I FOLLOWED THE BANK’S ADVICE AND LOST MY HOUSE.
Imagine no longer being able to afford the mortgage you’ve paid for years because you lost your job. As a result, foreclosure and losing your home is right around the corner. The good news, like many banks, you qualify for federal assistance geared to help you stay in your home. The bad news, you are unable to take advantage of the federal assistance due to the bank’s or mortgage servicer’s misconduct.
Federal assistance is available. The Emergency Economic Stabilization Act and American Recovery and Reinvestment Act were enacted in part to “protect home values” and “preserve homeownership.” These Acts also provided the Secretary of the Treasury the authority under the Troubled Asset Purchase Program to purchase troubled assets from financial institutions while considering the “need to help families keep their homes and to stabilize communities.” Put simply, many banks accepted billions in tax payer dollars to “help” families climb out of the mire left by the Great Recession. But that is old news.
Pursuant to authority under these Acts and funded by TARP, the Making Home Affordable programs further compensated banks for “assisting” homeowners with mortgage modifications and other alternatives under buzzword programs like HAMP, HARP, and HAFA, to name a few. The goal: incentivize banks to offer mortgage loan modifications, home price decline protection, and foreclosure alternatives, such as short sales or deed in lieu of foreclosure. In short, the banks would complete a modification program for a borrower and then collect money from the Feds. That is also old news. While the assistance is available, courts have time and time again denied homeowners a remedy when banks violate the program guidelines and essentially deny federal assistance to those who qualify.
There is new news, however, and it is good. In Montana, borrowers can essentially hold banks’ proverbial feet to the fire when those banks violate agreements under the federal programs. In Morrow1, the plaintiffs received conflicting information from “customer service representatives.” The plaintiffs alleged they were told to skip payments, to ignore default and acceleration notices, and to pay reduced amounts for a trial period. The bank also told them they were approved for a federal modification. In the end, the bank denied their modification plan and scheduled a trustee’s sale of their property. The plaintiffs paid various amounts for 18 months under the guise they were keeping their house, just to see it sold out from under them.
The borrowers’ claimed the bank misrepresented the modification process, provided them conflicting information, and delayed the eligibility determination. The Montana Supreme Court held that the bank owed the borrowers a duty to manage the modification process in a manner that would not cause loss or injury. The Montana Court analyzed the HAMP guidelines to determine whether the borrowers alleged a breach of that duty.
The federal guidelines under the various programs, such as HAMP, HARP, or HAFA, may be used to determine whether a bank breached its duty to a borrower. Ineffectual implementation of these guidelines may be sufficient to state a claim under the Montana Consumer Protection Act (MCPA). Finally, material misrepresentations or outright fraudulent representations concerning these programs or a borrower’s application status under these programs may also be actionable under state law. Good news for Montana consumers!
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1Morrow v. Bank of Am., N.A., 2014 MT 117.
Photo by Jeff Turner used under Creative Commons License