Can You Sue Your Bank for Failure to Offer Loan Modifications?

A question of first impression before the 11th Circuit is whether a borrower can sue her bank for failure to offer a loan modification in violation of the much-publicized federal mortgage relief programs passed in the midst of the 2008 economic crisis, the Home Affordable Modification Program (HAMP) and the Emergency Economic Stabilization Act of 2008 (EESA).

Short answer:  NO:
When we apply these factors to HAMP and EESA, it is clear that no implied right of action exists. First, EESA and HAMP were designed to “provide authority and facilities that the Secretary of the Treasury can use to restore liquidity and stability to the financial system of the United States.” 12 U.S.C. § 5201(1). EESA was not passed for the “especial benefit” of struggling homeowners, even though they may benefit from HAMP’s incentives to loan servicers.

Second, there is no discernible legislative intent to create a private right of action; in fact, the legislature gave the Secretary the right to initiate a cause of action, via the Administrative Procedure Act. Id. § 5229(a)(1). Third, providing a private right of action against mortgage servicers contravenes the purpose of HAMP—to encourage servicers to modify loans —because it would likely chill servicer participation based on fear of exposure to litigation. And fourth, “[c]ontract and real property law are traditionally the domain of state law.” Fid. Fed. Sav. & Loan Ass’n v. de la Cuesta, 458 U.S. 141, 174 (1982).
 So that's pretty much the end of that. 

(Or maybe the banks will magically comply with the law?)

Friday blog bonus--read Roy Black's bond motion in the John Goodman DUI manslaughter case!


  1. Terrible opinion.

  2. Civil settlement was $46,000,000? Holy cow! Lets hope that wasnt confidential.

  3. Happy 4/20 SFL!

  4. The way I see it - the banks always win. No matter what!

    Have a great weekend, SFL.

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  6. The way I see it! This post is really helpful..Great opinion.

  7. Mortgage loan modification might help you out of a tough situation, but the rest of your finances must be stable in order for a loan modification to be successful.

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