Lender’s Refusal To Modify Loan May Have Violated Borrowers’ Fifth Amendment Due Process Rights, Says Federal Judge In Denying Motion To Dismiss

In San Diego, California, iStockAnalyst reports on a recent ruling by a Federal judge denying a motion to dismiss filed by a foreclosing lender in a lawsuit alleging that it failed to grant a loan modification to a delinquent homeowner pursuant to the Federal government's Home Affordable Modification Program ("HAMP").

• The case involves non-judicial foreclosure proceedings on a single family home in Ramona, California. The borrower defaulted on the mortgage in November 2007. In February 2008, a notice of default was recorded and served. And in December 2008, a notice of sale was recorded and served, setting a date for the public auction of borrower's home. The borrower has alleged that their Fifth Ammendment rights to due process have been violated, and a federal court has refused to dismiss the case.

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• The most interesting aspect of the case is that the borrower alleges that the lender violated their Fifth Amendment procedural due process rights, even though the Fifth Amendment only applies to governmental actions, not those of private corporations. The court, in refusing to dismiss the complaint, agreed that in some circumstances the Fifth Amendment does apply to private entities, so long as there is sufficient nexus between the government and the private entity.

For more, see Federal Court: Denial of Loan Modifications May Constitute Violation of Fifth Amendment.

See also: Calculated Risk: HAMP Loan Modifications and the Fifth Amendment.

For the ruling, see Huxtable, et ano. v. Geithner, et al. (available online courtesy of Foreclosure Combatant).

Thanks to mortgage servicing fraud watchdog Mike Dillon at GetDShirtz.com for the heads-up on the court case.