Monday, March 21, 2011

The ugly truth about Obama's HAMP loan modification program revealed in New Jersey class action complaint

Law Offices of Robert E. Brown, P.C.

I had the opportunity to review a class action complaint recently filed in the U.S. District Court of New Jersey, wherein it is alleged that Citimortgage flagrantly disregards its obligations to offer loan modifications to New Jersey homeowners under Obama's Home Affordable Modifcation Program ("HAMP") notwithstanding the fact that Citimortgage received some $45 billion in TARP money on the condition that it participate in HAMP program.  See Juan Silva and Elizabeth Silva v. Citmortgage, Inc., 11-CV-01432 (D.C.N.J.).  The full text of the complaint may be accessed here:

  Silva v. Citimortgage complaint, 11-CV-01432

In light of the fact that I spend a good portion of my week working with banks to get my clients loan modifications under HAMP, I believe that I can say with some authority that the HAMP program is nothing less than an embarrassing failure for the Obama administration.  The allegations made in the Silva complaint are sadly all-too-familiar in my dealings, not only with Citimortgage, but with other lenders.

The plaintiff borrowers allege that Citimortgage intentionally set up its loan modification program to fail, and that Citimortgage instituted its HAMP program in order to feign compliance with TARP's conditions, although it never had any intention to allow widespread loan modifications for homeowners.  The complaint, in my opinion, correctly identifies a number of  financial factors that make it more profitable for a financial institution like Citimortgage to avoid modification and to continue to keep a mortgage in a state of default or distress and push loans to foreclosure.  The specifics factors may be found in ¶9 of the Silva complaint.  As a result, Citimortgage is incentivized to (1) maintain borrowers in default and delay decisions on modifications so that they can generate income through the imposition of late fees and inspection fees; (2) capitalize arrears to increase principal balances; and (3) create additional float income by putting borrowers in foreclosure.

In particular, the following allegation in ¶51 of the Silva complaint strongly resonated with me and was very reminiscent of a specific recent experience I myself had in my dealings with Citimortgage:
Throughout the HAMP application process, Citi also repeatedly and inappropriately demands that borrowers update their application materials, while warning homeowners that their modification is at risk and threatening to deny the modification if they fail to comply with requests.  Typically, Citi requests the same document(s) over and over. In other instance, it requests documentation that is irrational or impossible to obtain--such as W-2 forms for elderly individuals surviving on social security, or self-employment profit and loss statements for wage-earning employees. 
Citimortgage is not unique in its engagement in this paper shuffling charade.  This is standard operating procedure in the foreclosure conference parts throughout the City of New York--and, apparently, New Jersey as well.

In short, the Silva complaint alleges that Citimortgage has failed to comply with HAMP in a variety of ways and has essentially undermined the purpose of the program--namely, to help homeowners in foreclosure or facing the prospect of foreclosure make their loan payments more affordable during the current economic downturn.  For the past three years, the United States has been in a foreclosure crisis.  In late 2009, one in eight U.S. mortgages was in foreclosure or default, and 2.8 million homeowners received foreclosure notices in 2009.  New Jersey is among the top ten highest states for foreclosure filings.

Class Action Notice:
PHILADELPHIA, PA, March 16, 2011 (PRNEWSWIRE) -- The law firm of Berger & Montague, P.C. has filed a class action complaint in the United States District Court for the District of New Jersey on behalf of all New Jersey homeowners whose mortgage loans have been serviced by CitiMortgage, Inc., and who, since April 13, 2009, (1) have entered into a Trial Period Plan (“TPP”) contract with CitiMortgage and made all payments required by their TPP contract, but (2) have been denied a permanent loan modification agreement that complied with the U.S. Department of the Treasury’s Home Affordable Modification Program (“HAMP”) rules.

If you believe that you have been improperly denied a permanent loan modification by CitiMortgage, Inc., after April 13, 2009, please contact plaintiff’s counsel, Eric Lechtzin of Berger & Montague , P.C. at 888-891-2289 or 215-875-3000, or by e-mail at A copy of the Complaint can be viewed on Berger & Montague, P.C.’s website at or may be requested from the Court. The docket number is 11-cv-1432.

The Complaint alleges that CitiMortgage accepted billions in government bailout money under the Troubled Asset Relief Program (“TARP”) earmarked to help struggling homeowners avoid foreclosure. CitiMortgage, like other TARP-funded financial institutions, is contractually obligated to modify mortgage loans it services for homeowners who qualify under HAMP, a federal program designed to abate the foreclosure crisis by providing mortgage loan modifications to eligible homeowners.

According to the lawsuit, CitiMortgage systematically slows or thwarts homeowners’ requests to modify mortgages, depriving borrowers of federal bailout funds that could save them from foreclosure. The bank ends up reaping the financial benefits provided by TARP-funds and also collects higher fees and interest rates associated with stressed home loans.

For more information about this case, please contact:

Sherrie R. Savett, Esq.
Russell D. Paul, Esq.
Eric Lechtzin, Esq.
Kimberly A. Walker
1622 Locust Street
Philadelphia, PA 19103
Telephone: 1-888-891-2289 or 215-875-3000

Berger & Montague, founded in 1970, is a pioneer in class action litigation. The firm’s approximately 70 attorneys concentrate their practice in complex litigation, including consumer protection, securities fraud, whistleblower and false claims actions, antitrust.



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