Homeowners facing foreclosure often seek a mortgage modification, while the popular loan restructuring programs can be useful, there can also be difficulties. Maryland’s federal trial court recently dismissed the lawsuit brought by a couple that sued their bank after their attempt to modify their mortgage fell through.
In an attempt to stave off foreclosure, Robert and Shirley Goss sought a loan modification with their bank under the federal government’s HAMP program. The Gosses had financed their Pasadena, Md. home with a mortgage serviced by the Bank of America that was recorded in 2007. They fell behind on their mortgage in December 2010 because of unemployment and other circumstances.
The homeowners received a letter from the bank in June 2011 that said their account had been referred to the “Home Retention Division” and that a workout counselor had been assigned to their account to assist them in being reviewed for the program and other workout options. The Gosses submitted an application directly to HAMP on May 14, 2012 and calculated that their modified monthly mortgage payment would be $1,653. However, according to a letter they received from the bank, their request for a loan modification was approved, but the suggested modified payment was $2,634.67 — an amount that was nearly the same as their regular mortgage payment. The Gosses rejected the modified mortgage payment because it would not have improved their circumstances. And, in what some might say was insult added to injury, the homeowners said they received a letter from the bank several days later stating that the workout assistance they requested was not an option.
It is worth noting that although foreclosures are difficult to stop once they are started, a Chapter 13 bankruptcy can sometimes stop a foreclosure. Foreclosures and other legal actions are “stayed” — placed on hold — and a court-approved reorganization payment plan is put into place. And, many consumers are unaware that they can also file a Chapter 7 bankruptcy so as to discharge unsecured debts. In industry parlance, it’s called a “Chapter 20.”
The Gosses filed suit against the Bank of America on a variety of state law grounds, alleging, for the most part, that the bank failed to modify their mortgage after informing them that it would assist them. The Gosses claimed violation of the Maryland Consumer Protection Act (MCPA), fraud, detrimental reliance, breach of implied contract, negligence and negligent misrepresentation. The couple said they relied on BANA’s June 2011 letter to their detriment and that this reliance led to damage to their credit scores, increasing liability in penalties and fees and “severe mental anguish” leading to physical symptoms.
The United States District Court for the District of Maryland dismissed their lawsuit. “Although the Gossess have pointed to a frustrating, troublesome course of conduct by the bank in dealing with the Gosses’ requests for a mortgage modification, the Gosses have not stated any actionable claims under Maryland law,” the court declared.
The court pointed out that the June 2011 letter the couple received might have induced them to forego alternative solutions to their mortgage troubles, but explained that the letter was not false because it did not definitively state that the bank would offer the Gosses a modified mortgage payment plan. And, the court further observed, even if other statements the Gosses identified by the homeowners could be considered false and misleading; the Gosses could not prove that reliance on any of them caused an actual injury. The court noted that the Gosses had rejected the modified mortgage payment suggested by the bank.
Similarly, the court dismissed the couple’s breach of implied-in-fact contract claim, explaining that implied contracts, like all contracts, require mutual assent (offer and acceptance), definite agreement as to the terms and sufficient consideration. The couple’s contract claim was defective, the court observed, because the couple had not alleged bargained for consideration, nor the definite manifestation of mutual assent that would transform the bank’s June 2011 letter into a contract. Indeed, the court characterized the letter as a “letter of intent” that the bank would enter into a modified mortgage agreement with the Gosses.
Finally, the court also dismissed the couple’s negligence claim. To state a valid claim for negligence under Maryland law, the Gosses had to demonstrate that the bank “owed them a duty in tort.” Courts are exceedingly reluctant to find special circumstances sufficient to transform an ordinary contractual relationship between a bank and its customer into a fiduciary relationship or to impose any duties on the bank not found in the loan agreement. Here, the court said, where the letter and subsequent actions of the bank did not even create an enforceable contract beyond their mortgage agreement, the Bank of America did not owe them a duty in the processing of the HAMP application.
The case is Robert C. Goss, et al. v. Bank of America, N.A.
Belsky, Weinberg & Horowitz has represented consumers in mortgage, bankruptcy and debt collection cases for many years. Although foreclosures are difficult to stop once they are started, our attorneys have represented individuals facing foreclosure for more than 20 years and have achieved a very high success rate in stopping foreclosure sales, reorganizing client finances and helping with unpaid income tax problems through the use of the Chapter 13 bankruptcy process.
In Chapter 13, the foreclosure, repossession, garnishment, seizure or legal action is “stayed” or placed on hold and a court-approved reorganization plan is put into place which pays the creditors an amount to satisfy their claims. Clients obtain a fresh start without the burden of long-standing past due debt. This process saves the clients’ home, stops interest from accumulating and offers a great deal of emotional relief from pressing creditor action to collect debts.
Call our bankruptcy attorneys at 410-234-0100 or email us for a free consultation and let us help you to resolve your credit and debt problems through prompt and professional action that will make what otherwise would appear to be an impossible situation a very manageable one for you and your family!