In Block v. Seneca Mortgage (3:16-cv-00449) the Plaintiff/Homeowner asserts that her loan servicer’s failure to offer a permanent modification after her successful completion of a trial modification was breach of contract. U.S. District Judge Freda Wolfson denied a motion to dismiss the claim and determined that the elements of a breach of contract were evident.
The facts of the case suggest that the reason for the eventual permanent modification denial was a service transfer but the takeaways are clear. While the underlying goal of a trial modification offer is a permanent resolution, servicers and investors must protect themselves. Trial modifications require not only payment according to their terms but additional documentation and certifications. These requirements should be clearly explained within the trial modification so a permanent mod denial on the basis of failure to provide the same is not deemed breach of contract on the lender’s part.
Written By Adam J. Friedman