N.J Courts Rule that Lenders May be Subject to Breach of Contract Claims by Homeowners for the Lenders Failure to Provide HAMP Loan Modifications

In a case of first impression in New Jersey, on January 23, 2015, the Appellate Division in Arias v. Elite Mortgage held that a HAMP Trial Period Plan is a “unilateral offer” by the Lender to the homeowner. What does this mean? Well, a unilateral offer is a term used when discussing contracts. In essence, if a bank provides to a homeowner a Trial Plan under HAMP, it’s treated as if the bank is promising to give the homeowner a loan modification, if and only if the homeowner “complied fully and timely with their obligations under the Trial Period Plan, including making all payments timely and providing documentation establishing that the financial representations they made to the bank in applying for the Trial Period Plan were accurate when made and continued to be accurate.” If the homeowner has complied with the Trial Period Plan and the bank refuses to provide the loan modification, then the homeowner has a recognizable cause of action for breach of contract against their lender. Two months later, on March 5, 2015, a different panel of the Appellate Division in Miller v. Bank of America Home Loan Servicing, L.P., cited Arias approvingly and held that HAMP (federal law) does not preempt the homeowners private right of action against their lender under state contract law.