United States District Court, D. Massachusetts
MEMORANDUM AND ORDER
DOUGLAS P. WOODLOCK UNITED STATES DISTRICT JUDGE
a civil action between plaintiff Francine Regal and defendant
Wells Fargo Bank, N.A. (apparently misidentified in the
Complaint as Wells Fargo Corporation), in which Regal alleges
that Wells Fargo violated federal and state laws in its
mortgage and subsequent foreclosure of a property she owned.
Wells Fargo has filed a motion to dismiss Regal's
complaint pursuant to Rule 12(b)(6) for failure to state a
claim upon which relief may be granted.
Regal is the owner and occupant of a home in Everett,
Massachusetts. [Regal Complaint, Dkt. No. 1, Exh. 1, ¶
1]. In August of 2004, she borrowed money from Lighthouse
Mortgage secured with an adjustable-rate mortgage on the
property. [Id. ¶ 5]. The terms of this mortgage
included a fixed rate of 4% for one year, followed by an
adjustable rate thereafter. [Id. ¶ 6]. The
plaintiff asserts that the loan amount of $396, 000 exceeded
the value of the property, and, without providing any
figures, that the monthly payments exceeded 50% of her
monthly income. [Id. ¶ 6]. Wells Fargo
contends, however, and the plaintiff does not dispute the
underwriter's appraisal, that the house was worth $420,
000 at the time of the mortgage, and provides a worksheet
with an estimate to support the contention. See
Wells Fargo Memorandum in Support of Motion to Dismiss,
203(K) Maximum Mortgage Worksheet, Dkt. No. 8, Exh.
the first year, the rate of the mortgage was adjustable by
the mortagee, Lighthouse. The rate was pegged to the United
States Treasury Securities weekly average yield rate with a
constant maturity of one year. [Wells Fargo Memorandum in
Support of Motion to Dismiss, Dkt. No. 8, 3]. This rate was
then added to a fixed baseline of 2.25%. [Id.]. At
some point, Lighthouse Mortgage was acquired by Wells Fargo
Bank, N.A., the defendant in this action, which assumed
control over Regal's mortgage in the process.
thereafter defaulted on the mortgage. [Id.]. In an
effort to rehabilitate the mortgage, she submitted a Home
Affordable Mortgage Program (“HAMP”) loan
modification application to Wells Fargo on June 20, 2011.
[Id.]. Wells Fargo denied the HAMP application on
February 20, 2012, providing Regal with nothing by way of
explanation. [Compl. ¶ 13]. Wells Fargo did, however,
offer a repayment plan for the loan, an offer that was
rejected by Regal. [Id.]. Wells Fargo then commenced
foreclosure proceedings. On May 8, 2014, Regal filed the
complaint initiating this action in the Middlesex County
Superior Court. On June 9, 2014, Wells Fargo removed the case
to this Court.
complaint alleges three claims for relief. The First Claim
for Relief alleges that Wells Fargo violated its duties under
HAMP and its Servicer Participation Agreement with the United
States Department of the Treasury; Regal alleges that in this
connection she was injured as a third-party beneficiary of
the Agreement. The Second Claim seeks relief under
Massachusetts General Laws Chapter 93A § 9. Regal
alleges that Wells Fargo's failure to modify her loan
under HAMP guidelines was an unfair and deceptive business
practice giving rise to liability under Chapter 93A.
Regal's Third Claim for Relief alleges that Wells Fargo
violated Chapter 93A § 2 in offering the loan
originally, because the loan, as structured, was and is
predatory within the meaning of Massachusetts consumer
protection laws. I will address all three claims, although in
the opposition memo, plaintiff's counsel only presses the
first. I take a comprehensive approach not only in the
interests of completeness, but also specifically because the
disbarment of plaintiff's attorney for misconduct in
other mortgage foreclosure matters, see Note 4
infra, raises the specter of inadequate assistance
of counsel in this case and consequently more judicial
attentiveness appears warranted.
order to survive a motion to dismiss pursuant to Fed.R.Civ.P.
12(b)(6), “a complaint must contain sufficient factual
matter, accepted as true, to state a claim to relief that is
plausible on its face.” Ashcroft v. Iqbal, 556
U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009)
(citation and internal quotation marks omitted).
“[W]here the well-pleaded facts do not permit the court
to infer more than the mere possibility of misconduct, the
complaint has alleged - but it has not ‘show[n]' -
‘that the pleader is entitled to relief.'”
Maldonado v. Fontanes, 568 F.3d 263, 269 (1st Cir.
2009) (quoting Iqbal, 129 S.Ct. at 1949). I
“must accept all well-pleaded facts alleged in the
Complaint as true and draw all reasonable inferences in favor
of the plaintiff.” Watterson v. Page, 987 F.2d
1, 3 (1st Cir. 1993). While I am “generally limited to
considering facts and documents that are part of or
incorporated into the complaint, ” I “may also
consider documents incorporated by reference in the
[complaint], matters of public record, and other matters
susceptible to judicial notice.” Giragosian v.
Ryan, 547 F.3d 59, 65 (1st Cir. 2008) (citation and
internal quotation marks omitted) (alteration in original);
see also Note 1 supra.
Third-Party HAMP Claim
First Claim for Relief, Regal asserts that she is an intended
third-party beneficiary of the Service Participation
Agreement Wells Fargo signed to recognize its undertaking
with Treasury to abide by HAMP guidelines in restructuring
eligible loans. She argues that, because she met the
requirements for eligibility under HAMP, Wells Fargo's
refusal to modify her loan constitutes a violation of HAMP
and a breach of the SPA. Attendant on this argument is the
proposition that, if the denial of refinancing is indeed a
violation, then, as an intended third party beneficiary of
the SPA, Regal is entitled to damages as a result of Wells
Fargo's purported breach.
order to analyze Regal's claim, it will be useful first
to examine the history of HAMP and its related programs. HAMP
is a subpart of the Making Home Affordable Program, enacted
in February 2009 as part of the government's response to
the financial crisis. “The goal of HAMP is to provide
relief to borrowers who have defaulted on their mortgage
payments or who are likely to default”; this is to be
done by reducing mortgage payments to sustainable levels,
without discharging any of the underlying debt.”
Bosque v. Wells Fargo Bank, N.A., 762 F.Supp.2d 342
(D. Mass. Jan. 26, 2011).
banks that owned or serviced home mortgages (including Wells
Fargo) agreed to modify terms of eligible mortgages in
exchange for billions of dollars from the United States
government through the Trouble Asset Relief Program
(“TARP”). In order to qualify to participate in
the program for loans not owned, securitized or guaranteed by
Fannie Mae or Freddie Mac (i.e. owned, securitized, or
serviced by financial institutions that are not
government-sponsored enterprises (“GSEs”) like
Fannie Mae and Freddie Mac), these banks were required to
sign Servicer Participation Agreements (“SPAs”)
that committed the banks to certain standards with respect to
refinancing of eligible loans in exchange for incentive
payments for successful refinancings. The SPAs are contracts
between each bank and the Department of the Treasury, which
promulgates rules under HAMP as to how banks should refinance
home mortgages so as to avoid unnecessary foreclosures. The
banks solicit refinancing applications from
potentially-eligible individual mortgagors, and make a
determination as to whether or not to offer them refinancing.
question of what rights HAMP gave individual homeowners was,
at the outset, not well understood. At least one
Massachusetts Superior Court Judge concluded that homeowners
seeking to refinance their mortgages under HAMP guidelines
were intended third-party beneficiaries to SPAs between
Treasury and banks. See Parker v. Bank of Am., N.A.,
No. 11-1838, 2011 WL 6413615 (Mass. Super. Ct. Dec. 16,
2011). However, that interpretation, as recognized by the
Superior Court judge in Parker, id. at 7,
stands contrary to the consensus among courts in this
District and elsewhere that Congress never intended to give
homeowners a private right of action under HAMP or any of its
related programs. “Although HAMP was generally designed
to benefit homeowners, it does not follow necessarily that
homeowners like the plaintiff are intended third-party
beneficiaries of the contracts between servicers and the
government.” Teixeira v. Fed. Nat'l Mortg.
Ass'n, No. 10-cv-11649, 2011 WL 3101811, at *2 (D.
Mass. July 18, 2011) (citing Klamath Water Users
Protective Ass'n v. Patterson, 204 F.3d 1206, 1212
(9th Cir. 1999)).
First Circuit adopted this consensus approach in
MacKenzie v. Flagstar Bank, FSB, 738 F.3d 486 (1st
Cir. 2013), where the MacKenzies, commenced an action against
Flagstar Bank after the bank initiated foreclosure
proceedings against them.
First Circuit concluded that HAMP did not provide a private
right of action to aggrieved borrowers. The court decided
that the standard HAMP SPAs do “‘not give any
indication that the parties intended to grant qualified
borrowers the right to enforce the contract.'”
MacKenzie, 738 F.3d at 492 (1st Cir. 2013) (quoting
Teixeira, 2011 WL 3101811, at *2).
approach aligns with the general presumption that government
contracts ordinarily do not give private citizens the right
to sue as third-party beneficiaries. As a result, “it
would be unreasonable for a borrower to rely on the HAMP
guidelines as evidence of intent to extend a right of
enforcement to third-party beneficiaries. . . .”
Markle v. HSBC Mortg. Corp. (USA), 844 F.Supp.2d
172, 182 (D. Mass. July 12, 2011). If homeowners “were
third-party beneficiaries, every homeowner-borrower in the
United States who has defaulted on mortgage payments or is at
risk of default could become a potential plaintiff.”
case is no exception. The SPA Wells Fargo signed with
Treasury, Fannie Mae and Freddie Mac, included a provision
identifying those to whom the agreement applies. The SPA here
was expressly intended to “inure to the benefit of and
be binding upon the parties to the Agreement and their
permitted successors-in-interest.” Nothing in the
contract at issue, and nothing in HAMP more generally,
provides a basis for concluding that servicers, banks or the
government intended that homeowners like Regal were entitled
to sue under HAMP or the SPAs. Regal may have sought to
benefit from the contract between Treasury and Wells Fargo,
but there is nothing to indicate that she was an intended
beneficiary, with an interest cognizable in litigation.
Therefore, to the extent that she relies on HAMP directly for
any particular federal cause of action, such a claim fails,
and must be dismissed.
question whether violations of HAMP guidelines can serve as
part of the underlying basis for a separate state law claim,
however, is a distinct matter to which I now turn.
Massachusetts General Laws Chapter 93A Claim
complaint, Regal asserts two separate claims - (1) a HAMP
violation and (2) a predatory loan violation - under Chapter
93A of the Massachusetts General Laws. Overall, Chapter 93A
is a consumer protection law that prohibits “unfair or
deceptive acts or practices in the conduct of any trade or
commerce.” Mass. Gen. L. c. 93A § 2. The statute
provides a private right of action for individuals to assert
claims if they believe they have been wronged by such a
deceptive practice. Id. at § 9. “Chapter
93A is ‘a statute of broad impact which creates new
substantive rights and provides new procedural devices for
the enforcement of those rights.'” Kattar v.
Demoulas, 433 Mass. 1, 12, (2000) (quoting Slaney v.
Westwood Auto, Inc., 366 Mass. 688, 693 (1975). What is
unfair or deceptive requires careful analysis;
“Massachusetts courts ...