Like millions of Americans, Minneapolis resident Connie Gretsch lost her job, fell behind on her mortgage, and found herself facing foreclosure.   Unlike many others, however, Ms. Gretsch knew of a federal program that could help her avoid foreclosure, and she asked her loan servicer to consider her for the program. The loan servicer refused, however, despite having signed a contract with the federal government to consider homeowners for the program before foreclosing.  Instead, the servicer simply foreclosed.

This story is unfortunately all too common. The federal government’s Home Affordable Mortgage Program, commonly referred to as HAMP, should be able to keep millions of families in their home, by restructuring mortgages so payments are reduced and foreclosure is avoided. Many homeowners, however, have lost out on their chance under HAMP, frequently because loan servicer companies have routinely ignored their commitments to the federal government to process homeowners under the HAMP program.

Because of this widespread pattern of loan servicer disregard of HAMP requirements, many homeowners have gone to court, asserting various legal theories to establish their rights under HAMP. Courts have rejected most of those legal theories, though some have succeeded. Ms. Gretsch’s attorneys, however, came up with a novel legal theory no one else had tried. Relying on a little noticed provision of state law, the attorneys claimed that the courts could enforce HAMP rules by relying on state law to create the right to sue, even though federal law did not create a right to sue for this federal program. Ms. Gretsch lost her case in the district court and in the Court of Appeals, but the Supreme Court of Minnesota decided to hear the case. Along the way, HPP was asked to co-counsel on the case, and HPP Attorney Tim Thompson handled the case at oral argument before the state Supreme Court. 

The oral argument took place on December 2. A video of the argument is available on the Minnesota Supreme Court website. A decision is expected in the next couple months. If Ms. Gretsch manages to prevail, the decision could open the door to new legal rights for many Minnesota homeowners who have been deprived of their HAMP rights.