• October 15, 2009

Latest news re: Home Affordable Modification Program (HAMP) Class Action:  Judge Ann D. Montgomery heard argument this afternoon on plaintiffs’ motion for a preliminary injunction in this putative class action on behalf of individuals who have sought government assistance to avoid foreclosure and eviction from their homes under the HAMP and have been denied that assistance without any articulated/written basis (and thus, presumably, have no means to challenge the rejection).

Word has it that the Court appeared troubled by a government program, where benefits are non-discretionery for qualified homeowner/borrowers, but where applicants do not appear to be getting any kind of explanation when they are rejected, much less any opportunity to challenge the denial.  On the other hand, the Court was apparently (and understandably, in my view) troubled by plaintiffs’ proposed injunction of huge numbers of foreclosures across the state.

Plaintiff’s counsel proposed a narrower injunction, suggesting the Court could perhaps enjoin all foreclosures where the borrower has submitted an application for a HAMP modification but has not yet received the results of the application.

Defendants’ arguments appear to have focused on statutory immunity, on the proposition that they are not state actors and therefore not bound by procedural due process obligations, and, in the case of servicers, on joinder under Rule 19 (i.e., “don’t shoot the messenger”).

One of the named plaintiffs in the suit faces the Sheriff’s Sale and eviction in late December.  Judge Montgomery expects to reach a decision before then.  She has her work cut out for her.

Background:  Mark Ireland and the Housing Preservation Project have brought a class action against Timothy Geithner, the U.S. Department of the Treasury, Fannie Mae, Freddie Mac, Ocwen, GMAC Financial, in connection with the federal Home Affordable Modification Program (“HAMP”). The thrust of the complaint: homeowners who apply for relief under HAMP are allegedly denied assistance and given no explanation for the denials which, plaintiffs argue, violates their constitutional rights to due process.

Plaintiffs are seeking to enjoin all foreclosures in Minnesota of mortgages owned by Fannie Mae or Freddie Mac, or serviced by one of the mortgage loan servicers who have agreed to administer the HAMP program and provide loan modifications to the homeowners they service.

Invoking the Due Process Clause and class-action procedures, Fannie Mae and Freddie Mac counter, “Plaintiffs ask this Court to impose upon Defendants a constitutionalized system of intricate procedures for servicers’ HAMP eligibility determinations, including highly detailed notices of denial and opportunities to appeal any such denials to neutral decisionmakers.”

Briefs and supporting papers here.

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