Minnesota Federal Judge Dismisses Suit Seeking To Block Foreclosures Alleging Due Process Violations In HAMP Program

In Minneapolis, Minnesota, The Wall Street Journal reports:

• Borrowers don’t have a legal entitlement to loan modifications. That was the conclusion of a federal judge who this week dismissed a lawsuit filed by Minnesota homeowners seeking to block foreclosures.(1) The decision was a setback to struggling borrowers who have turned to the courts in an effort to get help under the Obama administration’s housing rescue plan.

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• The lawsuit, which was filed in U.S. District Court in Minnesota and sought class action status, alleged that the Obama administration’s foreclosure prevention plan violated borrowers’ constitutional rights because homeowners who were denied help under the program weren’t given a written denial and an opportunity to appeal. The action sought to halt foreclosures on homeowners eligible for the Obama plan until the government put in place certain procedural safeguards, such as creating a formal appeals process. In a decision Monday, U.S. District Court Judge Ann Montgomery said that Congress did not make loan modifications an entitlement. In addition, the Treasury Department gave mortgage companies some discretion in evaluating borrowers for help, the decision said.(2)

For more, see Minnesota Judge Delivers Setback to Struggling Homeowners.

(1) See Williams, et al. v. Geithner, et al.: Order denying Plaintiffs' Motion for Preliminary Injunction. For more information on the Minnesota lawsuit or to read the filed documents, click here.

(2) According to the story, Mr. Ireland, an attorney with the Housing Preservation Project, said that the administration has taken several steps to improve the process since the lawsuit was filed. In October, for instance, the Treasury Department issued guidelines that require mortgage companies to provide borrowers a written notice of denial within 10 days. Earlier this month, it required that mortgage companies stop foreclosures when a borrower challenges the denial and provides specific denial information, including some of the data used to evaluate the borrower for help.