Finally an answer to that *vexing* question. Is There Life After HAMP?

Published by THE RECORDER, Essential California Legal Content

modification-fraudChavez v. Indymac Mortgage Services [C.A. 4thD061997]
Click here for the full decision

“We conclude the homeowner sufficiently alleged equitable estoppel to preclude the lender’s reliance on the statute of frauds defense.

We also conclude that the homeowner sufficiently alleged a cause of action for wrongful foreclosure.”

The Fourth Appellate District reversed a judgment. The court held that lenders who failed to execute and return a loan modification agreement to a borrower were equitably estopped from relying on the borrower’s inability to produce an executed agreement as grounds for dismissing her breach of contract action.

Homeowner Angelica Chavez defaulted on her mortgage payments. Lenders Indymac Mortgage Services and OneWest Bank, F.S.B. offered Chavez a loan modification plan under the Home Affordable Mortgage Program (HAMP). Under the terms of the plan, Chavez was to make three specified monthly payments during a three-month “trial period.” loan-modificationIf she complied with the terms of the trial period plan, she would then be eligible for loan modification.

The trial period plan stated that Chavez was required to sign and return two copies of the plan to the lenders, after which the lenders would send Chavez a signed copy of the plan if Chavez qualified for the offer or would send her written notice if she did not qualify. This plan stated it would not take effect “unless and until” both Chavez and the lenders signed it and the lenders returned a signed copy of the plan to Chavez.

Chavez signed the agreement and returned it to the lenders. They never sent it back to her. Chavez thereafter made the three payments required under the plan. The lenders accepted the payments and, in June 2010, sent Chavez a loan modification agreement. The agreement stated that if all of Chavez’s material representations therein were true in all material respects and if she had fully complied with the trial period plan, her loan would “automatically become modified on 7/1/2010.” Chavez signed and returned the agreement.

Chavez thereafter made all monthly payments required under the modified loan agreement.

In September 2010, the lenders returned her check for the October payment because “the check [was] not certified,” although the modification agreement contained no such LENDER FORECLOSURE AUCTIONrequirement. On October 15, without notice to Chavez, the property was sold at auction below fair market value. In November, Chavez was served with an unlawful detainer summons and forced to relocate.

Chavez sued Indymac and OneWest for wrongful foreclosure and breach of the modification agreement.

The trial court sustained the lenders’ demurrer without leave to amend, finding that the statute of frauds barred enforcement of the modification agreement.

The court of appeal reversed, holding that the lenders were equitably estopped to assert the statute of frauds.

Under the statute of frauds, certain contracts are invalid unless memorialized in writing. Here, the lenders argued, because the trial period plan was never executed by the lenders, that agreement was invalid. Not so, the court found.

Chavez alleged she sent the lenders all required information and timely made all payments under a trial period plan that was a prerequisite for execution of the modification agreement. The lenders accepted the trial period payments and mailed her the modification agreement. Based on the language of the trial period plan, the lenders were required to either send Chavez a signed copy of the trial period plan if she qualified for the woman victory against skyoffer, or send her a notice that she did not qualify for the offer. The lenders did neither; rather, they sent Chavez a copy of the modification agreement.

This action, when considered together with the language of the trial period plan, suggested that the lenders concluded that Chavez qualified for a permanent modification, even though they did not send Chavez a signed copy of the trial period plan. This interpretation, the court opined, gave effect to all provisions in the trial period plan and did not render an otherwise straightforward offer an illusion. [Read MORE]

Thanks Deontos for the heads up!

2 thoughts on “Finally an answer to that *vexing* question. Is There Life After HAMP?

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