Facts: A distressed borrower applied for a loan modification under the Home Affordable Modification Program (HAMP). The lender prepared a trial period plan (TPP) stating the borrower will receive a permanent modification if they make trial modification payments and submit qualifying documents. The borrower successfully made all TPP payments and submitted the required documents. The lender denied the borrower a permanent loan modification. The lender instructed the borrower to continue making TPP payments and the borrower complied. Later, the borrower received a notice of trustee’s sale.

Claim: The borrower sought to prevent the trustee’s sale and collect damages from the lender for breach of contract, claiming the lender was obligated under HAMP to offer a permanent loan modification as the borrower successfully complied with the terms of the TPP.

Counterclaim: The lender sought to hold the trustee’s sale, claiming the TPP was not a binding contract guaranteeing permanent modification, but rather a promise to consider the borrower for permanent modification.

Holding: A California court of appeals held the lender may not hold the trustee’s sale and the borrower is entitled to money damages from the lender since the lender was obligated under HAMP to offer a permanent loan modification when the borrower successfully fulfilled the terms of the TPP. [Bushell v. JPMorgan (2013) __ CA4th__]

Related articles:

If a borrower meets all terms of a trial modification and the lender does not provide notice of failure to qualify, must the lender grant the modification?

Is a lender required to offer a permanent loan modification to a HAMP borrower who successfully completes a trial period plan?