A class action has been filed in the federal court in New York against a mortgage servicer, Saxon Mortgage Services, Inc., for failing to fulfill its obligations under the federally sponsored HAMP (Home Affordable Modification Program) to homeowners in financial distress. The lawsuit is brought on behalf of plaintiffs Ranujoy and Deborah Pandit and a nationwide class of homeowners who sought loan modifications.
The Pandits, who live in Long Island, sought a loan modification in October 2008. After giving them a runaround for several months through ill-informed and ill-trained representatives who routinely misled them, Saxon offered them a trial period with reduced payments. Under the HAMP program, this trial period was to be for 3 months, at the end of which the loan had to be modified. On numerous occasions, when the Pandits inquired about the status of their application, Saxon’s representatives demanded re-submission of essentially the same information and documentation. The Pandits dutifully responded to every one of these demands; they sent and re-sent documentation, and completed the same financial package, at least three times. After about a year, Saxon denied their application - but advised them to apply again.
Servicers have significant incentives to avoid modifying the loan under HAMP, according to the lawsuit. Servicer fees depend on the unpaid principal balance; therefore, any reduction in loan amounts in turn reduce the servicer’s fees. Besides, the servicers pocket all late fees, inspection fees, and other related delinquency charges, and stand to profit handsomely by keeping the mortgages in a state of default. And of course, meeting HAMP obligations requires significant overhead expenses such as training adequate staff and providing necessary resources.
Thus, despite receiving $65.8 million of taxpayer funds – and a commitment of an additional $634 million - from the United States government to assist homeowners avoid foreclosure, Saxon nonchalantly failed to even bother setting up a proper system with adequately trained staff to meet its obligations. Instead, Saxon routinely and systematically misled hapless homeowners into making monthly “trial” payments far beyond the trial period contemplated under HAMP, and into repeatedly sending and resending copies of documents, by fostering the mistaken belief that Saxon was considering their applications in good faith. After all this, however, Saxon refused to modify their loans - and advised them to apply again.
HAMP has been widely viewed as a failure primarily due to the banks and mortgage servicer’s failure to cooperate. As of June 30, 2011, for example, Saxon had used less than 20% of these funds from TARP ($12.25 million) to subsidize homeowners, the primary intended beneficiaries of HAMP. In contrast, Saxon pocketed a hefty 45% ($29,456,450) of these TARP funds for itself, and used 37% to benefit its investors ($24,114,854).
Saxon Mortgage has moved the Court to dismiss the lawsuit. In essence, Saxon Mortgage has claimed that the Trial Period Plan Agreements that it entered into with homeowners is not enforceable, and that since homeowners did not sign the Servicer Participation Agreement, they cannot enforce it. Saxon has also asserted that it did not violate New York's deceptive trade practices statute or the Equal Credit Opportunity Act. Plaintiffs filed their opposition papers on Monday, October 24, 2011. After Saxon submits its reply papers, the motion will be taken under consideration by the Court.
This site is to provide up-to-date information about this lawsuit, and material developments will be posted here contemporaneously.
For further details contact: Chittur & Associates, P.C., at kchittur@chittur.com