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Financial Services Law Insights and Observations

Massachusetts Federal Court Denies Servicer Motion to Dismiss UDAP Claim for HAMP Violation

State Issues

On April 4, a Massachusetts federal court denied a mortgage servicer’s motion to dismiss a complaint that the servicer’s failure to timely comply with a request for modification under the federal Home Affordable Modification Program (HAMP) gave rise to a violation under Massachusetts’ unfair and deceptive trade practices statute (Chapter 93A). Morris v. BAC Home Loans Servicing, L.P., No. 1:10-11572 (D. Mass. Apr. 4, 2011). In this case, plaintiffs alleged that the defendant violated Chapter 93A when it failed to evaluate or respond to the plaintiffs’ request for a modification under HAMP. The defendant moved to dismiss, arguing that HAMP does not provide for a private right of action and that, therefore, the plaintiffs had failed to state a claim. The court disagreed, reasoning that a violation of HAMP would be actionable under Chapter 93A if the violation was unfair or deceptive and that recovery under Chapter 93A would be compatible with the objectives and enforcement mechanisms of HAMP. However, the court found that the plaintiffs had failed to plead sufficient facts to make the showing that the defendant’s alleged violations of HAMP rose to the level of unfair or deceptive. As a result, the court denied the motion to dismiss, and instructed the plaintiffs to amend the complaint within 30 days.

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