A loan modification, broadly defined, reduces or delays loan payments on an existing loan in order to make the loan more affordable for the borrower, and to avoid default. Servicers may provide these benefits by reducing the interest rate, extending the loan term, rearranging the timing of payments, reducing the loan principal, or some combination of the above.

This discussion begins by describing the landmark HAMP program in general, before discussing many of the cases where courts have held that the borrowers possess no private right of action for its enforcement, and no right to a loan modification even if they qualify under HAMP’s guidelines. The survey then describes how borrowers have attempted to pursue constitutional, statutory, and common law claims outside of HAMP as the basis for a right to a loan modification, including allegations of constitutional violations, racial discrimination in modifying loans, and false advertising by servicers in offering the possibility of a loan modification. As discussed below, these causes of action also have largely been dismissed.

Several borrowers have asserted that their servicers solicited their application for a loan modification, and that by this solicitation the servicer effectively offered a loan modification. The courts have rejected this argument. In Anderson v. Fremont Investment & Loan, for example, the court held that a lender’s invitation to the borrower to apply for a loan modification did not justify reliance so as to estop the lender from foreclosing, nor did it prevent the lender from continuing with the foreclosure even after the borrower applied.

Other borrowers have similarly argued that their servicer’s allusions to a possible loan modification should prevent a pending foreclosure. The courts likewise have rejected these arguments, even where the servicer has made seemingly firm promises about a loan modification. For example, in Rodriguez v. OneWest Bank, the borrower alleged that the bank promised to postpone a foreclosure sale while evaluating the borrower for a loan modification. After he sent in the application package, the bank proceeded with a non-judicial foreclosure. The court dismissed the borrower’s claims for lack of specificity.

Even when more facts are pled, such claims still have failed. In Kincaid v. Wells Fargo Bank, N.A., the borrower similarly alleged a promise not to foreclose while a loan modification application was pending. Even assuming the facts as pled, the court concluded that the allegations could not give rise to a breach of contract claim because the original loan agreements lacked any promise to postpone foreclosure sales during the pendency of a loan modification application. Moreover, there could be no breach of the implied covenant of good faith and fair dealing because the oral promise occurred long after the loan was originated, and thus fell “outside the scope” of the governing contract. Finally, the mortgagee did not owe any fiduciary duty to its borrower that would prevent it from reneging on its gratuitous oral representation.