Can you Sue for a HAMP Violation in Massachusetts?

The New Making Home Affordable Handbook (Version 4.2) is an impressive 224 document.  MHA includes the HAMP, principal reduction, and second mortgage modification programs, which, among other things, make certain homeowners eligible for mortgage modifications, forbearance, and in some cases, debt forgiveness.  The servicing guidelines in the handbook are complex but impose duties on servicers to help homeowners in certain circumstances.  People are often denied unjustly what they deserve under HAMP and other MHA programs because servicers do not always follow the guidelines.

In Massachusetts, homeowners have a special avenue to ensure compliance with MHA.  Courts here have found that the failure to follow MHA guidelines can be a violation of the Massachusetts Consumer Protection Act, M.G.L. c 93A.  Courts have generally found that the following must be true for a violation of the MHA/HAMP to be a violation of 93A.

1) You must adequately pled that the defendant violated HAMP;  2) the violations would be independently actionable under Chapter 93A as unfair and deceptive, even absent the statutory provisions; and 3) if the conduct is actionable, any Chapter 93A recovery would be compatible with the objectives and enforcement mechanisms of MHA/HAMP.

Courts have often viewed the MHA guidelines as optional for servicers. However, due to a directive issued by the Treasury Department in 2010, at least under the HAMP guidelines, trial periods are mandatory if the homeowner qualifies, and not simply an option for the servicer to consider.  That is because of the following in Section 3.1.1 of the HAMP chapter of the handbook, which incorporates the directive, says:

"A servicer may not refer any loan to foreclosure or conduct a scheduled foreclosure sale unless
and until at least one of the following circumstances exists: The borrower is evaluated for HAMP and is determined to be ineligible for the program [...]"

Whether the mandatory nature of HAMP will convince courts in Massachusetts to loosen the three-part test for 93A liability is unclear.  However, even under that test, if one can allege facts that the servicer has been generally unfair and deceptive, one can state a claim for a MGL 93A violation for some HAMP violations and bring the servicer to the negotiation table in a very effective way by filing a lawsuit.