Fried v. JP Morgan Chase – 3d Cir. –
March 9, 2017
Ginnine
Fried bought a home in 2007 for $553,330. It was near high tide in the real
estate market, but she had to believe she was getting a bargain, as an
appraisal estimated the home’s value to be $570,000.
Fried
borrowed $497,950 at a fixed interest rate to make her purchase and mortgaged
the home as collateral. Because the loan-to-purchase-price ratio ($497,950 /
$553,330) was more than 80%, JPMorgan Chase Bank, N.A. (“Chase”), the servicer
for Fried’s mortgage (that is, the entity who performs the day-to-day tasks for
the loan, including collecting payments), required her to obtain private
mortgage insurance. Fried had to pay monthly premiums for that insurance until
the ratio reached 78%; in other words, the principal of the mortgage loan needed
to reduce to $431,597, which was projected to happen just before March 2016.
We
now know that the housing market crashed in 2008, and the value of homes
dropped dramatically. Fried, like many homeowners, had trouble making mortgage
payments. Help came when Chase modified Fried’s mortgage under a HAMP, a federal
aid program, by reducing the principal balance to $463,737. The rub was that
Chase extended Fried’s mortgage insurance premiums an extra decade to 2026.
Whether
it could do this depends on how we interpret the Homeowners Protection Act
(“Protection Act”), 12 U.S.C. § 4901 et seq. Does it permit a servicer to rely
on an updated property value, estimated by a broker, to recalculate the length
of a homeowner’s mortgage insurance obligation following a modification or must
the ending of that obligation remain tied to the initial purchase price of the
home? We conclude the Protection Act requires the latter.
