Mortgage Modification Agreement is a Valid Contract

Too often homeowners seeking mortgage modifications comply with the requirements of a trial modification, only to find that their mortgage company has refused to modify the mortgage terms. The case of Bloc v. Seneca Mortgage Servicing, could be the beginning of the end of such a frustrating process for homeowners.

mortgageFlorence Block, a New Jersey homeowner, defaulted on her $580,000 loan leading to the commencement of a foreclosure action in January 2013. During the foreclosure action, Mrs. Block came to an agreement with Seneca Mortgage Servicing that would lower her monthly payment if she made six consecutive payments on time, along with a deposit. After completing the obligations under the agreement, Mrs. Block found that the loan was sold and the servicing was transferred to Ocwen Loan Servicing.

After Ocwen’s initial refusal to honor the modification agreement, Mrs. Block’s counsel persuaded the servicer into accepting the agreement using proof of the full compliance with the agreement with Seneca. To Mrs. Block’s dismay, Ocwen never followed through with the agreement. The loan was then transferred to a third servicing company, Fay Servicing. Mrs. Block then filed claims against all three companies for breach of contract along with violations of several state and federal consumer protection acts. After successful motions to dismiss on the federal claims, the judge reviewed the breach of contract claims.

In reviewing the breach of contract claims, the judge ruled against several Fifth and Seventh circuit cases holding that no contract existed in a loan modification existed. The former cases relied on the theory that the plaintiff did not provide proper consideration in establishing a contract, because they are performing a pre-existing obligation to the defendant. However, the judge in this case found that there was a proper contract, and therefore a breach of contract ensued. The Plaintiff was awarded damages resulting from the breach because they had performed their contractual obligations.

The attorney for the Plaintiff noted that tens of thousands of people are in the same situation as Mrs. Block. This case could go a long way to preventing the common practice of mortgage servicers not following through with agreements in a mortgage modification agreement.

The foreclosure process can be difficult and confusing to homeowners. The Law Offices of Hunziker, Jones & Sweeney assists those who are facing the crisis of foreclosure. If you are facing foreclosure, contact the firm at (973) 256-0456 to explore your legal options.

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