It is hard out there for a third-pary interest holder.

We've recently settled a couple of our appellate foreclosure cases. One of the appeals had to do with whether TTP (Temporary Trial Plan/Temporary Loan Modification) is a valid contract, and whether a debtor has the right to bring an action to enforce provisions of such contract in a civil trial (vs. exclusively in a foreclosure stay/dismiss 7-105.1 hearing). The other one was... less interesting.

Strangely enough, both were settled on the same day, but with different lenders.

So what's the next batch of cases that are heading for the Court of Special Appeals? Well, we are anticipating (and perhaps going to consolidate) several that deal with the third-party investors in foreclosure proceedings.

In Maryland, a debtor in a foreclosure proceeding is entitled to a loss mitigation review, mediation, etc. And a lender must file an affidavit showing that such options were made available to a debtor.

Well... One problem. The HAMP guidelines do not address what happens when someone purchases interest in a note that is held by a HAMP participant, and when that someone (a bank or a trust) specifically prohibits modifications.  The foreclosure trustees (or, for that matter, the Maryland law) do not have a good solution for this issue either.

This issue usually comes up when a debtor completes a Temporary Trial Plan and is eagerly waiting for a permanent modification contract to appear in the mail... And then, when the lender's underwriters discover that a mortgage is not eligible for a modification due to some ownership conflict glitch, the debtors is told that he/she is not eligible for a modification because the note holder (who is usually a participant in HAMP) sold a portion of its interest in the note to some holding (or, worse yet, a REMIC trust).

Buy then, a debtor is in the arrears for quite a few thousands of dollars and his/her options to refinance or reinstate the mortgage are very limited. Is a lender negligent when it fails to disclose to a debtor that the mortgage cannot be modified before they are several months into [an irreversible] process? Does it owe at least SOMETHING to the debtor? We will find out soon enough!