The HAMPer Is Getting Full

Add this case to the laundry list of Home Affordable Modification Program ("HAMP") complaints that the United States District Court for the District of Maryland has thrown in the HAMPer.  Rhodomoyer v. Wells Fargo Bank, RDB 12-3806 is useful because it cites the numerous cases which have, in the Court's words, "uniformly held that relief cannot be granted to private plaintiffs alleging HAMP violations."  We have reported on some of these cases previously as these decisions have been rendered, and they include Goss v. Bank of America, CCB-12-2680 (Jan. 8, 2013); Farasat v. Wells Fargo Bank, N. A., WDQ-12-1276 (Dec. 19, 2012); Legore v. OneWest Bank, FSB, L-11-0589 (Oct. 15, 2012);  Spaulding v. Wells Fargo Bank, N.A.; GLR-11-2733 (July 23, 2012); Stovall v. Suntrust Mortg., Inc., RDB-10-2836 (Sept. 20, 2011); Allen v. CitiMortgage, Inc., CCB-10-2740 (Aug. 4, 2011).

What makes this case different?  This decision makes clear that while HAMP does not create a private right of action, it does not preclude such claims either and that "state law claims involving agreements made as part of HAMP" can theoretically be brought.  The problem, of course, is that such state law claims are founded in diversity, not federal question, jurisdiction and plaintiffs seem to be challenged in either pleading a prima facie state law claim or (as in this case) pleading damages that exceed the $75,000 federal diversity jurisdiction requirement. 

Mr. Rhodomoyer (who is pro se) was a little creative and alleged medical costs resulting from a "stress induced illness" that he purportedly obtained while dealing with the bank in its modification program.  Less creative (but perhaps more plausible) he alleged damages resulting from closing costs and home improvements he purportedly made in reliance on HAMP.  Not enough, sir.  The HAMPer is getting fuller by the day.

Another Complaint To Throw In The HAMP-er

                                               Photo: http://www.homedecorators.com/P/Rattan_Elephant_Hamper/

Bob Gaumont co-authored this post. 

In a previous post, we discussed a decision by the U.S. District Court for the District of Maryland that has recently been affirmed by the Fourth Circuit, Spaulding v. Wells Fargo Bank, No. 12-1973 (decided April 19, 2013).  The Fourth Circuit, once again, did not preclude state law claims brought under the Home Affordable Modification Program (“HAMP”).  However, the Court affirmed dismissal of these claims.  In sum, plaintiffs may bring these claims, but they may still not be able to overcome the motion to dismiss hurdle. 

The Plaintiffs in Spaulding alleged five state law claims in response to Wells Fargo’s denial of their application for a mortgage modification under HAMP.  Id. at 8.  The District Court dismissed Plaintiff’s complaint in its entirety.  Id.  The Fourth Circuit affirmed.  Id.

Regarding the first count, breach of implied-in-fact contract, the Court held that the conduct alleged by Plaintiff, which focused on Wells Fargo’s agreement with the U.S. Treasury to participate in HAMP and sending “HAMP Starter Kits” to distressed homeowners, did not constitute the “meeting of the minds” necessary to demonstrate the existence of a contract, implied-in-fact or otherwise.  Id. at 12.  The Starter Kit expressly states that the bank determines if the borrower qualifies.  Such qualifying language made clear that further action was required by Wells Fargo before an offer to Plaintiff would be extended.  Id. at 13.  Where no offer is made, no contract exists.  Id.

The second count (negligence) failed because Wells Fargo did not owe Plaintiff a tort duty.  In Maryland, the Court explained, the relationship between a bank and borrower is “contractual, not fiduciary.”  Id. at 14 (citing Kuechler v. Peoples Bank, 602 F. Supp. 2d 625, 633 (D. Md. 2009)).  Consequently, absent special circumstances, courts resist imposing additional fiduciary duties on a bank that are not provided in the contract or loan agreement between the bank and its customer.  Id.

Plaintiffs also could not impose a duty to process their loan modification application under HAMP because Plaintiffs could not demonstrate the “intimate nexus” required where the failure to exercise due care creates a risk of economic loss only.  Id. (citing Jacques v. First Nat’l Bank of Md., 515 A.2d 756, 759 (Md. 1986)).  The nexus required under Maryland law is satisfied by contractual privity or its equivalent. Id. (citing Jacques, 515 A.2d at 759-60.)  The Court concluded that the nexus did not exist here and distinguished the case from Jacques on the grounds that Wells Fargo never promised Plaintiffs anything and Plaintiffs never provided any consideration to Wells Fargo.  Id. at 16. 

Plaintiffs submitted two weeks of pay stubs with their application for a mortgage modification.  Id. at 17.  Wells Fargo informed Plaintiffs that it needed more documentation and provided a specific deadline for receipt of this documentation.  Id.  Plaintiffs sent the paystubs to Wells Fargo eleven days after they were due.  Id. at 17-18.  As a result, Plaintiffs’ claims under the Maryland Consumer Protection Act (Count III) and Count IV (negligent misrepresentation) failed because Wells Fargo did not make a false representation by requesting additional documentation (paystubs) from Plaintiffs and then later informing Plaintiffs that they failed to provide Wells Fargo with the documents requested because the paystubs were not received by the deadline.  Id. at 19-20.  Count IV also could not stand because, as previously noted, Wells Fargo did not owe a duty of care to Plaintiffs.  Id. at 20.

Finally, regarding Plaintiffs’ fraud claim, the Court held that Plaintiffs failed on every element of that claim.  Id.  

The Fourth Circuit opinion: 

http://www.ca4.uscourts.gov/Opinions/Published/121973.P.pdf