The Lawletter, Vol 34 No 9, October 8, 2010
Anne Hemenway—Senior Attorney, Business Law, NLRG
With the economy in a slow recovery and homeowners still struggling with mortgage payments, individuals are considering their legal options under the new mortgage relief programs established in the wake of the mortgage crisis. The Home Affordable Mortgage Program ("HAMP") and the Housing and Economic Recovery Act of 2008 ("HERA") are two such programs.
Section 1403 of HERA amends section 1639a of the Federal Truth in Lending Act ("TILA"), which addresses the duties of servicers of residential mortgages. HAMP was promulgated under the Emergency Economic Stablization Act of 2008, 12 U.S.C. §§ 5201–5261 ("EESA"). Section 5219 of EESA required the Secretary of the Treasury to develop programs to assist with loan modifications. See Marks v. Bank of Am., N.A., No. 03:10-cv-08039-PHX-JAT, 2010 WL 2572988 (D. Ariz. June 22, 2010) (slip copy) (available only on Westlaw). Under the HAMP program, loan servicers may enter into Service Participation Agreements and engage in loan adjustment programs as guided by the Department of the Treasury.
Although these programs and regulations urge loan servicers to engage in loan modification efforts with mortgagors, recent interpretations of these federal laws conclude that individuals do not have a private right of action to bring claims for relief under the federal laws. Hart v. Countrywide Home Loans, Inc., No. 09-12088, 2010 WL 3272623 (E.D. Mich. Aug. 19, 2010) (slip copy); see also Aleem v. Bank of Am., No. EDCV 09-01812-VAP (RZx), 2010 WL 532330 (C.D. Cal. Feb. 9, 2010) (not reported) (holding that there is no express or implied right to sue fund recipients under either TARP or HAMP); Zendejas v. GMAS Wholesale Mortg. Corp., No. 1:10-CV-00184 OWW GSA, 2010 WL 2490975 (E.D. Cal. June 16, 2010) (slip copy) (available only on Westlaw) (holding that neither HAMP nor 12 U.S.C. § 1701x(c)(5), the National Housing Act, provides a private right of action); Wallace v. Bank of Am., N.A., No. 10-cv-017-JL, 2010 WL 2574058, at *3 (D.N.H. June 17, 2010) (not for publication) (available only on Westlaw) ("Congress did not create a private right of action for individuals to sue banks under TARP, EESA or the HOPE for Homeowners Act.").
In addition, even if there were a private right of action under the new federal laws, courts in several jurisdictions have held that the laws impose no legal duties to modify mortgage loans. The court in Hart held that while the laws encourage loan servicers to modify loans, they impose no legal duty on loan servicers to modify individual mortgage loans. Instead, loans may be modified where appropriate and at the discretion of the servicers. Williams v. Geithner, Civ. No. 09-1959 ADM/JJG, 2009 WL 3757380 (D. Minn. Nov. 9, 2009) (slip copy).