Borrower Can Sue For A Breach Of A Trial Period Plan Agreement Under A Contract Theory

As part of the Home Affordable Modification Program (HAMP), the defendant servicer in Stagikas v. Saxon Mortg. Services, Inc., CIV.A. 10-40164-FDS (D. Mass. July 5, 2011) entered into a Trial Period Plan agreement (TPP) with the plaintiff who later sued when the servicer did not permanently modify the mortgage. The plaintiff contended that the TPP was a binding contract under which the servicer was duty bound to offer a permanent loan modification if the plaintiff complied with the TPP’s terms and conditions over a three-month trial period. The plaintiff did not sue under HAMP but rather under state law contending that the servicer breached the contract. The servicer moved to dismiss on the grounds that the plaintiff lacked standing to sue for a breach of the TPP because there is no private right of action under HAMP. It also argued, in the alternative, that the TPP agreement is unenforceable because it lacks consideration. The court was not persuaded. Whether HAMP creates a private right of action is not the issue. Plaintiff brought suit on the theory that the TPP constituted a contract between defendant and plaintiff and that defendant breached that contract. The fact that the TPP is a form contract created by the government makes no difference. If the TPP is properly construed as a contract between the parties in this case, then plaintiff has standing to bring suit in order to recover for any breach of that contract. The court also found there was consideration. Invoking the pre-existing duty rule, the servicer argued that because plaintiff’s partial monthly mortgage payments under the TPP went towards satisfying his undisputed pre-existing mortgage loan obligations, the TPP payments cannot constitute new bargained-for consideration. But the court said that while it is true that modified mortgage payments, standing alone, would likely not constitute cognizable consideration. Plaintiff’s legal detriment consisted of more than the modified monthly payments. The plaintiff was required to provide documentation of current income, make legal representations about his personal circumstances, and agree to undergo credit counseling if requested to do so. These conditions all constitute new legal detriments to plaintiff that flowed from his acceptance of the TPP and thus constitute consideration.

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