Invocation of Government Programs and Stipends in Defense of Foreclosure

Invocation of Government Programs and Stipends in Defense of Foreclosure - HAMP Program

From time to time, as societal and economic issues have warranted, the federal government has become involved in relief efforts intended to render assistance to struggling homeowners fighting foreclosure. Among recent examples are the moratorium on foreclosure and evictions occasioned by the COVID pandemic.[1]

Also, stemming from the mortgage meltdown of 2008 and beyond, the Home Affordable Modification Program (HAMP) allowed for the deceleration of loans in foreclosure, and compulsory refinancing on terms more favorable to the mortgagee, provided that mortgagors met certain financial conditions, including specific income-to-payment ratio, and loan-to-value ratio criteria.[2] For those not qualified, an alternative called the Home Affordable Refinance Program, or HARP, involving refinancing of delinquent mortgages, as the name suggests, even where the homeowners were “underwater” on the LTV ratio.[3]

The compulsory aspect of requiring a given mortgage holder to comply with HAMP was the subject of some jurisprudential controversy. After all, the government was not, strictly speaking, a party to the originating mortgage transaction, so how could a mortgage lender be forced to accept the terms imposed by the federal government? Many institutional lenders sounded of sanctimony in claiming undue government interference and overreaching,[4] though they weren’t necessarily complaining when the government bailed them out in promulgating TARP.[5] Indeed,  the mortgage lenders were the beneficiaries of extensive government funding in association with the bailout of the financial sector in general under TARP[6], under which the HAMP program was promulgated. Ultimately, the Courts determined that the mortgage lender was a third-party beneficiary under HAMP, and thereby bound to accept the terms thereof in the Wigood case in particular, and the denouement of the controversy in general.[7]

The bad news for defaulting homeowners is that HAMP and HARP are no longer in effect, and the relief protocols enforcing a moratorium on foreclosures have terminated as of July 31st, 2021.[8] The good news is that there’s already a move afoot to implement new relief programs in the aftermath of the COVID-created financial woes.[9] And, of course, the same legal principles deriving from the Wigood case are still valid, and presumably dictate that we will be able to avail our clients of them. Stay tuned as a new round of distressed property litigation commences.



[3] Id.

[4] Wigood vs Wells Fargo Bank, N.A., 673 F.3d 547 (7th Cir. 2012)



[7] Wigood vs Wells Fargo Bank, N.A., 673 F.3d 547 (7th Cir. 2012)


[9] Id.

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