Civil Practice Files Law Suit to Help Homeowners At Risk of Losing Homes to Foreclosure

Four homeowners from Queens and Brooklyn, who are at risk of losing their homes to foreclosure, today filed a federal class action lawsuit, charging that Aurora Loan Services, their mortgage servicer, has denied them access to the Obama Administration’s Home Affordable Modification Program (HAMP) for spurious reasons, and has failed to provide them with notice so they may contest such denials. The lawsuit, Edwards et al v. Aurora Loan Services,LLC et al filed in the United States District Court for the District of Columbia, is one of the first law suits to challenge a mortgage servicer for breach of contract by failing to review mortgage loans of eligible homeowners for HAMP and to provide a procedure to contest denial.

As the economic crisis places record numbers of homeowners at risk of losing their homes, the lawsuit contends that the named plaintiffs have been denied their rights under the program.

A federal program designed to provide mortgage modifications to qualified borrowers as part of a larger economic recovery package, HAMP’s primary purpose is to reduce mortgages to an affordable level to enable borrowers to keep their homes. Aurora Loan Services is one of several dozen mortgage servicers which entered into a contract with the government to implement HAMP. Yet, despite their efforts to have their mortgages reviewed under HAMP, plaintiffs have been denied access to the program by Aurora Loan Services for spurious reasons and they have no recourse to obtain a timely review of the servicer’s denial.

“As a result of the economic downturn, countless homeowners have lost their homes or are in imminent danger of losing their homes,” said Oda Friedheim, an attorney with The Legal Aid Society’s Civil Law Reform Unit, who is the lead counsel in the case. “By launching HAMP, the Obama Administration took a significant step to stem the devastating effects foreclosures have on families and their communities. However, in order for the program to achieve its purpose and prevent foreclosures, mortgage servicers must be required to properly implement the program.”

The lawsuit also names federal officials including The United States Treasury and the Federal National Mortgage Association because of their failure to ensure that homeowners are afforded their full due process rights. Although Treasury on November 3, 2009, issued new notice requirements to take effect January 1, 2010, these requirements do not allow for an independent appeal process and do not apply retroactively.

The lawsuit, Edwards v. Aurora Loan Services, seeks class action status and requests a preliminary and permanent injunction, preventing Aurora from engaging in all unjust and unreasonable practices. It also requests that the Court order Aurora to provide a meaningful notice of HAMP denial, the specific grounds for denial and a process to challenge such denials.

The four homeowners are represented by The Legal Aid Society in New York City. Lawyers handling the case include Oda Friedheim, Scott Rosenberg and Judith Goldiner.

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