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themselves and all others similarly situated, CLASS ACTION COMPLAINT






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C. THE HAMP_~ROGRAM ,,' "" , , .. , ,,, .. , 8

D. CITI'S OBUGA TIONS UNDER BANfF , .. " .. " .. ,,"""" .. " " 10

E. CITI'S PRA.CTICES 1 ••••••••• ~.~.~ ••••••••••••••• I •••••• 11.1.II.t ,.,., 1.~1+11+ •••• t.I , •• 114


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VII. PRAYER FOR "RELIEF I •• I ••• I ••• I •• I.~ ••••••••••••••••••• ,.,." •••••••••••• 1 ••••••••• ~ ••••••••••••••••••••••••• ~." ••••• ,26

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1. Plaintiffs Juan and Elizabeth Silva bring this action on behalf of themselves and

all similarly situated New Jersey homeowners who have been wrongfully denied a permanent

modification of their mortgages by Citilvlortgage, Inc. ("Citi" or "Defendant"), in violation of its

contractual obligations to borrowers who qualify for loan modifications under the U.S ..

Department of the Treasury's Home Affordable Modification Program ("HAMP"), a federal

program designed to abate the foreclosure crisis by providing affordable mortgage loan

modifications to eligible borrowers.

2. Rather than honoring its contractual duties arising from its acceptance of billions

of dollars in federal bailout J!!.nds under the Troubled Asset Relief Program ("TARP"), Citi has

~ ~"_ ... '.. - .

intentionally set up its loan modification program to fail, It instituted a program in order to feign

compliance with T ARP's conditions, but never had any intention to allow widespread

modification for homeowners in need.

3. Citi accepted $45 billion in funds from the federal government as part ofT ARP.

By accepting these payments, Citi agreed in writing that it would participate in one 01' more

programs that TARP authorized the Secretary of the Treasury to establish to minimize


4. Consistent with TARP's mandate, the Treasury Department implemented

HAMP. Lending institutions that accepted money under TARP are subject to mandatory

inclusion in HAMP as are certain classes of loans) specifically those held by Federal National

Mortgage Association ("Fannie Mae") and Federal Home Loan Mortgage Corporation ("Freddie

5. On April 13, 2009, CHi signed a Servicer Participation Agreement ("SPA") with

the Treasury Department, which Plaintiffs incorporate herein by reference, in which it agreed to

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comply with HAMP's requirements and to perform loan modification and other foreclosure

prevention services described in the program guidelines. The guidelines issued by the Treasury

Department set forth a detailed process whereby a participating servicer like Citi must:

a. Identify loans that are subject to modification under HAMP, both through its own review and in response to requests for modification from individual homeowners;

b. Collect financial and other personal information from the homeowners to evaluate whether the homeowner is eligible for a loan modification under RAMP;

,c. Institute a modified loan with a reduced payment amount as per a mandated formula, that is effective for a three-month trial period for borrowers that are eligible for a modification; and

d. Provide a pennanentIy modified loan to those homeowners who comply with the requirements during the trial period, Whether the homeowner qualifies for a modification or not, participating servicers are also required to provide written notices to every mortgage borrower who has been evaluated for a loan modification, whether or not the borrower has been found eligible.

6. HAMP and its associated directives also prohibit certain conduct; including: (i)

demanding upfront payments in order to be evaluated for a loan modification; (ii) instituting or

continuing foreclosures while a borrower is being evaluated for a loan modification; and (iii)

restricting the way a servicer may report the borrower to credit reporting agencies,

7. Although Citi accepted a total of$45 billion in TARP funds and entered into the

SPA on April 13,2009, obligating itself to comply with HAMP's directives and to extend loan

modifications for the benefit of distressed homeowners; Citi has systematically failed to comply

with RAMP's directives and has regularly and repeatedly violated its prohibitions.

8. Under HAMP, the federal government incentivizes participating servicers to make

adjustments to existing mortgage obligations in order to make the monthly payments more

affordable. Servicers receive $1,000.00 for each HAMP modification and up to $4,000 if the

loan continues to perform. However, these incentives are countered by a number offmancial

factors that make it more profitable for a mortgage servicer such as Citi to avoid modification


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and to continue to keep a mortgage in a state of default or distress and to push loans toward

foreclosure .. This is especially true in cases where the mortgage was sold by the Joan originator

and is now owned by a third-party investor and is merely serviced by a servicer such as Citi, On

information and belief, CHi does not own the majority of the loans on which it functions as a


9. Economic factors that discourage Citi from meeting its contractual obligations

under RAMP by facilitating loan modifications include the following:

a. Citi may be required to repurchase loans from the investor in order to permanently modify the loan. This presents a substantial cost and loss of revenue that can be avoided by keeping the loan in a state of temporary modification or lingering default.

b. .~ The monthly se..vke-fee that Citi, as the servicer, collects for each loan it services in a pool of loans, is calculated as a fixed percentage of the unpaid principal balance of the loans in the pool. Consequently, modifying a loan to reduce the principal balance reduces the unpaid principal balance of the loans in the pool and thus results in a lower monthly fee to the servicer,

c. Fees that Citi charges borrowers that are in default constitute a significant source of revenue to Citi. Aside from income Citi directly receives, late fees and "process management fees" are often added to the principal loan amount thereby increasing the unpaid balance in a pool of loans and increasing the amount of the servicer's monthly service fee.

d. Entering into a permanent modification will often delay a servicer's ability to recover advances it is required to make to investors of the unpaid principal and interest payment of a non-performing loan. The servieer' s right to recover expenses from an investor in a loan modification, rather than a foreclosure, is often less clear and less generous.

e. Performing loan modifications requires increased fixed overhead costs) including up-front cost to the servicer for additional staffing, physical infrastructure, and expenses such as property valuation, credit reports and financing costs.

10. Rather than allocating adequate resources and working diligently to reduce the

number ofloans in danger of default by establishing permanent modifications, Citi has serially

strung out, delayed, and otherwise hindered the modification processes that it contractually


undertook to facilitate when it accepted billions of dollars in TARP funds. Citi's delay and obstruction tactics have taken various forms with the common result that homeowners with loans serviced by CHi, who are eligible for permanent loan modifications, and who have met the requirements for participation in the RAMP program, have not received permanent loan modifications to which they are entitled.

11. In addition to its obligations based on its SPA contract with the Treasury

Department, Citi has entered into written agreements with individual homeowners, including Plaintiffs, for temporary loan modifications that must be converted to permanent loan modifications. Plaintiffs and a similar class of New Jersey borrowers have complied with the agreements by submitting a_ll .: cfthe.requireddocumentation asked of them and, when requested, by making timely payments in order to even be considered for loan modification. Despite Plaintiffs' efforts, CHi has ignored its contractual obligation to permanently modify loans.


12. This Court has subject matter jurisdiction over this action under 28 U.S.C. §

1332(d)(2) in that the matter is a class action wherein the amount in controversy exceeds the sum Of value of $5,000,000, exclusive of interest and costs, and members of the Class are citizens of a State different from the Defendants.

13. This Court also has subject matter jurisdiction over this action under 28 U.S.C. §§

1331 and 1367 in that the Plaintiffs and the Class are intended, third-party beneficiaries to the SPA contract between Citi and the U.S. Treasury that was entered into pursuant to and under the direction ofTARP.

14. This Court has personal jurisdiction over Defendant because a substantial portion

of the wrongdoing alleged herein took place in this state. Defendant is authorized to do business in this state, has sufficient minimum contacts with this state and otherwise intentionally avails


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itself of markets in this state through its promotion, marketing and servicing of loans in this state

. so as to render the exercise of jurisdiction by this Court permissible under traditional notions of

fair play and substantial justice.

15. Venue is proper pursuant to 28 U.S.C. § 1391(a) because at least one plaintiff

resides in this District and Defendant has hundreds if not thousands of customers in this District,

Defendant receives substantial fees and interest from borrowers who hoJd mortgage loans in this

District, and a substantial part of the events or omissions giving rise to the claims asserted herein

occurred in this District.




... ~ --

16. Juan and Elizabeth Silva are, and at all times mentioned herein were, residents of

Harrison, New Jersey. Plaintiffs were and are the rightful sole owner of a home in Harrison,

New Jersey, which at all pertinent times has been, and continues to be, Plaintiffs' primary



17. Defendant Citi is a Delaware corporation and at all times relevant hereto was a

mortgage servicer that maintained its principal place of business at 1000 Technology Drive,

O'Fallon, Missouri 63368-2240.



18. For the past three years, the United States has been in a foreclosure crisis. In late

2009, one in eight U.S. mortgages was in foreclosure or default, and 2.8 million homeowners

received foreclosure notices in 2009.


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19. New Jersey has been among the states hardest hit by this crisis, According to

Reaitytrac, New Jersey ranked tenth highest on the state foreclosure list in the United States for all of2009. The total number of New Jersey properties with foreclosure filings in 2009 was 63,208. This represents a 103% increase from 2007. In the first half of201O, over 1.65 million properties in the United States received foreclosure notices. The total number of New Jersey properties receiving foreclosure filings in the first half of 20 1 0 totaled 36,542, again putting New Jersey in the top ten highest states for foreclosure filings.

20. The foreclosure crisis "continues unabated," asa Congressional oversight panel

stated in Apri120 1 O. indeed; economists have predicted that interest rate resets on the riskiest of lending products will not reach their zenith until sometime in 2011. See Eric Tymoigne, Securitization, Deregulation, Economic Stability, and Financial Crisis, Working Paper No. 573,2 at 9, Figure 30 (available at id=1458413, last visited Pebruary25, 2011).


21. Mortgage Loans are generally originated with the intention of selling them to

investors. Loans can be sold in whole on the secondary market, so that a single investor owns the entire loan Of; more commonly today, securitized. In a securitization, thousands of loans are pooled together in common ownership held by a trust. Bonds are issued to investors based on the combined, anticipated payment streams of the pooled loans. The bonds may be issued for different categories of payments, such as interest payments, principal payments, or late payments, with different groups of bondholders getting paid from different categories of payments.


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22. With securitizations, loan servicers take on a more prominent and potentially

lucrative role. Loan servicers compete for the right to service Joans at the time mortgages pools are created. Once selected, loan servicers collect and process payments on mortgage loans, and maintain records of payments. Loan servicers receive their income from direct payments from borrowers based on the principal balance of the pool of loans, and thus, benefit from higher principal loan balances.

. 23. Loan servicers are the entities through which any loan modification request must

be made. Securitization agreements (also called pooling and servicing agreements or "PSAs") generally identify a master servicer who receives a portion of the payments from a mortgage pool. The P~As provide nq ~~~full'estrictions on individual loan modifications and, thus, loan servicers generally have unfettered discretion to analyze and approve modifications. Because servicers' fees are based on the size of loan principal balances, they have an incentive to maintain high loan balances. Servicers can keep loan principal balances high by capitalizing arrears and unpaid fees, or by refusing loan modifications in which principal would be reduced.

24. Servicers also receive income from fees imposed on borrowers, such as late fees,

inspection fees, and broker opinion fees, which PSAs allow servicers to collect directly from borrowers, or in the case of foreclosures, directly from foreclosure fees. Such fees are another profit center for loan servicers.

25. Servicers also receive interest income 011 the float between the time when

payments are made by borrowers and when they are passed on to the investors. Servicers can augment their interest income by stretching the amount of float time to tum over funds, such as by paying taxes and insurance at the last moment possible.


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26. Servicers who fail to modify loans face few consequences. Although investors

generally do not have an interest in foreclosure, large mortgage pools may involve hundreds of different investors who have differing views about whether foreclosure is appropriate.

Moreover, investors who hold different interests in a pool of mortgages (i.e., principal payments, interest payments, or late fees) may be impacted differently by.foreclosure because they are paid according to different priorities.

'27. Even if investors favor loan modifications, generally they lack any authority to

direct or control the servicers' decision whether to grant a modification or pursue foreclosure. Investors typically can only act through the trustee and only when a majority of the investors agree upon a.proposed course.of action.

28. Because of this lack of direct control by investors, and in light of the

compensation scheme described above, loan servicers have strong incentives to not pursue loan modifications. Instead, loan servicers are incentivized to: (1) maintain borrowers in default and delay decisions on modifications so that they can generate income through imposition of late fees and inspection fees; (2) capitalize arrears to increase principal balances; and (3) create additiona1 float income by putting borrowers in foreclosure.


29. Congress passed the Emergency Economic Stabilization Act of 2008, 12 U.S .C. §

5201 et seq., on October 3, 2008 and amended it with the American Recovery and Reinvestment Act of2009, Pub. L. No. 111-5, 123 Stat. 115, on February 17,2009 (collectively, the "Act").

30. The purpose of the Act was to grant the Secretary of the Treasury authority to

restore liquidity and stability to the financial system, and to ensure that such authority is used in a manner that "protects home values" and "preserves homeownership.' 12 U.S.C. § 5201.


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31. The Act granted the Secretary of the Treasury authority to establish TARP. See

12 U.S.C. § 5211 et seq. Under TARP, the Secretary of the Treasury may purchase or make commitments to purchase troubled assets from financial institutions. ld. Congress allocated up to $700 billion to the Treasury for TARP. See 12 U.S.C. § 5225.

32. The Act further mandates that, with regard to any assets acquired by the Secretary

of the Treasury that are backed by residential real estate. the Secretary "shall implement a plan that seeks to maximize assistance for homeowners" and use the Secretary's authority over servicers to encourage them to take advantage of programs to "minimize foreclosures." 12 U.S.C. § 5219. The Act grants authority to the Secretary of the Treasury to use credit enhancement and loan guarantees to. "facilitate loan modifications to prevent avoidable foreclosures." ld.

33. On February 18. 2009, pursuant to their authority under the Act, the Treasury

Secretary and the Director of the Federal Housing Finance Agency created the Making Home Affordable ("MHA") initiative to help at-risk homeowners avoid foreclosure by restructuring their mortgages.

34. RAMP is the portion of the MHA initiative that provides mandatory directives for

implementation, and with which Citi has not complied. RAMP creates a uniform loan modification protocol) and provides financial incentives for participating servicers to modify loans. The Treasury Department has allocated at least $75 billion in federal funds to HAMP, of which at least $50 bi1lion is TARP money, to keep up to "3 to 4 million homeowners" in their homes by 2012.


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35. Because Chi accepted bill ions in federal funds and additional loan guarantees, it

was and is required to participate in HAMP for the loans on which it functions as a loan servicer,

Paul Ince of CHi executed the SPA, which is incorporated herein by reference, with the federal

government on April B, 2009, making official Citi's participation in HAMP, and binding it to

comply with the HAMP procedures.'

. 36. The SPA executed by Citi explicitly incorporates all "guidelines," "procedures,"

and "supplemental documentation, instructions, bulletins, frequently asked questions, letters,


directives, or other communications," referred to as "Supplemental Directives" issued by the

Treasury, Fannie Mae or Freddie Mac in connection with RAMP. These documents together are

+ p- ~. •• - • •

referred to as the "Program Documentation" ("SPA I.A. "), and are incorporated by reference

herein. The SPA mandates that a Participating Servicer "shall perform" the activities described

in the Program Documentation "for all mortgage loans it services.') SPA LA., 2.A.5.

37. Fannie Mae issued the first "Supplemental Directive' ("SD 09-01") in April,

2009. That Directive, together with others issued since, sets out the activities CHi must perform

"for all mortgage loans it services," SPA § 2.A.

38. . The Program Documentation, which is incorporated herein by reference, also


• Supplemental Directive 09-01 ("SD 09-01"), Apr. 6,2009, https:/ servicer/sd090 I.pdf;

• Supplemental Directive 09-03 ('ISD 09-03H), July 6,2009,

https:l Iwww.hmpadmin.comJportalJprograms/docs/hamp servicer/sd0903.pdf;

1 A copy of the SPA signed by Citi on April 13, 2009, as modified, can be found at

programs/mhaIDocuments Contracts Agreements/0930 1 OcitimortgageincSPA(incltransmittal)-r .pdf (last visited February 25, 2011).


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• Supplemental Directive 09-07 (USD 09-0r), Oct. 8,2009,

https:/ /www.hmpadmin.comlportal/programs/docslhamp servicer/sd0907.pdf;

• Supplemental Directive 09-08 ("SD 09-08"), Nov. 3,2009,

https ://www.hmpadmin.comlportalfprograms/docslhamp servicerlsd0908.pdf;

• Supplemental Directive 10-01 ("SD 10-01 "), Jan. 28, 201 O~ servicerlsdl 001 ,pdf;

• Supplemental Documentation - Frequently Asked Questions - Home Affordable

Modification Program ("HAMP FAQs»), Apr. 2, 2010, .]/programs/docs/hamp servicer/hampfags.pdf;

• Supplemental Documentation - Frequently Asked Questions - Home Affordable Modification Program 2009-2010 Conversion Campaign ("HAMP ConversionFAQs"), Jan. 8,2010,

https:/ sel'vicerlhampcollversionfags,p df;

.' .

• Checklist for Getting Started and Participating in RAMP for Non-GSE Loans, Guidance Effective for Verified Trial Period Plans, Feb. 22, 2010 ("RAMP Checklist"), QQ.f;and

• Home Affordable Modification Program Base Net Present Value (NPV) Model Specifications C'NPV Overview"). June 11,2009; https:l/ servicer/npvQverview.pdf.

(all last visited February 25, 2011).2 These documents together describe the basic activities

required under RAMP.

39. First, Citi must evaluate all borrowers who are 60 or more days in default.Jn

"imminent default," or who request a loan modification to see if the loan and borrower meet

basic eligibility criteria, setforth in SD 09-01, at 1 ~2, 3-4, which include:

• The loan must be a first lien mortgage originated before 2009;

• The property must be occupied, and that it be the borrower's principal residence;

2 The Program Documentation has been consolidated by the U,S. Treasury Department into a single document known as the Making Home Affordable Handbook version 3,0, which can be found at https:llwww,hmpadmin ,comJp0l1alJprograms/docs/hamp servicer/mhahandbook 30 .pdf (last visited February 25,2011),


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• The loan must be delinquent or that default is reasonably foreseeable;

• The borrower must document a financial hardship, as defined in the Program Documentation; and

• The "borrower has a monthly mortgage payment ratio of greater than 31 percent" of the borrower's monthly income,

40. Next, the servicer is required to calculate whether, by taking certain modification

steps .such as reducing the interest rate or extending the term of the loan, the borrower's total

monthly housing payment can be reduced to 31 % of the borrower's monthly income. See SD

09~0 1 at 8-10; HAMP Checklist at 6. Finally, the servicer must perform a "net present value"

«'NPVH) analysis, comparing the net present value of cash flow from these modified loan terms

to the NPV of the loan without modification. See SO 09~01 at 4-5; NPV Overview; HAMP

FAQs at 27-29, Q2314.

41. If the NPV test yields a "positive" outcome (i. e., the value of a performing

modified loan exceeds the value of foreclosing the property), the servicer is required to offer a

trial modification or Trial Period Plan ("TPP") under HAMP. SD 09-01 at 4, 14-15. If the NPV

test yields a "negative" outcome, the servicer is required to consider the borrower for other

foreclosure prevention measures. See SD 09-01 at 4; SD 09-08 at2-3.

42. The TPP consists of a three-month period in which the homeowner makes

mortgage payments based on adjusted loan terms derived from steps followed by the servicer

under HAMP. See SD 09-01 at 17-18; SD 10-01 at 8.

43. Citi offers TPPs to eligible homeowners through a TPP Contract, which describes

the homeowner's duties and obligations. The TPP Contract promises a permanent RAMP

modification for those homeowners who make the required payments under the plan and fulflll

the documentation requirements. Citi also represents on its website, and in other standardized


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written and oral communications, that borrowers who successfully make the trial period payments will be given a permanent modification.

44. If the homeowner makes aIL three of the TPP monthly payments and complies

with documentation requirements, then the second stage of the !lAMP process is triggered and the homeowner must be offered a permanent modification. See SD 09-01 at 18; SD 10-01 at 8.

45. RAMP directives mandate specific protections for borrowers applying for

modification under the program. Servicers may not proceed with foreclosure until the borrower has been evaluated for the program, and borrowers are protected against foreclosure during the application process and the trial period. See SD 09-01 at 14. 19; SD 10-01 at 4-7. Servicers cannot forceborrowers to 'Y~iY~th(!!r Jegal rights, or demand certain fees from them. See SD 09-01 at 2, 22. Servicers are required to give borrowersinformation so they can engage in informed decision-making. See SD 09-01 at 13,

46, Finally, servicers are required to report a "full file" status report to credit

reporting agencies while they evaluate borrowers for eligibility during the TPP. "If the borrower is current when they enter the trial period, the servicer should report the borrower as current but on a modified payment .... " See HAMP FAQs at 20.

47. HAMP rules and directives create explicit rules and rigorous timelines for the

HAMP modification program. Timing is of the essence in the servicer's processing of borrower modification requests and evaluating eligibility for a permanent modification. HAMP rules require that servicers evaluate the income documentation submitted "upon receipt» -later clarified to within 30 days. See HAMP FAQs at 5, 15; SD-09-07 at 1. In all cases) HA1 v 1P rules direct servicers to prepare the permanent I-lAMP modification agreement early enough to allow


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sufficient processing time for the modification to become effective on the first day of the month

following the final TPP month. See SD-09-03.

48. I-IAMP rules mandate that servicers "comply with RAMP requirements" and

"document the execution of loan evaluation, loan modification and accounting processes." SD

Servicers must also have procedures and systems in place to be able to respond to inquiries and

09-01 at 25. Servicers must have adequate staffing, resources.and facilities for receiving and

processing HAMP documents and any requested information that is submitted by borrowers.

complaints about RAMP. See ld. at 13. Servicers must retain documents and keep detailed




49. Citi has routinely failed to comply with its requirements and responsibilities under


50. Citi regularly fails to evaluate borrowers' eligibility for the RAMP program or

perform an NPV test in a timely manner, if at all. CHi also regularly instructs applicants to begin

making trial payments without having evaluated the applicants' eligibility for the program.

Instead, it waits to underwrite the loan and evaluate borrowers' eligibility until months after the

homeowner begins making trial payments. Homeowners thus make months of trial payments

(and comply with stressful and burdensome documentation requirements), without any assurance

that Citi will comply with HAMP's guidelines and offer a permanent modification.

51. Throughout the HAMP application process, Citi also repeatedly and

inappropriately demands that borrowers update their application materials, while warning .

homeowners that their modification is at risk and threatening to deny the modification if they fail

to comply with these requests. Typically, Citi requests the same document(s) over and over. In


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other instances, it requests documentation that is irrational or impossible to obtain - such as W-2

forms for elderly individuals surviving on social security, or self-employment profit and loss

statements for wage-earning employees. Chi's demands that borrowers submit duplicative or

unnecessary documentation creates opportunities for cHi to reject otherwise eligible borrowers

for permanent modifications. The requests for documents are unnecessary, duplicative,

burdensome, and harassing.

'52. Citi has routinely failed to comply with RAMP's guidelines and offer permanent

modifications to qualifying homeowners, instead stringing them along for months in trial


modifications, or with no guidance whatsoever.

5~._ Citi has routinelyfailed to comply with the requirement that it give borrowers

written notification when they are denied a HAMP modification. Within ten days of the date of

determination that a permanent HAMP modification will not be offered, Citi must send a

Borrower Notice that explains the primary reason for the denial in clear, non-technical language,

and set out any other alternatives to foreclosure to which the borrower may be eligible. See SD

09-08, at 2-3. If the borrower was not approved because the result of the NPV test was negative,

the borrower is entitled to request the NPV values used and to dispute those values if they are

incorrect. Id. The Borrower Notice of denial letter, therefore, provides the sole formal

opportunity for borrowers denied a modification to dispute or appeal thedenial.

54. Citi's failure to comply with its obligations under HAMP and its TPP contracts,

and its failure to comply with the written and oral representations described above, have serious

consequences for borrowers.

55. A homeowner's total unpaid principal balance increases each month that he or she

is making trial payments. Trial payments are less than the amount ordinarily due under the


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mortgage. The rest of the amount that would be due - in most cases, primarily interest - is not waived. Instead, the remainder of the regular payment is "recapitalized" or added to the unpaid loan balance at the end ofthe trial period. If the trial period lasts three months, only three months' worth of the difference between the trial and regular payments are added to the unpaid balance. lfthe trial period continues longer than three months, however, homeowners may find that five, six, or more months' differential is added to the loan balance. The more Citi delays, the more the homeowners owe. Perversely, as the loan principal balance increases due to Chi's failure to timely implement permanent HAMP modifications or timely denials, Citi's servicing fees increase.

5~. "_ Although borrowersare paying all that Citi is asking them to pay - and an amount that will match their payments under a permanent modification - their accounts are not reported as current to credit scoring agencies. The RAMP directives require Citi to report borrowers who were previously current when they entered the trial period as "current but on a modified payment." RAMP F AQs at 20. However, Chi improperly reports such borrowers as delinquent. Thus, the more months a borrower spends in limbo, the more months they are reported as delinquent, and the more months they suffer derogatory credit reporting.

57. Citi's failure to honor its obligations under HAMP and its TPP Contracts leaves

homeowners in long-term limbo, unsure if they can save their homes, and unable to make rational financial decisions about the future. Money that could be used to fund bankruptcy plans, relocation costs, short sales, or other means of curing their default continue to go toward mortgage payments that stretch on indefinitely.


Gase 2:11-cv-01432-WHW -GGG Document 1

Filed 03/11/11 Page 19 of 29 PagelD: 19


58. Plaintiffs' experience with Citi epitomizes the foregoing problems. Plaintiffs

purchased their home in 2001. They financed $180,000 of the purchase price of their home with

Quicken Loans. This loan was refinanced in 2004 and increased to $235,000 with an adjustable

rate mortgage that could be adjusted beginning after 3 years toa maximum rate of 7.5%. At the

time of this 2004 refinancing, the property was appraised at approximately $280,000.

. 59. The loan was refinanced a second time in 2006 and increased to $315,000 with a

fixed rate of interest at 6.5%.

60. The servicing of Plaintiffs' loan was performed by Defendant Citi beginning in


61, Due to Plaintiffs' financial situation, by July 2009 servicing their mortgage was

becoming an increasingly difficult and uneconomical burden.

62. Plaintiffs first inquired in writing about a modification oftheir mortgage in early

July 2009 and applied to Citi for modification shortly thereafter. Plaintiffs met all of the

requirements for the HAMP program, however, Citi failed to properly process their modification

request in accordance with the RAMP guidelines and, in February 2011, rejected their

modification in writing. The following timeline summarizes Plaintiffs' experiences.

63. In September 2009, Citi sent Plaintiffs a formal TPP, pursuant to which the trial

period commenced on October 1, 2009. The TPP opens by stating:

IfI am in compliance with this Trial Period Plan (the "Plan") and my representations in Section 1 continue to be true in all material respects, then the Servicer will provide me with a Home Affordable Modification Agreement ("Modification Agreement"), as set forth in Section 3, that would amend and supplement (1) the Mortgage on the Property, and (2) the Note secured by the Mortgage.

A copy of the Trial Period Plan is attached hereto as Exhibit A.


Gase 2: 11-cv-01432-WHW -GGG· Document 1 Filed 03/11/11 Page 20 of 29 Pagel D: 20

64. On August 19,2009, Plaintiffs signed and returned a copy of the TPP to Citi

using the self-addressed Federal Express envelope that Citi provided.

65. The TPP called for Plaintiffs to make three (3) trial period payments of$1202.49

each, on October 1,2009, November 1,2009 and December 1,2009.

66. Plaintiffs made each of these payments in full prior to the date each payment was

due. Citi accepted each ofthese payments pursuant to the terms of the TPP. Thus, the representations Plaintiffs made in Section 1 of the TPP remained true in all material respects.

67. Further, despite making the three (3) required revised monthly payments under

the TPP, Citi failed to grant Plaintiffs a permanent loan modification after those three (3) months as it was required to do.

68. Plaintiffs sent Citi all requested and required documentation. Plaintiffs sent each

such document to Citi more than three (3) times because Chi claimed on at least several occasions that it did not receive these documents. Plaintiffs sent, infer alia; tax returns, Form 4506T, bank statements, P&L statements and a Hardship Affidavit.

69. After the three (3) month trial period, Plaintiffs heard nothing from Citi

concerning their mortgage. Rather, CHi failed to comply with HAMP)s guidelines and offer Plaintiffs a permanent modification, and instead strung them along for another nine months in a trial modification with no guidance whatsoever.

70. Plaintiffs continued to make monthly payments of$1200 through October 2010,

when Citi returned Plaintiffs' October 2010 monthly payment. At that time, Plaintiffs were informed by CHi that they did not need to make their monthly mortgage payment until their permanent modification was approved.


71. Then, on October 21, 2010, despite making all payments required under the TPP,

Citi sent a letter to Plaintiffs advising them that Citi had rejected their application for a permanent loan modification. A copy of Citi's October 21,2010 letter is attached hereto as Exhibit B.

72. The reason given by Citi in its October 21,2010 letter for denying Plaintiffs'

HAMP modification was because Plaintiffs "did not make all of the required Trial Period Plan payments by the end of the trial period." This explanation was nothing more than a pretext for denying Plaintiffs' loan modification, and was utterly false and without any basis. In fact, Plaintiffs had made all of the required TPP payments by the end of the trial period.

7~. "_ Despite making ~11 n~yments required under the TPP, o.n February 23, 2011,Citi sent a letter to Plaintiff John Silva advising him that Citi had rejected his application for a permanent loan modification. A copy of Citi' s February 23, 2011 letter is attached hereto as Exhibit C.

74. The reason given by Citi in its February 23, 2011 letter for denying Plaintiffs'

RAMP modification was because of a negative net present value, and that "based on the NPV results the owner of your loan has not approved a modification." This explanation was nothing more than another pretext for denying Plaintiffs' loan modification. Citi failed to advise Plaintiffs as to the NPV values Citi used or to provide Plaintiffs with an opportunity to dispute those values, in violation ofHAMP.

75. Moreover, throughout Plaintiffs' TPP, Citi improperly instituted and/or continued

to pursue forec1osure on Plaintiffs' residence, in violation ofHAMP. Also during Plaintiffs' TPP, Citi improperly charged Plaintiffs late fees and penalties, in violation of HAMP. As a result of CHi's failure to timely grant a permanent HAMP modification and other violations ofHAMP

Case 2:11-cv-01432-WHW -GGG Document 1 Filed 03/11/11 Page 21 of 29 PagelD: 21


Case 2: 11-cv-01432-WHW -GGG Document 1 Filed 03/11/11 Page 22 of 29 PagelD: 22

alleged herein, the foreclosure proceedings against Plaintiffs have continued unabated and Plaintiffs' property is currently scheduled to be sold through a Sherriff's Sale on March 31, 2011.


76. Plaintiffs repeats and re-alleges every allegation above as if set forth herein in

full .

. 77. Plaintiffs bring this action pursuant to Fed. Ri'Civ. P. 23(a), (b)(2), and (b)(3) of

the Federal Rules of Civil Procedure, on behalf of himself and a Class consisting of:

a. All New Jersey homeowners whose mortgage loans have been serviced by Citi mtd. ~ho? since April 13; 2009, (i) have entered into a TPP contract with Citi and made all payments required by their TPP Agreement, and (ii) have not received or have been denied a permanent Home Affordable Modification Agreement that complied with HAMP rules; and

b. An New Jersey homeowners whose mortgage loans have been serviced by Citi and who; since April 13, 2009, (i) have entered into a TPP contract with Citi and made all payments required by their TPP Agreement, and (ii) were reported to credit reporting agencies as delinquent during the TPP.

78. Excluded from the Class are governmental entities, Defendant, its affiliates and

subsidiaries, Defendant's current employees and current or former officers; directors, agents, representatives; and their family members.

79. Plaintiffs do not know the exact size or identities of the members of the proposed

Class, since such information is in the exclusive control of Defendant. Plaintiffs believe that the Class encompasses many hundreds and perhaps thousands of individuals whose identities can be


Case 2:11-cv-01432-WHW -GGe Document 1 Filed 03/11/11 Page 23 of 29 PagelD: 23

readily ascertained from Defendant's books and records. Therefore, the proposed Class is so

. numerous that joinder of all members is impracticable.

80. Based on the size of the modifications at issue, Plaintiffs believe the amount in

controversy exceeds $5 million. All members of the Class have been subject to and affected by

the same conduct.

81. The claims are based on the terms of a single unifying contract between Citi and

Fannie Mae, acting as agent for the United States Treasury, and on form contracts and uniform

modification processing requirements. There are questions of law and fact that are common to


the class, and predominate over any questions affecting only individual members of the Class.

82. These questions jnclude, but are not limited to the following:

a. The nature, scope and operation of Defendant's obligations to

homeowners under RAMP;

h. whether Defendant's receipt of an executed TPP contract, along with

supporting documentation and three monthly payments, creates a binding

contract or otherwise legally obligates Defendant to offer class members a

permanent RAMP modification;

c. whether Defendant's failure to provide permanent I-IAMP modifications in

the circumstances described herein where the borrower has timely made

the requisite 3 monthly payments pursuant to the TPP and supplied the

necessary documentation and in the underlying complaints amounts to a

breach of contract andlor a breach of the covenant of good faith and fair



Gase 2:11-cv-01432-WHW -GGG Document 1 Filed 03/11/11 Page 24 of 29 PagelD: 24

d. whether Defendant's conduct violates New Jersey's Consumer Fraud Act

and corresponding regulations; and

e. whether the Court can order damages and enter injunctive relief.

83. The claims of the individual named Plaintiffs are typical of the claims of the Class

and do not conflict with the interests of any other members of the Class in that both the Plaintiffs

and the other members of the Class were subject to the same conduct, were subject to the terms

of the same agreement and were met with the same absence of a permanent modification.

84. The individual named P1aintiffs will fairly and adequately represent the interests


of the Class. Plaintiffs are commltted to the vigorous prosecution of the Class' claims and have

retained attorneys who are qualified to pursue this litigation and have experience in class actions

- in particular, consumer protection actions.

85. A class action is superior to other methods for the fast and efficient adjudication

of this controversy. A class action regarding the issues in this case does not create any problems

of manageability.

86. This putative class action meets the requirements of Fed. R. Civ, P. 23(b)(2) and

Fed. R. Civ. P. 23(b)(3).

87. Citi has acted 01' refused to act on grounds that apply generally to the

Class so that final injunctive relief or corresponding declaratory relief is appropriate respecting

the Class as a whole.



88. Plaintiffs repeat and re-alleges every allegation above as if set forth herein in full.


Case 2:11-cv-01432-WHW -ccc Document 1 Filed 03/11/11 Page 25 of 29 PagelD: 25


89. Plaintiffs bring this claim on their own behalf and on behalf of each member of

the Class described above.

90. Plaintiffs and members of the Class entered into written or oral TPP contracts

with Citi, Citi made TPP offers, through either formal TPP Contracts, oral TPP offers, or written

TPP offers.

91. Plaintiffs and members of the Class formed binding and enforceable agreements

whenthey executed written TPP Contracts, andlor when they made payments under a TPP

offered orally or in writing by Defendants.

92. Payments in accordance with an executed TPP Contract or TPP offer constitute

consideration. In the alternative, the TPP Contracts or offers, coupled with Plaintiffs' payments,

constitute implied contracts.

93. Citi failed to perform under the TPP contracts with Plaintiffs and members of the

Class. Citi's refusal to perform its duties under the TPP contracts were unlawful, without

justification and/or excuse, and constituted a total and material breach of the TPP contracts

between the parties.

94. CHi breached the TPP contracts with Plaintiffs and members of the Class by

failing to offer Plaintiffs and members of the Class permanent RAMP modifications after

payment of the TPP payments.

95. Plaintiffs and all members of the Class gave consideration that was fair and

, reasonable, and have performed all conditions; covenants, and promises required to be performed

under their TPP contracts with Chi.

96. As a result ofCiti's breach of the TPP contracts, Plaintiffs and members of the

Class suffered and will continue to suffer reasonable and foreseeable consequential damages


Case 2:11-cv-01432-WHW -GGG Document 1 Filed 03/11/11 Page 26 of 29 PagelD: 26

resulting from such breaches; including payment of increased interest, longer loan payoff times,

higher principle balances, deterrence from seeking other remedies to address their default and/or

unaffordable mortgage payments, damage to their credit, additional income tax liability, costs

and expenses incurred to prevent or fight foreclosure, and other damages for breach of contract.

97. Plaintiffs and the Class have been damaged by Citi's breach of the TPP contracts

in an amount to be proven at trial.


98. Plaintiffs repeat and re-alleges every allegation above as if set forth herein in full.

99. Citi, by way of the TPP contracts described above, made a representation to

Plaintiffs and the Class that. iUhey agreed to the terms of a TPP proposal, either by returning an

_ ...... ~ _ r _. T _ •

executed TPP Contract, or making the proposed trial payments, they would receive a permanent

-. RAMP modification.

100. CHi's TPP contracts were intended to induce Plaintiffs and the Class to rely on

them and make monthly TPP payments and Plaintiffs and the Class did, indeed, rely on Citi's

representations, by submitting TPP payments.

101. Given the language in the TPP Agreement, Plaintiffs' and the Class' reliance was

reasonable and justified.

102. Plaintiffs' and the Class' reliance was to their detriment. For example, those who

complied with the TPP contracts but were denied a permanent modification have been required

to pay increased interest, longer loan payoff times, higher principle balances, deterrence from

seeking other remedies to address their default andlor unaffordable mortgage payments, damage

to their credit, additional income tax liability, costs and expenses incurred to prevent or fight

foreclosure, and other damages for breach of contract


Case 2:11-cv-01432-WHW -GGG Document 1 Filed 03/11/11 Page 27 of 29 PagelD: 27

103. Plaintiffs and the Class have been damaged by Citi's actions and representations

in an amount to be proven at trial.


104. Plaintiffs repeat and re-alleges every allegation above as if set forth herein in full.

105. Plaintiffs bring this claim on his own behalf and on behalf of all other members of

the Class described above.

106. This is a claim for violation of the New Jersey Consumer Fraud Act ("CF A"),

N.J.S.A. 56.8-1, et. seq.

107. At all relevant times material hereto, Defendant conducted trade and commerce

~ithln the meaning oftheCFA.:· ._

108. Plaintiffs and the Class are "persons" as defined and construed under the CF A.

109. Defendant's conduct as set forth herein constitutes and unconscionable

conunercial practice comprised of deceptive acts or practices in violation of the CFA, § 56:8-2,

including its practice of leading borrowers to believe that Citi would offer permanent RAMP

modifications of their mortgages upon successfully completing a TPP and due to Citi's illegal

collection oflate fees and penalties.

110. Defendant's conduct as set forth herein has been unfair in violation of the CFA

because the acts or practices violate established public policy, and because the harm they cause

to consumers in New Jersey greatly outweighs any benefits associated with those practices.

111. Plaintiffs and the Class suffered actual and ascertainable losses of money or

property as a result of Defendant's unconscionable, deceptive andlor unfair trade practices,

including hut not limited to: payment of increased interest, longer loan payoff times, higher

principle balances, deterrence from seeking other remedies to address their default and/or


Case 2: 11-cv-01432-WHW -Gee Document 1 Filed 03/11/11 Page 28 of 29 PagelD: 28

unaffordable mortgage payments, damage to their credit, additional income tax liability, costs

and expenses incurred to prevent or fight foreclosure, and other damages.


WHEREFORE, the Plaintiffs respectfully request the following relief:

a. Certify this case as a class action and appoint the named Plaintiffs to be a Class

representative and his counsel to be Class counsel;

'b. Enter a judgment declaring the acts and practices ofCiti complained of herein to

constitute a breach of contract and a breach of the covenant of good faith and fair dealing, as

well as a declaration that they are required by the doctrine of promissory estoppel to offer

permanent modifications to 91ass members on the tenus promised in class members' temporary

. ....... ~. ~ .. . .

modifications, together with an award of monetary damages and other available relief on those


c. Grant a permanent or final injunction enjoining Citi's agents and employees,

affiliates and subsidiaries, from continuing to harm Plaintiffs and the members of the Class;

d. Order Citi to adopt and enforce a policy that requires appropriate training of their

employees and agents regarding their duties under HAMP;

e. Order specific performance of Citi's contractual obligations together with other

relief required by contract and law;

f. A ward actual and statutory damages to the Plaintiffs and the Class in amounts to

be proven at trial;

g. Award restitution and prejudgment interest;

h. Award Plaintiffs the costs of this action) including the fees and costs of experts,

together with reasonable attorneys' fees; and


Case 2:11-cv-01432-WHW -GGG Document 1 Filed 03/11/11 Page 29 of 29 PagelD: 29

1. Grant Plaintiffs and the Class such other and further relief as this COUlt finds

necessary and proper.


Plaintiffs demand a trial by jury on all issues so triable.

DATED: March 11, 2011


By ~s/ Lisa J. Rodriguez Lisa J. Rodriguez

258 Kings Highway East Haddonfield, New Jersey 08033 Telephone: (856) 795-9002 Facsimile: (856) 795-9887

Liaison Counsel for Plaintiffs and the Class

BERGER & MONTAGUE, P.C. Sherrie R. Savett

Russell D. Paul

Eric Lechtzin

1622 Locust Street Philadelphia, PA 19103 Telephone: 215-875-3000 Facsimile: 215-875-4613 E-mail: E-mail: E-mail:

Attorneys /01' Plaintiffs and the Class


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