MINNEAPOLIS (CN) – A $75 billion federal program meant to protect homeowners from foreclosure falls far short of its goals and denies applicants the chance to appeal or correct errors or misinformation, according to a federal class action against Treasury Secretary Timothy Geithner. The class wants all Minnesota foreclosures of mortgages owned by Fannie Mae or Freddie Mac enjoined.
The class also wants to stop all foreclosures on mortgages owned by mortgage loan servicers who have agreed to participate in the federal Home Affordable Modification Program.
Named as defendants with Geithner are the Federal Housing Finance Agency, the Federal Home Loan Mortgage Corp., the Federal Home Loan Mortgage Association, Ocwen Loan Servicing, and GMAC Mortgage.
Named plaintiffs Nichole Williams and Johnson Sendolo say they both had good jobs when they entered into their mortgage agreements; both lost their jobs as a result of the global economic crisis.
Both found new jobs, but in the interim had fallen behind on their mortgage payments and needed some form of loan modification to make their payments sustainable. Despite meeting all the requirements for the federal program, both say they were denied program benefits without explanation or being given an opportunity to appeal.
As a result, Sendolo’s home has been sold at a sheriff’s auction; Williams, a mother of two, continues to face foreclosure.
The class claims there are several problems with the Home Affordable Modification Program.
While the enabling legislation and implementing guidelines say that eligible and qualified homeowners “shall” receive a loan modification, it denies them the most fundamental due process protections: notice of the basis for a decision and an opportunity to appeal, the class claims.
The program does not require that homeowners be given any notice of a denial at all, the complaint states. And when the frustrated applicants’ homes have been sold, there’s no formal or uniform method to undo the wrongful foreclosure.
The plaintiffs are represented by Mark Ireland of the Foreclosure Relief Law Project in St. Paul.