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In Re O’Biso

2011 WL 5574938 (Bkrtcy. D. N.J. 2011) (Unpublished)

MORTGAGES — There is no private cause of action under the Home Affordable Mortgage Program and that program does not guarantee permanent loan modifications to a borrower.

A borrower was delinquent on mortgage payments and received a notice from its lender that it was going to foreclose on her property. The borrower benefitted from two trial period plans arising out of the lender’s “participation in the United States Treasurer’s Home Affordable Mortgage Program (HAMP).” According to the borrower, she thought that these trial period plans “were to become final loan modifications when all appropriate documentation was submitted” by her to her lender. Although she asserted “that she made numerous payments ... and provided all required documentation,” the lender asserted “that none of the payments were received and [its borrower] failed to produce the required documentation” under the plans. It proceeded to foreclose on its borrower’s property and, in response, the borrower filed for a Chapter 13 bankruptcy. When the lender filed a proof of claim, the borrower, now a bankrupt debtor, sought to expunge the claim. Her argument was that she entered into the plans and fully performed under them. Therefore, she argued that she was entitled to a final loan modification because the lender’s proof of claim did not take the final loan modification into consideration, and thus the proof of claim “must fail.” In the alternative, she argued that she had reasonably relied on the lender’s “alleged promise to enter into a final loan modification.”

The Bankruptcy Court was unsympathetic to the debtor. It ruled that she was not entitled to redress under HAMP. According to the Court, “[w]hat the Debtor fail[ed] to recognize, however, is that there can be no private cause of action (i.e., a breach of contract claim) under HAMP.” It based this ruling on prior case law. In addition, it found “no evidence before the Court that [the lender] guaranteed permanent loan modification to [the] Debtor. Thus, [the] Debtor’s theory that [the lender’s] claim must be expunged because [the lender] breached its agreement with [the] Debtor” was rejected. The reason the Court rejected the debtor’s promissory estoppel argument as grounds for expunging the claim was because “there can be no justifiable reliance without an express promise.” Here, there was “no evidence to suggest that [the lender had] guaranteed or made an express promise of a final loan modification.” In fact, the express language of each plan contained conditional language suggesting otherwise.

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