The Lawletter Vol 37 No 1
Overall, residential mortgage borrowers have not met with much success in obtaining modifications to their existing mortgages under the federal Home Affordable Modification Program ("HAMP"), enacted during the economic crisis of 2008. In Miller v. Chase Home Finance, LLC, No. 11-15166 Non-Arg. Calendar, 2012 WL 1345834 (11th Cir. Apr. 19, 2012), the Eleventh Circuit Court of Appeals dealt another blow to residential mortgage borrowers by ruling that neither HAMP nor the common law provides a private right of action to borrowers based on a lender's refusal to grant a permanent modification to an existing home mortgage.
In that case, Jason Miller had secured a mortgage loan from Chase's predecessor. In 2009, Miller sought a loan modification from Chase on the ground of financial difficulties. Although Chase agreed to temporarily modify Miller's loan, in August 2010, Chase informed Miller that it would not extend a permanent loan modification to him. Miller then filed suit, alleging that Chase had failed to comply with its obligation under HAMP and that this failure gave rise to actions for breach of contract, breach of the implied covenant of good faith and fair dealing, and promissory estoppel. The district court dismissed Miller's complaint for failure to state a claim upon which relief could be granted.
Concluding that HAMP does not provide a private right of action, the Eleventh Circuit affirmed. In making this determination, the court found that HAMP had been designed to enable the Secretary of the Treasury to restore liquidity and financial stability to the nation's financial system. The program was not enacted "for the 'especial benefit' of struggling homeowners, even though they may benefit from HAMP's incentives to loan servicers." Id. at *2. Because no relevant factor favored the finding of a private right of action in favor of residential mortgage borrowers, the court ruled that Miller lacked standing to pursue his claims against Chase.
In addition, the court determined that "[t]o the extent Miller's claims fall outside of HAMP, they fail as a matter of law." Id. Miller's breach-of-contract claim was not independent of Chase's obligations under HAMP. Further, under Georgia law, the implied duty of good faith imposed on Chase was inseparable from Chase's contractual obligations and could not form an independent basis for liability. Finally, Miller did not present a viable estoppel claim, because he failed to set forth any factual allegations that Chase had promised to permanently modify his loan. Moreover, Miller was unable to show that he had reasonably relied on any such promise by Chase.
As Miller demonstrates, courts tend to set high hurdles for a home mortgagor to overcome in order to prevail on a claim against a lender for breach of a promise concerning the underlying mortgage. These high standards have not been ameliorated by the enactment of federal legislation designed to avert mortgage foreclosures, such as HAMP.