Earlier this month, the Ninth Circuit reversed a lower court’s dismissal of two consolidated class action complaints, holding that mortgage servicers participating in the Home Affordable Modification Program (HAMP) are contractually required to offer borrowers permanent loan modifications if they comply with standardized trial period plans. Corvello v. Wells Fargo Bank, NA and Lucia v. Wells Fargo Bank, NA.
As background, loan servicers provide so-called trial period plans, or TPPs, to borrowers who appear eligible to participate in HAMP based on the financial information they supply, often informally and over the telephone. TPPs require borrowers to submit documentation, so servicers can verify the accuracy of the financial information they supplied, and also require borrowers to make trial payments in the meantime, which are typically less than the mortgage payments borrowers would otherwise be obligated to make under their promissory notes. The servicers are then required to report to borrowers the results and consider borrowers for alternatives if they are not HAMP eligible. The applicable TPP in Corvello/Lucia stated that “[i]f I am in compliance with this [TPP] and my representations in Section 1 continue to be true in all material respects, then the Lender will provide me with a Loan Modification Agreement ….”
In Corvello, the borrower...
