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Monday, September 13, 2010

Rejected HAMP Borrowers File Lawsuits

Borrowers who were turned down by the Home Affordable Modification Program (HAMP) are suing lenders in a variety of lawsuits, and several of them seeking class action status.

Most of the lawsuits allege that the trial periods were contracts and lenders like Bank of America, JPMorgan Chase and Wells Fargo broke the contracts when they refused permanent status to borrowers who made the trial payments on time and provided proper documentation.

Lenders are asking the courts to dismiss most of the cases, arguing that the trials aren’t contracts and they have discretion in deciding whether to approve modifications.

Nearly 620,000 trial modifications since spring 2009 have been canceled, according to an Aug. 20 Treasury report. Borrowers who are denied find themselves in worse positions because banks require them to immediately pay the difference between what they paid toward their mortgages during the trial period and what they would have owed without the trial reduction.

Source: USA Today, Stephanie Armour

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