Saxon Mortgage Services Inc. Denied Bid to End HAMP Class Action Lawsuit

In the past, we have written several blog posts about the wave of class action lawsuits relating to the United States Treasury’s Home Affordable Modification Program (“HAMP”), including the Fletcher litigation where Abbey Spanier is lead counsel.  See our posts here, here and here.  HAMP was created by the federal government to combat the national foreclosure crisis. The program was specifically designed to allow eligible homeowners who are about to default on their mortgages to save their homes by modifying the terms of their loans. Despite the government’s noble intentions, HAMP has been largely unsuccessful. Mortgage service providers have been accused of unjustifiably denying permanent modifications by losing paperwork, claiming ignorance of payments made and papers submitted, and engaging in other evasive conduct which makes it extraordinarily difficult, if not completely impossible, for eligible homeowners to obtain loan modifications

On May 30, 2012, the Honorable John R. Padova of the United States District Court for the Eastern District of Pennsylvania denied defendant Saxon Mortgage Services, Inc.’s motion to dismiss plaintiff’s class action claims for breach of contract, promissory estoppel and violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Laws.  Cave v. Saxon Mortg. Servs., 2012 U.S. Dist. LEXIS 75276 (E.D. Pa. May 30, 2012).

In Cave, plaintiffs brought breach of contract and other claims arising out of Saxon’s failure to permanently modify home mortgage loans. The plaintiffs alleged, among other things, that Saxon breached its contract by not offering them a permanent modification at the end of a three month trial period.  Alternatively, plaintiffs’ complaint also alleged that even if plaintiffs were not qualified for a permanent modification, Saxon breached its contract because it did not send them a timely written denial explaining why they were not qualified.  In this case, it took Saxon over a year after plaintiffs applied for a HAMP modification to inform them that they did not qualify.

As part of his detailed decision, Judge Padova determined that plaintiffs had adequately alleged that Saxon breached its implied duty of good faith and fair dealing for failing to perform its obligations under a trial period plan contract in a timely fashion:

We conclude that Plaintiffs have plausibly alleged that Saxon breached its implied duty [of good faith and fair dealing] to perform its TPP obligations in a diligent fashion by not informing them that they did not qualify for a permanent modification until over a year after Plaintiffs applied for a permanent modification, and months after actually determining that Plaintiffs did not qualify.  Indeed, as the TPP contains no express provision stating when Saxon had to send a written denial, the implied covenant of good faith and fair dealing may ultimately be the only aspect of the TPP that Saxon breached.

Abbey Spanier, LLP, located in New York City, is a well-recognized national class action and complex litigation law firm.  Abbey Spanier is following many of the HAMP related class action lawsuits and will report on any significant litigation developments.