CAUSES OF ACTION BASED ON TRIAL LOAN MODIFICATION MAY INCLUDE FRAUD CLAIM AGAINST LENDER’S EMPLOYEES
Homeowners applied with a lender to have their home loan modified under the Making Homes Affordable Act. The Lender approved the Homeowners for a trial period under a Fannie Mae load modification program which the Homeowners had to make three monthly trial payments. If the Homeowners made the required payments and passed a subsequent test of financial hardship their loan would be permanently modified. After the Homeowners made their first two payments, the Lenders told the Homeowners that foreclosure proceedings had been suspended, but before the end of the second month, the property was sold at a trustee’s sale. The Homeowners sued and the court determined that since the Homeowners were performing the terms of the trial period agreement, the Lender was in breach of contract. The court also upheld the cause of action for fraud against the Lender and three of its employees based on allegations that, despite assurances made to the Homeowners, the defendants had no intention of honoring the agreement but rather intended to foreclose. This case draws further attention to issues involving negligent loan servicing.