not appropriate for federal law. Thus, it found no private right of action. The court went on to find that Miller's HAMP-independent claims fail under Georgia law. For example, it said, his promissory estoppel claim failed because Chase never made Miller a promise he reasonably relied on, and Chase never promised to grant a permanent loan modification. Thus, it upheld the district court.
Vincent Howard and our Orange County foreclosure defense lawyers disagree with several of these conclusions, and so did the Seventh Circuit in the recent HAMP case, Wigod v. Wells Fargo Bank. In that case, the appeals court agreed that there's no express private right of action, but found actionable claims for breaches of an agreement Wigod signed with the bank. This agreement specified both parties' obligations under HAMP, so presumably, the HAMP rules at issue would be the same across all lenders. Under Illinois law, the appeals court said, this was sufficient to find breach of contract and promissory estoppel (among other claims). Thus, there appears to be at least a potential split between those two circuits. We look forward to hearing more on this issue, because it's very important to the everyday work of Vincent Howard and our team of Norwalk foreclosure defense attorneys.
If you've struggled for months to get your mortgage lender to give you a fair shake, only to be repeatedly ignored or unfairly denied, you should call Howard Law, P.C., to discuss your legal options. For a consultation, send us a message online or call 1-800-872-5925.