Tag Archives: hamp

9th Circuit Tells Wells Fargo: You Can’t Have Your Cake and Eat it Too

Processed by: Helicon Filter;In a recent case, the Ninth Circuit Court of Appeals told Wells Fargo that it had to live up to its part of the bargain when dealing with modifications under the federal HAMP program.

HAMP and the Trial Period Plan

In that case, Corvello v. Wells Fargo (and its companion case Lucia v. Wells Fargo), the homeowners applied for mortgage modifications under the federal Home Affordable Modification Program (more commonly known as HAMP).  Although lender participation in the HAMP program is voluntary (lenders get monetary incentives to join in), if a lender does choose to offer HAMP modifications, it must comply with program rules.  (To learn more about HAMP, see the articles in Nolo’s  Federal Making Home Affordable Programs topic page.)

In accordance with HAMP rules, Wells provided the homeowners with a trial period plan (TPP). Under the TPP, the homeowners were to submit required documentation so that Wells could determine HAMP eligibility. The homeowners also had to make trial payments to Wells. The TPP also lays out Well’s obligations.

  • If Wells determined that the homeowners did not qualify for modifications, Wells was required to notify them of this fact and immediately end the period of trial payments.
  • If Wells determined that the homeowners did qualify and the homeowners made all trial payments, Wells was required to offer the homeowners permanent mortgage modifications.

Mr. Corvello kept his end of the bargain – he submitted all required documentation and made the trial payments. Wells Fargo didn’t keep its end of the bargain. It accepted and kept all of Mr. Corvello’s trail payments, yet:

  • it never notified Mr. Corvello that he did not qualify for HAMP
  • nor did it offer him a permanent modification.

The facts in the Lucias’ case were similar, except that Wells actually foreclosed on their home.

The Ninth Circuit Says:  Wells Fargo Is Not King

When taken to court, Wells argued that it was not “contractually obligated” to offer Mr. Corvello or the Lucias a permanent loan modification.

The Ninth Circuit, in its majority opinion, was less than thrilled by Wells’ position which it characterized, more or less, as this:

“Hey homeowner, thanks for the trial payments and for living up to your end of the bargain. So sorry we never got back to you about your eligibility, but actually we don’t feel like offering you a permanent modification after all.”

The concurring judge (he agreed with the final result but for different reasons), was more blunt in his assessment of Wells Fargo’s business practices.  He pointed out that Wells Fargo drafted the TPP agreement itself and worded it in such a way as to engage in “flim-flam or, in plain words, to work a fraud.”

The bottom line: If the lender signs a TPP with the homeowner, the homeowner complies with the terms of the TPP, and the lender does not notify the homeowner of ineligibility, the lender is contractually obligated to provide the homeowner with a permanent modification under HAMP.

Will Mortgage Lenders Change Their Behavior?

The Ninth Circuit pointed out that the Seventh Circuit and some other courts have come to the same conclusion – that if a lender chooses to participate in HAMP and the homeowner complies with all terms of the TPP, the lender must offer a permanent mortgage modification if it does not inform the homeowner of ineligibility. Hopefully, lenders will start to get the picture – they cannot always have their cake and eat it too.  Although if history teaches us anything, it will take even more litigation to drive the point home.

Making Home Affordable Programs Extended Through 2015

This morning Treasury Secretary Jack Lew announced that the deadline to apply for federal Making Home Affordable (MHA)  programs designed to assist struggling homeowners will be extended another two years, to December 31, 2015.

MHA Program Extensions

The extension will apply to all of the MHA programs. Some of those include:

  • Home Affordable Modification Program (HAMP)
  • Second Lien Modification Program (2MP)
  • Home Affordable Refinance Program (HARP 2)
  • Principal Reduction Alternative (PRA)
  • Home Affordable Unemployment Program (UP)
  • Home Affordable Foreclosure Alternatives Program (HAFA)

(To learn about these programs, visit Nolo’s Government Foreclosure Prevention Programs topic area.)

The department was emphatic, however, that these extensions should not lull homeowners into waiting to apply for relief. The government urged eligible homeowners to apply for these programs right away.

Extension of Tax Relief for Forgiven Mortgage Debt Is Top Legislative Priority

Mark McArdle, Chief of Treasury’s Homeownership Preservation Office also made clear that a top legislative priority this year will be to extend the Mortgage Forgiveness Debt Relief Act to December 31, 2015, so that it matches the MFA program deadlines.

The Mortgage Forgiveness Debt Relief Act allows  homeowners who have had mortgage debt forgiven or canceled (perhaps through a mortgage modification or restructure) or who have suffered through a foreclosure to have income tax on that debt forgiven.  The Act currently currently sunsets (ends) on December 31, 2013. (To learn more, see Canceled Mortgage Debt: What Happens at Tax Time?)

Making Home Affordable Website Now Available in Spanish

Finding information on the federal government’s Making Home Affordable program, including the ever popular Home Affordable Modification Program (HAMP), that is both trustworthy and easy to understand can be difficult enough if you’re a native English speaker. Now imagine how difficult it must be for non-English speakers. Yet studies show that Latino families have been significantly affected by the foreclosure crisis in the United States. And non-English speakers have been and continue to be the most at risk of falling prey to foreclosure rescue scams. To address the needs of these homeowners, the Treasury Department and HUD have introduced a Spanish version of the Making Home Affordable website. You can find the site at www.makinghomeaffordable.gov/spanish.

Making Home Affordable Eligibility Requirements Expanded

Changes to the Making Home Affordable program that greatly expanded the pool of borrowers eligible for foreclosure relief went into affect on June 1, 2012. While the bulk of the changes were made to the Home Affordable Modification Program (HAMP), the Home Affordable Foreclosure Alternatives Program (HAFA), the Home Affordable Unemployment Program (UP), and the Second Lien Modification Program (2MP), two major changes affect the Making Home Affordable program as a whole. They include an extension of the application deadline to December 31, 2013 and an expansion of the definition of “owner occupied single family property” to include property owned by a borrower who was forced to relocate temporarily due to a change in employment, military deployment, or other reasons.

See Eligibility Requirements for Making Home Affordable Program Broadened to Help More Homeowners on the Nolo website for details on all of the changes.

The Great American Nightmare

Subprime lending. Mortgage-backed securities. TARP. HAMP. MERS. An article on the ProPublica site, “The Great American Foreclosure Story,” details how the foreclosure crisis came to be and why government programs designed to help homeowners failed. The article puts a face to the story–a 58-year-old grandmother with custody of her three grandchildren, who was forced to move from her three-bedroom home in Florida to a tent on a rural plot of land with no electricity on Hawaii’s Big Island. “Ramos’ story is remarkable not because it’s unique but because it isn’t.”

For those with shorter attention spans, ProPublica has also produced a music video, “The Great American Foreclosure Song,” that encapsulates the foreclosure crisis in four minutes.