Ninth Circuit Judge Withdraws Fraud Characterization of Bank's HAMP Trial Plan

Mortgage Servicing Mortgage Modification HAMP

On September 23, in a brief order, a judge for the U.S. Court of Appeals for the Ninth Circuit withdrew his concurrence in a recent opinion in which the court held that HAMP Trial Period Plans (TPPs) create a contractual obligation for servicers to offer a permanent modification to borrowers who complete the TPP. Corvello v. Wells Fargo Bank, N.A., Nos. 11-16234, 11-16242 (9th Cir. Sept. 23, 2013). In the concurring opinion, the judge had argued that the bank created the trial plan document for “the fraudulent purpose of inducing [the borrower] to make the payments while the bank retained the option of modifying the loan or stiffing him.” The bank filed a motion for rehearing and asked the court to withdraw the concurrence because the Treasury Department, not the bank, drafted the trial plan document and required its use. Therefore, according to the bank, its actions should not be characterized as fraudulent because it adhered to its obligations by using the required HAMP documents.