The 75 Billion Dollar Question: Why Is HAMP Not an Entitlement Program?

• Author: Nicholas T. Maxwell
• Position: J.D. Candidate, The University of Iowa College of Law, 2012
• Pages: 1305-1328

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The 75 Billion Dollar Question: Why Is

HAMP Not an Entitlement Program?

Nicholas T. Maxwell

ABSTRACT: The Home Affordable Modification Program (“HAMP”), the

Obama administration’s response to the foreclosure crisis, has failed to

substantially assist the millions of homeowners facing foreclosure. Loan

servicers not following the program’s directives have refused to modify

borrowers’ eligible loans. Attempts to enforce the directives through the courts

have been ineffective, and servicers continue to flaunt their agreements with

the Treasury. Early in the program’s history, a federal district court

dismissed a class-action lawsuit alleging that HAMP’s directives violated

procedural due process. By refusing to recognize HAMP as a protected

property interest, the court gave borrowers little recourse against servicers

that erroneously deny them a modification. For HAMP to be effective, the

government must establish a loan modification as a protected property

interest and protect it with procedural safeguards.

I. INTRODUCTION .................................................................................... 1307

II. BACKGROUND OF HAMP AND PROPERTY RIGHTS PROTECTED BY

PROCEDURAL DUE PROCESS ................................................................ 1310

A. THE FORECLOSURE CRISIS............................................................... 1310

B. THE GOVERNMENT’S “SOLUTION” ................................................... 1311

C. HOMEOWNERS’ CLAIMS .................................................................. 1314

D. PROCEDURAL DUE PROCESS AND PROPERTY INTERESTS .................... 1316

III. WILLIAMS V. GEITHNER ......................................................................... 1317

A. THE PLAINTIFFS’ ARGUMENT .......................................................... 1317

B. THE WILLIAMS DECISION ............................................................... 1319

IV. A CRITIQUE OF THE COURT’S DECISION .............................................. 1321

A. THE COURT INCORRECTLY REQUIRED UNMISTAKABLY MANDATORY

LANGUAGE ..................................................................................... 1321

 J.D. Candidate, The University of Iowa College of Law, 2012; B.A. San Diego State

University, 2007. I would like to thank Noah Zinner for his helpful comments.

1306 IOWA LAW REVIEW [Vol. 97:1305

B. THE COURT UNNECESSARILY EXCLUDED PROGRAMS THAT ARE

PROFITABLE TO TAXPAYERS AS ENTITLEMENTS ................................ 1323

C. THE COURT MISCHARACTERIZED THE NPV TEST AS ALLOWING

SERVICERS SUBSTANTIAL FLEXIBILITY .............................................. 1323

D. THE COURT ERRONEOUSLY DECIDED THAT SERVICERS ONLY

PARTICIPATED IN HAMP BECAUSE THEY WOULD MAINTAIN

DISCRETION IN WHO RECEIVED LOAN MODIFICATIONS ..................... 1324

E. THE COURT IGNORED PLAINTIFFS’ CLAIM THAT THE TEMPORARY

SUSPENSION OF FORECLOSURE WHILE THE SERVICER EVALUATES

THE APPLICANTS’ LOAN FOR HAMP IS A PROTECTED PROPERTY

INTEREST ....................................................................................... 1325

V. DEVELOPMENTS AFTER WILLIAMS V. GEITHNER .................................... 1326

VI. CONCLUSION ....................................................................................... 1328