August 10, 2015

Understanding HAMP and How to Avoid Claims

Home Affordable Modification Program (HAMP)

The federal Home Affordable Modification Program (HAMP) offers homeowners at risk for foreclosure reduced monthly mortgage payments. This program was designed to help families with documented financial hardship.  It is for those who would have the ability to make payments if their monthly bill was modified to a lower amount. This program does not offer borrowers a right to privately seek action against a lender if they allegedly violated the HAMP. However, a recent New Jersey decision held that borrowers are not precluded from pursuing a valid state claim against a lender who participated in the HAMP in bad faith or failed to comply with the terms of the program.

This decision provides borrowers a sort of relief against lenders who make decisions regarding this modification program in bad faith or have ulterior motives against providing the modified payments. There is no action for a borrower to hold a lender accountable if they deny a loan modification, but there is potential for action against a lender who agrees to a modification but fails to provide it, relying on unrealistic terms that must be satisfied by the borrower.

For lenders to avoid this, make certain that the terms and conditions listed under the agreement are clear and that the requirements the borrower must fulfill in order to receive the loan modification are concise and not subject to interpretation. As a lender, liability for an unclear agreement can subject you to legal action and a potential violation for acting in bad faith. Notice to the borrowers about their failure to comply with a term is also important to have, enforcing the need to have accurate records.

If you are a borrower, make sure you understand the terms and conditions in the agreement as well as the intent of the lender. The lender does not have to agree to a loan modification, but if they do, it is necessary to be aware of the requirements you must fulfill in order for the modification to take effect. The lender assuredly has a legal team equipped to help compose sophisticated binding agreements with terms only a lawyer would understand.

Seeking an experienced attorney before accepting the loan modification plan can save you from hefty litigation later. The Law Office of Michael Alan Siddons can help you understand the complex mortgage documents so you are fully aware of what is required before you sign. Call today for a free consultation at (610) 255-7500.