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Homeowners’ Home Affordable Modification Program Case Dismissed

Goss v. Bank of America, N.A.
No.: CCB-12-2680 (D.Md. Jan. 8, 2013)
by Kevin M. Cox, Associate
Semmes, Bowen & Semmes (www.semmes.com)

The Home Affordable Modification Program (“HAMP”) was established to mitigate the 2008 financial crisis. Under HAMP, participating mortgage servicers are promised incentives by the Federal Government if they process mortgage modifications applications under guidelines promulgated by the U.S. Department of Treasury. Servicers agree to enter into Trial Period Plans (“TPP”) with eligible homeowners that may lead to a permanent modification of their mortgage terms to avoid foreclosure. If homeowners meet the HAMP eligibility criteria, then they are entitled to a TPP. The TPP guidelines leave no discretion to the servicer to deny eligible applicants.

Plaintiffs, Robert and Shirley Goss (“the Gosses”), financed their home in Pasadena, Maryland with a mortgage serviced by Bank of America, N.A., (“BANA”) that was recorded in 2007. In December 2010, the Gosses fell behind on their mortgage payments and, on June 21, 2011, were informed that they could submit a HAMP application to BANA, which they did on May 14, 2012. On June 8, 2012, BANA informed the Gosses that their loan modification was approved, subject to a successful completion of a TPP. The TPP only offered to lower the Gosses monthly mortgage payment to $2,634.67, an amount that they could not afford and one that was nearly the same as their regular mortgage payments. Under the HAMP guidelines, based on the Gosses’ calculation, the maximum amount of their modified monthly mortgage payment should have been $1,653.00. Therefore, the Gosses alleged in their Complaint against BANA that the TPP violated the terms of HAMP, and that they could not accept it because it would not have improved their circumstances.

In light of BANA’s failure to offer an allegedly valid TPP, the Gosses filed suit alleging a variety of state law claims, including the following: (1) violation of the Maryland Consumer Protection Act (“MCPA”) and fraud; (2) promissory estoppel; (3) breach of implied-in-fact contract; and (4) negligence and negligent misrepresentation.

The MCPA prohibits unfair or deceptive trade practices. The Gosses alleged that BANA violated the MCPA by making a series of false and misleading representations regarding HAMP, the availability of work-out assistance, and the modification they were entitled to under HAMP. The Court held that even if the statements that the Gosses identified in their Complaint could be considered false and misleading, they could not prove that reliance on any of them caused an actual injury. Thus, the Gosses did not state a valid MCPA or fraud claim.

Promissory estoppel offers a vehicle to enforce a promise for which there is no consideration, but the plaintiff nonetheless relied upon the promise to his detriment in circumstances that make it unconscionable not to enforce the promise. The Court held that the Gosses failed to state a claim in their promissory estoppel claim because the only possible basis for such a claim was the June 2011, letter, and that letter did not plausibly include a “clear and definite promise” that BANA would take any action on the Gosses’ mortgage. Rather, it merely offered to assist them in seeking a modification.

Under Maryland law, implied contracts, like all contracts, require mutual assent (offer and acceptance) and an agreement definite in terms, and sufficient consideration. The Gosses did not allege bargained-for-consideration, nor a definite manifestation of mutual assent, sufficient to transform BANA’s letter into a contract; therefore, their count for breach of implied-in-fact contract was denied.

The Gosses negligence and negligent misrepresentation counts were dismissed because the Gosses did not demonstrate that BANA owed them a duty in Court. “Courts have been exceedingly reluctant to find special circumstances sufficient to transform an ordinary contractual relationship between a bank and its customer into a fiduciary relationship or to impose any duties on the bank not found in the loan agreement.” Here, where the letter and subsequent actions of BANA did not even create an enforceable or other nexus between BANA and the Gosses, beyond their mortgage agreement, BANA owed no duty in tort to them in the processing of their HAMP application.