OPINION OF THE COURT
It is ordered that this motion (No. 001) by the llardo defendants for summary judgment dismissing this mortgage foreclosure action and directing the plaintiff to modify its mortgage in accordance with the terms of a trial period modification plan offered by the plaintiff under the Federal Home Affordable Modification Program (HAMP) and an order “waiving” all interest accrued on the loan from implementation of the HAMP offer to the resolution of this action and “expunging any alleged deficiencies in payment” is denied.
This mortgage foreclosure action arises out of a mortgage given by the llardo defendants on August 23, 2004 to secure a $320,000 mortgage loan in connection with the purchase of residential real property situated in Centerport, New York. The complaint was filed on July 13, 2011, in response to which the llardo defendants filed an answer with counterclaims. That answer was amended by the defendants’ service of an amended
On December 7, 2011, the answering defendants served the instant motion in which they seek a judicially imposed loan modification and other relief. The defendants claim an entitlement to such relief under the terms of a trial plan program loan modification (hereinafter TPP) to which the parties agreed in September of 2009. The llardos further claim an entitlement to such relief by reason of the deceptive and bad faith conduct on the part of the plaintiff and its representatives in corresponding with the llardos in connection with their unsuccessful attempts to secure a permanent modification of the subject loan and the plaintiffs bad faith and prejudicial conduct in prosecuting this action other than in accordance with court rules and notions of fairness and justice. The llardos urge this court to apply principles of contract law and/or invoke this court’s equity powers and issue an order that (1) compels the plaintiff to provide the defendants with a permanent loan modification as of October 1, 2009 providing for a reduced monthly payment in the amount set forth in the trial program implemented by the parties during the last three months of 2009; (2) eradicates all interest and deficits in payment that accrued under the original loan documents; and (3) dismisses this foreclosure action.
Underlying these demands for relief are the following factual allegations, all of which are advanced in the affidavit of defendant, Dina llardo, that is attached to the moving papers. In August of 2004, the llardo defendants purchased their home with the aid of the $320,000 mortgage that is the subject of this action and they regularly paid the monthly installment due for principal, interest, taxes, insurance and escrow from the loan’s inception until May of 2009. At that time, the llardos were experiencing difficulties in meeting their financial responsibilities and began a 27-month pursuit of a modification of their mortgage loan. The llardos missed their first mortgage payment on August 1, 2009, allegedly at the direction of the plaintiff’s agents.
In the month preceding the August 1, 2009 default, Dina llardo was purportedly told by agents of Chase Bank, the loan servicer, to “stop paying” the mortgage (see 1Í12 of the llardo affidavit). Such advice was allegedly issued when Ms. llardo called Chase in July of 2009 to follow up on a buyer’s assistance form completed by her in May of 2009 in connection with her initial efforts to secure a mortgage loan modification. Ms. llardo
On or about September 1, 2009, the llardos received correspondence from Chase advising them that they were past due on the August installment. Ms. llardo “immediately” called Chase and “was assured not to worry because we were now in a temporary modification program,” the “specific amounts of which were confirmed in that conversation” (see H 14 of the llardo affidavit). On September 10, 2009, the llardos received written confirmation of a Home Affordable Modification Trial Period Plan (TPP) from Chase in which a three-month, trial term period was scheduled to begin on October 1, 2009. The plan provided for a reduction of the llardos’ monthly installment payments from $2,432 to $1,953. The llardos believed that if they paid the three trial payments beginning on October 1, 2009 and ending on December 1, 2009, Chase would provide them with a Home Affordable Modification Agreement (see H 16 of the llardo affidavit).
The llardos allege that they timely made the trial payments and that they continued to pay the reduced monthly installment following the expiration of the trial term for “months” even though Chase advised them that they were in arrears. In response, Dina llardo called Chase three times in January of 2010 and was allegedly told “not to worry” since they were in “a loan modification” (see 1Í1Í18-19 of the llardo affidavit). On February 11, 2010, Ms. llardo was advised by “Cindy” at Chase that “our application was still in review but that Chase may have to place us in a different program” (see 1i 20 of the llardo affidavit). According to Ms. llardo, she continued to converse with Chase representatives through July of 2010 and continued to send to them financial documentation in connection with obtaining a loan modification under programs other than the HAMP program which provided the three-month TPP beginning in October of 2009.
On January 12, 2011, Chase returned the llardos’ monthly payment (see H 25 of the llardo affidavit). The llardos continued to receive notices from Chase advising of loan deficiencies (see 11 28 of the llardo affidavit). Ms. llardo nevertheless claims that she was only notified by letter dated June 1, 2011 that Chase was unable to offer a HAMP loan modification or a modification under any Chase modification programs (see H 31 of the llardo affidavit). The llardos made no further payments to Chase following receipt of that letter (see H 27 of the llardo affidavit).
The plaintiff challenges the accuracy and completeness of Ms. llardo’s narrative of the conversations she purportedly had with Chase. Such challenges are premised on the self-serving and unsubstantiated nature of Ms. llardo’s factual allegations regarding her dialogue with Chase representatives. The plaintiff also points to a glaring omission on the part of Ms. llardo and her counsel in failing to mention or include a copy of Chase’s April 27, 2010 rejection letter. Therein, Chase advised the llardos that it was unable to offer a HAMP modification because the llardos’ housing expense was less than 31% of the gross monthly income and that they did not qualify for a modification under any programs offered by Chase, including the Making Homes Affordable program to which the defendants were first referred in February of 2010. The April 27, 2010 rejection letter references the trial plan documentation and advises that delinquencies in the loan must be addressed to avoid the “negative impact a possible foreclosure may have on your credit rating, the risk of a deficiency judgment being filed against you and the possible adverse tax effects of a foreclosure on your Property.” The plaintiff further challenges Ms. llardo’s claim that bank representatives advised her that she had to be in default under the terms of her loan to qualify for a loan modification since the TPP documentation itself clearly provides otherwise. The plaintiff also contests the merits of the defendants’ claims for dismissal of this action, reinstatement of the trial modification as of the date of its inception on October 1, 2009 and a waiver of all interest and an expungement of all loan deficiencies under HAMP or the common-law theories advanced by the defendants.
Without denying the existence of the plaintiffs April 27, 2010 rejection letter or the accuracy of the assertion set forth therein that the llardos’ housing expense was 26% of their gross monthly housing income and thus less than the 31% required for a positive net present value (NPV) result, the defendants claim that their right to a permanent loan modification upon the same terms as the trial modification rests upon the language of the TPP itself. In support of this claim, the llardos rely upon the following language set forth on page two of the TPP:
“If I am in compliance with this Loan Trial Period and my representations in Section 1 continue to be*365 true in all material respects, then the Lender will provide me with a Loan Modification Agreement, as set forth in Section 3, that would amend and supplement (1) the Mortgage on the Property, and (2) the Note secured by the Mortgage.”
The llardos thus contend that under HAMP and principles of contract law and the law governing waiver and estoppel, the court should mandate that the plaintiff permanently modify the loan by reinstating the terms of the TPE In opposition to these arguments, the plaintiff contends that it was not required to permanently modify the mortgage loan if it determined during the trial period that the borrower did not meet the requirements under HAMP for a modification. In support of these contentions, the plaintiff cites the following language from the Trial Period Plan:
“I understand that the Plan is not a modification of the Loan Documents and that the Loan Documents will not be modified unless and until: (i) I meet all of the conditions required for modification, (ii) I receive a fully executed copy of a Modification Agreement, and (iii) the Modification Effective Date has passed. I further understand and agree that the Lender will not be obligated or bound to make any modification of the Loan Documents if I fail to meet any one of the requirements under this Plan.”
As an alternate ground for the granting of this motion, the defendants assert that the plaintiff engaged in outrageous and deceptive conduct and has acted in such bad faith that the defendants are entitled to a judicially mandated loan modification. As legal authority for this position, counsel assiduously relies on a decision issued in a mortgage foreclosure proceeding in this court in the case of Wells Fargo Bank, N.A. v Meyers (
The facts as alleged by Ms. llardo in this action are remarkably similar to those set forth in the Meyers decision except that the plaintiff here did not commence this foreclosure action prior to the issuance of a determination as to the ineligibility of the borrowers for a HAMP modification. This court nevertheless declines to adopt the reasoning of the Meyers court or to otherwise concur in its result. Nor is this court persuaded that the remedies demanded are otherwise available to the defendants under HAMP state contract law or principles of waiver and/or estoppel. For these reasons and those outlined below, the court finds that the defendants are not entitled to the relief demanded on this motion.
The HAMP Program
The Home Affordable Modification Program or HAMP is a federal program that arose out of the Emergency Economic Stabilization Act of 2008 and the Helping Families Save Their Homes Act (Helping Families Act) of May of 2009. The HAMP program is administered by the Federal National Mortgage Association (Fannie Mae) as the agent of the Department of the Treasury. The program’s aim is to provide relief to borrowers who have defaulted on their mortgage payments or who are likely to default by reducing mortgage payments to sustainable reduced levels, without discharging any of the underlying debt. Under HAMP loan servicers are provided with incentive payments for issuing permanent loan modifications and it requires that all mortgage loans owned or guaranteed by Fannie Mae or the Federal Home Loan Mortgage Corporation (Freddie Mac and, together with Fannie Mae, the government-sponsored entities or GSEs) that meet certain requirements be evaluated by the loan servicers for loan modifications.
Although participation in HAMP is required for government-sponsored entities (GSEs) such as Fannie Mae and Freddie Mac, HAMP participation is voluntary for non-GSEs. Non-GSE servicers who elect to participate (participating servicers) are
The guidelines and supplemental directives issued by Fannie Mae set forth HAMP activities servicers must perform and all modification eligibility guidelines. The guidelines set forth basic eligibility criteria and require the servicer to perform a net present value analysis, comparing the NPV of a modified loan to the NPV of an unmodified loan. The servicer is required to apply a sequence of steps, the “Standard Modification Waterfall,” to evaluate a hypothetical loan modification that would lower the borrower’s payment to no greater than 31% of the borrower’s gross monthly income. The standard modification waterfall includes the steps of reducing the interest rate in increments of .125% down to the floor interest rate of 2%, extending the term of the loan, and forgiving principal. If the NPV result for the modification scenario is greater than the NPV result for no modification, the result is deemed “positive” and the servicer should offer the modification. If the NPV result for no modification is greater than the NPV result for the modification scenario, the modification result is deemed “negative” and the servicer has the option of performing the modification in its discretion (see id. at 149).
Prior to June 1, 2010, servicers were permitted to rely upon borrowers’ unverified verbal representations when determining whether the borrower qualified for a TPP (see US Dept of the Treasury, Supplemental Directive 09-01, at 6-7). Borrowers who
HAMP Litigation in the Federal Courts
Borrowers rejected for loan modifications began to file federal lawsuits in which they claimed a constitutionally protected property right to permanent modifications under HAMP and its guidelines and other federal statutes and regulations. In a 2009 case entitled Williams v Geithner (
“Loan servicers seek to maximize their investments, and in doing so, make profitability determinations between modification or foreclosure, based in part on predictions about an individual borrower’s likelihood of default. If the Secretary prescribed the exact criteria all servicers must use to determine whether a loan has a positive NPV (and therefore should be modified if the other criteria are satisfied) then servicers may choose to forego participating in the HAMP program so that they are not forced to modify loans that do not make financial sense. While Congress required the Secretary to implement a*369 plan to assist distressed homeowners, that plan not only made servicer participation voluntary, but also afforded to program participants discretion on several variables that impact the NPV determination” (2009 WL 3757380 at *7,2009 US Dist LEXIS 104096 at *21-22).
The court in Williams went on to hold that “loan modifications are not an entitlement, but are linked to decisions that result in profits to taxpayers. Congress did not intend to mandate loan modifications” (
In a plethora of federal cases decided after Williams, federal courts have held that HAMP only requires participating servicers to consider eligible loans for modification but does not require servicers to modify eligible loans (see Lucia v Wells Fargo Bank, N.A.,
“The language of the HERA [Housing and Economic Recovery Act of 2009] requires the Secretary of the Treasury ‘to encourage the servicers of the underlying mortgages, considering net present value to the taxpayer, to take advantage of the HOPE for Homeowners Program.’ 12 U.S.C. § 5219. While the Secretary must encourage mortgage servicers to modify loans, the statute does not require Defendant or other mortgage servicers to modify loans. See Escobedo v. Countrywide Home Loans, Inc., No. 09cvl557 BTM(BLM),2009 WL 4981618 , at *3 (S.D-.Cal. Dec. 15, 2009) (‘The [SPA] Agreement does not state that Countrywide must modify all mortgages that meet the eligibility requirements.’); Williams v. Geithner, No. 09-1959 ADM/JJG,2009 WL 3757380 , at *6 (D.Minn. Nov. 9, 2009) (concluding that loans may be modified where appropriate and with discretion). Therefore, even if Plaintiff were eligible for modification, there would be no duty imposed on Defendant for which Plaintiff could seek relief.”
Borrowers’ claims of a private right of action under HAMP and their breach of contract claims as third-party beneficiaries
In an effort to avoid these results, borrowers who successfully participated in trial modifications under HAMP increasingly began to assert common-law contract claims based on their TPP agreements. However, many federal courts have rejected these claims as being nothing more than HAMP claims dressed in the verbiage of commonlaw breach of contract claims (see Hemmenway v Wells Fargo, N.A.,
Other federal courts held that state common-law claims of a contractual entitlement to a permanent loan modification may be viable (see Gaudin v Saxon Mtge. Servs., Inc.,
Rejection of state breach of contract claims premised upon a TPP rests upon various failings. Some courts hold that since there is no duty to modify a loan and no unqualified promise to do so under the terms of the TPP, there is no enforceable contract (see e.g. Mclnnis v BAC Home Loan Servicing, LP, supra; Pennington v HSBC Bank USA, Natl. Assn., supra [there
In Thomas v JPMorgan Chase & Co. (
Following Costigan, two decisions issued out of the Federal District Court of New Jersey likewise addressed the merits of the borrowers’ state law claims based on purported breaches of the TPP and related tort claims and rejected those claims as unmeritorious (see Stolba v Wells Fargo & Co.,
In contrast to the federal courts, HAMP litigation in New York courts has yielded fewer than 20 reported decisions, only two of which emanate from appellate courts. In Aames Funding Corp. v Houston (
Analysis
This court finds that the llardos’ claims of an entitlement to a permanent modification of their mortgage loan under the terms of their TPP and by reason of their due and timely fulfillment of their obligations to pay, during the three-month trial period, reduced monthly installments are without merit under federal law. As indicated above, various federal courts have held that qualified borrowers may not reasonably rely upon an SPA between servicers and Fannie Mae as manifesting an intention to confer a right upon them because the SPA does not require the servicer to modify eligible loans (see e.g. Williams v Geithner, supra; Escobedo v Countrywide Home Loans, Inc., supra). Since there is no duty on the part of the HAMP servicers to modify mortgages (see Nelson v Bank of Am., N.A., supra; Lucia v Wells Fargo Bank, N.A., supra; Hart v Countrywide Home Loans, Inc., supra), neither the engagement in the processing of
Nor did the llardos establish an entitlement to summary judgment on their counterclaims for a judicially imposed permanent modification of their mortgage loan and the eradication of accrued interest and loan deficiencies under state law theories. Under New York law, the elements of a cause of action to recover damages for breach of contract are: the existence of a contract, the claimant’s performance under the contract, the defendant’s breach of that contract, and resulting damages (see Palmetto Partners, L.P. v AJW Qualified Partners, LLC,
The llardos’ claims that the TPP was a binding contract and the plaintiff breached it by failing to offer a permanent modification after the llardos successfully performed are rejected as unmeritorious. Assuming, without so finding, that súch claims are sufficiently distinct from claims that the plaintiff breached HAMP directives or guidelines, there has been no offer of proof that the plaintiff breached any binding obligation imposed upon it under the terms of the TPf) as the issuance of permanent modification was conditioned upon a number of events. The TPP between the parties here contains terms identical to those in the Costigan case, with respect to which the Costigan court stated as follows:
“Although the TPP states that Citi ‘will provide [the borrower] with a Home Affordable Modification Agreement’ [(TPP Preamble)] if the borrower is in compliance with the TPI) it also unequivocally states that the TPP does not constitute a permanent modification of the original loan; by signing the TPfi Costigan attested that he
“ ‘understand^] that this Plan is not a modification*375 of the Loan Documents and that the Loan Documents will not be modified unless and until (i) [he] meets all of the conditions required for modification, (ii) [he] receive [s] a fully executed copy of a Modification Agreement, and (iii) the Modification Effective Date has passed.’ [(Id. § 2.G.)]
“The TPP ponders that ‘[i]f prior to the Modification Effective Date . . . the Lender does not provide [the borrower] with a fully executed copy of. . . the Modification Agreement . . . the Loan documents will not be modified . . . .’ [(Id. § 2.E)] By signing the TPI] Costigan ‘agree[d] that [Citi] will not be obligated or bound to make any modification of the Loan Documents if [Citi] determines that [Costigan does] not qualify.’ [(Id.)] The Complaint fails to plead that Costigan met ‘all of the conditions required for modification’ and Citi clearly never received a ‘fully executed copy of the Modification Agreement’ ” (2011 WL 3370397 at *6,2011 US Dist LEXIS 84860 at *21-22).
This court finds this reasoning persuasive and thus finds that the llardos’ breach of the TPP claim “is contradicted by the express terms of the TPP agreement, which states that any permanent modification is subject to the subsequent approval of Chase, and the receipt of a signed modification agreement” (Costigan v CitiMortgage, Inc.,
Equally lacking in merit are the defendants’ claims for relief under principles of promissory estoppel. “The elements of a cause of action based upon promissory estoppel are a clear and unambiguous promise, reasonable and foreseeable reliance by the party to whom the promise is made, and an injury sustained in reliance on that promise” (Agress v Clarkstown Cent. School Dist.,
Likewise unavailing are the asserted claims of equitable estoppel. Although a mortgage lender may be estopped from asserting rights under a mortgage to prevent a fraud or injustice upon the person against whom enforcement is sought, the reli
The court rejects the defendants’ claim that their motion should be granted in light of the failure of the plaintiff to file a request for judicial intervention (RJI) upon the filing of the proofs of service as required by Uniform Rules for Trial Courts (22 NYCRR) § 202.12-a (b). The rule does not require that the plaintiff file the RJI upon the filing of proof of service upon the borrower, who is likely one of several proper party defendants to be joined in the action. Additionally, there is no time requirement imposed upon the filing of proof of service effected by personal delivery (see CPLR 308 [1]). Since a plaintiff has as long as 120 days to effect service, and even longer if it be extended by the court, the rule does not mandate the immediate filing of the RJI. In any event, dismissal of any claim due to a default in the observance of procedural statutes is considered a drastic remedy available only upon a clear showing of wilful and contumacious conduct (see CPLR 3126; Orgel v Stewart Tit. Ins. Co.,
“Concededly, a foreclosure action is a ‘proceeding in a court of equity which is regulated by statute.’ (Dudley v. Congregation of St. Francis,138 N. Y. 451 , 457; see, also, Amherst Factors v. Kochenburger, 4 NY2d 203) Nevertheless, it is well settled that such a proceeding is unlike other equity actions in several ways. Thus, while equity acts only in personam, an action for foreclosure ‘is in the nature of a proceeding in rem to appropriate the land”. (Reichert v. Stilwell,172 N. Y. 83 , 89.) Just as this court sustained the legality of a mortgage where the note was illegal (Amherst Factors v. Kochenburger, supra.;), we now conclude that a mortgage may not be set aside solely because the underlying transaction was tainted by a fraudulent representation. The trial court, which was the court of equitable jurisdiction in this instance, chose not to sustain the defense of fraud in the foreclosure proceeding and neither common sense nor precedent warrants a contrary determination” (id. at 122 [emphasis added]).
“Plaintiffs may be ungenerous, but generosity is a voluntary attribute and cannot be enforced even by a chancellor. Forbearance is a quality which under the circumstances of this case is likewise free from coercion. Here there is no penalty, no forfeiture (Ferris v. Ferris,28 Barb. 29 ; Noyes v. Anderson,124 N. Y. 175 , 180), nothing except a covenant fair on its face to which both parties willingly consented. It is neither oppressive nor unconscionable. (Valentine v. Van Wagner,37 Barb. 60 .) In the absence of some act by the mortgagee which a court of equity would be justified in considering unconscionable, he is entitled to the benefit of the covenant. The contract is definite and no reason appears for its reformation by the courts. (Abrams v. Thompson,251 N. Y. 79 , 86.) We are not at liberty to revise while professing to construe. (Sun P. & P. Assn. v. Remington P. & P. Co.,235 N. Y. 338 , 346.) Defendant’s mishap, caused by a succession of its errors and negligent omissions, is not of the nature requiring relief from its default. Rejection of plaintiffs’ legal right could rest only on compassion for defendant’s negligence. Such a tender emotion must be exerted, if at all, by the parties rather than by the court. Our guide must be the precedents prevailing since courts of equity were established in this State. Stability of contract obligations must not be undermined by judicial sympathy. To allow this judgment to stand would constitute an interference by this court between parties whose contract is clear” (Graf,254 NY at 4-5 ).2
Guided as it is by the foregoing precedents, this court finds that a determination not to modify a mortgage loan by a
In view of the foregoing, the defendants’ motion for summary judgment on their counterclaims is denied and reverse summary judgment dismissing the defendants’ counterclaims, pursuant to CPLR 3212 (b), is awarded to the plaintiff.
Notes
. The Second Department in Fisher reversed the order of the trial court which reduced the mortgagors’ monthly payments due, among other things, to the trial court’s apparent sympathy for the distressed financial circumstances of the borrowers who were suffering from one or more medical conditions.
. Because the result in Graf is predicated upon a rejection of a resort to equity in aid of a borrower, it has its detractors (see Di Matteo v North Tonawanda Auto Wash,