Heyman v. CitiMortgage, Inc., Civ. No. 14-1680-KM-MAH
| Decision Date | 27 June 2019 |
| Docket Number | Civ. No. 14-1680-KM-MAH |
| Parties | ABRAHAM S. HEYMAN and GEULA HEYMAN, Plaintiffs, v. CITIMORTGAGE, INC., Defendant. |
| Court | U.S. District Court — District of New Jersey |
I. Introduction
Abraham and Geula Heyman, husband and wife, represented at all relevant times by counsel, have brought this action against their mortgage servicer, Citimortgage, Inc. ("Citi"). On October 5, 2006, the Heymans obtained a $435,000 mortgage at a fixed interest rate of 6.75%. They occupied one part of the mortgaged two-family home, and apparently maintained the other as an income-producing rental apartment.
In 2011, the Heymans stopped making monthly mortgage payments. By September 2012, they were some $62,000 in arrears. At about that time, they proposed a short sale of the property. The reason for seeking a short sale, testified Mr. Heyman, was that his family was growing, and he wished to "walk away" from this mortgage and move to a bigger home. Citi made a proposal pursuant to which a short sale of the property for $235,000 would be deemed to satisfy the outstanding balance of $400,000. The Heymans did not agree because they objected to Citi's requirement that they contribute $5000 in cash.
In mid-2013, with the advice and participation of counsel, the Heymans requested from Citi a loan modification under the Department of Treasury's Home Affordable Modification Program ("HAMP"). In keeping with HAMP guidelines, they were required to make three trial payments during the months of June, July, and August of 2013. Following successful completion of the trial payments, Citi would offer an agreement for permanent modification of the loan.
The Heymans successfully made three HAMP trial payments in the months of June, July, and August of 2013 (as well as a payment in May, the status of which is disputed). Citi therefore presented the Heymans with a proposed modified loan agreement. The Heymans executed the agreement, and the loan was modified as of August 1, 2013. The then-outstanding principal balance was reduced from $516,662.50 to $341,350.80; the interest rate of 6.75% was reduced to 5.25%. The Heymans made one regular payment under the loan modification agreement in September 2013, but made no further payments.
The Heymans make many objections to the effect that the modification agreement they signed was not HAMP-compliant. Chief among them is the objection that the monthly payment calculated by Citi exceeded 31% of their monthly income. They point to inconsistencies in Citi's statements about their monthly income, but have declined to offer evidence or even state what their monthly income was.
In 2014, the Heymans moved out of their portion of the two-family house, and they now live elsewhere. Since then, they have maintained the house as an income-producing property, collecting rent on the two apartments. Except for the payments made in connection with the trial period and loan modification in 2013, they have made no payments of principal, interest, or taxes in the eight years since 2011.
The Heymans' Second Amended Complaint asserts eight causes of action against Citi: (1) violation of the New Jersey Consumer Fraud Act ("CFA"); (2) promissory estoppel; (3) conversion; (4) negligent misrepresentation; (5) breach of contract; (6) unjust enrichment; (7) slander of title; and (8) violation of the Real Estate Settlement Procedures Act ("RESPA"). The Heymans allege primarily that they were orally promised a 2% interest rate, but the written loan modification agreement they signed imposed a rate of 5.25%; that the monthly mortgage payment exceeded 31% of the Heymans' monthly gross income, in violation of HAMP guidelines; that late fees were not waived; and that an appraisal fee should not have been assessed.
Before the Court are two motions filed by Citi:
(1) a motion for summary judgment (DE 104); and
(2) a motion to assign rental income, or, in the alternative, to appoint a rent receiver (DE 103).
For the following reasons, Citi's motion for summary judgment is granted. Citi's motion for the assignment of rental income, or to appoint a rent receiver, is denied.
II. Home Affordable Modification Program (HAMP)
Before addressing the merits, I provide some background on HAMP and its guidelines, which governed the terms of the loan modification granted by Citi in 2013.
In response to the downturn in the financial markets in 2008, Congress enacted the Emergency Economic Stabilization Act of 2008 ("EESA"). P.L. 110-343, 122 Stat. 3765, 12 U.S.C. §§ 5201-5261; see Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547, 556 (7th Cir. 2012). The "centerpiece" of the EESA "was the Troubled Asset Relief Program (TARP), which required the Secretary of the Treasury . . . to 'implement a plan that seeks to maximize assistance for homeowners and . . . encourage the servicers of the underlying mortgages . . . to take advantage of . . . available programs to minimize foreclosures." Wigod, 673 F.3d at 556 (quoting 12 U.S.C. § 5219(a)).
In February of 2009, the Secretary of the Treasury set aside $50 billion in TARP funds to induce lenders to refinance mortgages with more favorable interest rates to help homeowners avoid foreclosure. Id. The Secretary negotiated Servicer Participation Agreements with home loan servicers. Under those agreements, servicers agreed to identify homeowners in default and to modify those homeowners' loans under the program. Id. For each modification, loan servicers received a $1,000 payment, as well as other incentives. Id.
Also in February of 2009, "President Obama announced the Homeowner Affordability and Stability Plan . . . which spawned the Home Affordable Modification Program ('HAMP') managed jointly by the Treasury Department and the Department of Housing and Urban Development." Thomas v. U.S. Bank Nat. Ass'n, 474 B.R. 450, 452 (D.N.J. 2012) (internal citations omitted). HAMP is one of four foreclosure mitigation programs instituted under the Treasury Department's and HUD's Making Home Affordable program ("MHA"). Id.
Under HAMP, participating lenders will modify the terms of a loan for a borrower that meets certain criteria, pursuant to a three-step process:
First, the servicer confirms that the mortgagee meets the threshold income and property-related requirements. Id. at 455.
Second, the servicer calculates the modification using a "waterfall" method "that is designed to downwardly adjust the monthly mortgage payment to around 31 percent of the mortgagee's income." Id. The order of operations in the waterfall method is to (1) capitalize accrued interest and escrow advances to third parties; (2) reduce the annual interest rate to as low as two percent; (3) extend the term up to 40 years and re-amortize the loan; and (4) if necessary, forbear repayment of principal until the loan is paid off and waive interest on the deferred amount. Wigod 673 F.3d at 557 n.1 (citing U.S. Dep't of the Treasury, Home Affordable Modification Program Supplemental Directive 09-01 (Apr. 6, 2009)).
Third, the servicer applies the "net present value (NPV) test to determine if the modification would be more profitable to the servicer than foreclosure." Thomas, 474 B.R. at 455 (citation omitted). If the value of the modified mortgage is lower than the servicer's expected return after foreclosure, then the servicer is not obligated to offer a loan modification. Id.; see also Wigod, 673 F.3d at 557.
A borrower will qualify for HAMP only if the interest rate on the mortgage loan can be reduced by at least 0.125 percent without the modified monthly mortgage payment ratio going below 31 percent. If the servicer cannot reduce the borrower's monthly mortgage payment ratio to the target of 31 percent, the modification will not satisfy HAMP requirements and no incentives will be payable in connection with the modification.
Phipps v. Wells Fargo Bank, N.A., 2011 WL 302803, at *10 (E.D. Cal. Jan. 27, 2011) (quoting Making Home Affordable Program, Handbook for Servicers of Non-GSE Mortgages Version 3.0, § 6.3).
Once a borrower is qualified for a HAMP loan modification, the modification process itself proceeds through two stages. Wigod, 673 F.3d at 557. After determining that a borrower is eligible under HAMP, the borrower and servicer enter a "trial period" of three months or more. During the trial period, the provisional loan repayment terms consist of those formulated by the servicer using the waterfall method. Id. at 557. If the borrower meets his or her obligations during the trial period, then the servicer may offer a loan modification that is permanent. See Sinclair v. Citi Mortgage, Inc., 519 F. App'x 737, 738 (3d Cir. 2013); Wigod, 673 F.3d at 554.
A servicer's participation in the Department of Treasury's program "is governed by a set of guidelines (referred to as 'the HAMP Guidelines') that apply to those servicers who executed a Servicer Participation Agreement ('SPA') in exchange for federal funds." Thomas, 474 B.R. at 454 (citation omitted). Servicers that do not comply with HAMP Guidelines "may be held in default of their obligations under the SPA." Id.; see also Rost v. Avelo Mortgage, LLC, 2015 U.S. Dist. LEXIS 148703, at *16 (D.N.J. 2015). III. Facts and Procedural History1
On Citi's motion for summary judgment, the Court is required to identify undisputed and disputed issues of fact, and to interpret disputes in favor of the Heymans. Unless otherwise indicated, the facts recited below are undisputed for purposes of Fed. R. Civ. P. 56.
On October 5, 2006, GFI Mortgage Bankers, Inc. ("GFI") provided the Heymans with a loan in the amount of $435,000.00. (DSMF ¶1; PRS ¶1). The loan is evidenced by a promissory note, signed by Mr. Heyman. . The Note is secured by a mortgage, signed by Mr. and Mrs. Heyman, with GFI as mortgagee. (DSMF ¶2; DE 104-4 (Nov. 29, 2017 Deposition of Abraham Heyman, 70:14-25, 71:1-3,...
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