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Ely
Ely, Counselor at Law
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In Massachusetts, there is a mortgage contract (called Contract

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In Massachusetts, there is a mortgage contract (called Contract I). Homeowner was getting to the point where it was impossible to make $3800 monthly payments
The mortgage company suggested the Homeowner take out a government inspired HAMP loan. Homeowner filled out the requisite paperwork and followed the terms of this new contract, (called Contract II). The terms of the HAMP loan called for reduced monthly payments to $2700, that after making 3 consecutive payments of $2700, this would be become the new term for repayment of the mortgage, and that the mortgage contract would be considered current.
Homeowner made the requisite three consecutive payments. Homeowner then made 6 additional monthly payments under the new price term. In the 7th month, the Mortgage company wrote and said the investor behind the HAMP loan denied the contract (Contract II)---AND the mortgage company subsequently REFUSED to take any further payments from the homeowner.
In addition, the Mortgage Company took the the some $20,000+ payments made under the terms of the HAMP contract (Contract II) and placed it in an escrow account, rather than taking it as mortgage payments under Contract II.
The Mortgage company has taken the money paid under the terms of Contract II and has arbitrarily applied those funds to pay off part of the price term of Contract I.
The legal question (s) are:
1) Under these circumstances, what legal argument can the Homeowner present stating that the money paid to the HAMP contract (Contract II) was wrongfully applied by the Mortgage company to the original Mortgage contract (Contract I)--as they are two separate contracts---and that the money should be returned to the Homeowner with interest?
2) Can the Mortgage company arbitrarily cancel a HAMP mortgage contract --and refuse to accept further payments---when the Homeowner made the requisite three initial payments, and a subsequent 6 additional payments, on the grounds that its investor denied the contract?
Submitted: 5 years ago.
Category: Legal
Expert:  Ely replied 5 years ago.
Hello,

Welcome to JustAnswer and thank you for the opportunity to assist you. Please remember that there might be a delay between your follow up questions and my answers because I may be helping other clients or taking a break.

1) Under these circumstances, what legal argument can the Homeowner present stating that the money paid to the HAMP contract (Contract II) was wrongfully applied by the Mortgage company to the original Mortgage contract (Contract I)--as they are two separate contracts---and that the money should be returned to the Homeowner with interest?

There really is no legal argument here for the homeowner. They money would be applied to the payment, be it interpreted under Contract I or Contract II.

2) Can the Mortgage company arbitrarily cancel a HAMP mortgage contract --and refuse to accept further payments---when the Homeowner made the requisite three initial payments, and a subsequent 6 additional payments, on the grounds that its investor denied the contract?

This cannot be done. Homeowner signed a contract with the mortgage institution. Institution cannot breach contract for the Home Affordable Modification program(unless the new contract has a clause that states that upon the underwriter withdrawing support, the contract is voided - check carefully!), and and the underwriter's withdrawal is the Institution's problem, and not Homeowner's.

So what to do? The Homeowner needs to write a certified letter to the Institution advising them of said stand and threaten suit unless they reinstate HAMP.

In this case, the Homeowner would have the right to sue for the tort of breach of contract. The elements for this tort are: (1) an agreement was made between the plaintiffs and the defendant supported by valid consideration; (2) the plaintiffs have been ready, willing, and able to perform; (3) the defendant's breach has prevented them from performing; and (4) the plaintiffs have suffered damage. Singarella v. City of Boston, 342 Mass. 385, 387, 173 N.E.2d 290, 291 (Mass.1961).

The homeowner may also then request a motion for temporary orders enjoining the Institution from filing for foreclosure and forcing it to apply the amount in escrow to Contract II and take payments in Contract II's amount, while the matter is pending.

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