In 2010, Minneapolis homeowner Connie Gretsch lost her job and, like many Americans, fell behind on her mortgage. When her lender, Vantium Capital, began foreclosure proceedings, Ms. Gretsch asked to be considered for the HAMP program. HAMP is a federal program designed to avoid foreclosure by requiring that participating lenders first consider defaulting homeowners for loan restructuring, modifying the payments to make them affordable, before foreclosing. In fact, if the homeowner meets all the HAMP criteria, he or she is entitled to the loan modification.  

However, Vantium simply ignored Ms. Gretsch’s requests and proceeded to foreclose. As egregious as this was, unfortunately it was, and is, not unusual. The HAMP program has been plagued since its inception by widespread disregard of the program requirements by lenders who have agreed, or are required, to participate. As a result, frustrated homeowners have turned to the courts to seek enforcement of their HAMP rights.  However, because the HAMP program legislation lacked a clear right to sue, in most cases the courts have dismissed claims by homeowners in federal court.   

Fortunately, Ms. Gretsch found enterprising consumer lawyers who had identified a different way to make the legal claim. Lawyers Richard Fuller, Randy Smith and Bert Black had uncovered a little noticed Minnesota law establishing standards of conduct for home loan servicers like Vantium Capital. This statute, combined with another one, provided that a homeowner could sue for damages if the loan servicer violated a contract it had with a federal agency.  And the homeowner did not need to be a party to that contract; she only needed to be injured by the servicer’s violation of the contract with someone else, the federal agency.  This fit Ms. Gretsch’s situation perfectly because Vantium had clearly violated a contract it had with Fannie Mae to follow the HAMP program.  

The Hennepin County District Court rejected this novel theory, however, and Ms. Gretsch appealed to the Minnesota Court of Appeals. The consumer lawyers asked HPP to sign on to the case, which we did.  The Court of Appeals also ruled against Ms. Gretsch, however.  The determined Ms. Gretsch did not give up, though, and the Minnesota Supreme Court agreed to hear her appeal. At the request of co-counsel, HPP’s Tim Thompson argued the case before the Minnesota Supreme Court justices.  

On April 2, 2014, the Court issued its decision, ruling in favor of Ms. Gretsch and rejecting all of Vantium’s arguments as well as the rationales of the District Court and Court of Appeals below. The Supreme Court held that the loan servicer standards of conduct statute in Chapter 58 did in fact apply to this situation, and when combined with another provision, did authorize the right to sue for damages. Given the widespread disregard that continues to accompany the HAMP program, this decision could now provide a powerful tool for many homeowners threatened with foreclosure.

As of this writing (late April 2014), Vantium Capital has asked the Supreme Court to reconsider the decision.  The Court has not yet acted on that request.