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Case 2:11-cv-02318-ER Document 1 Filed 04/01/11 Page 1 of 35

IN THE UNITED STATES DISTRICT COURT


EASTERN DISTRICT OF PENNSYLVANIA

WILLIAM T. WHITING, on behalf of No. ______________


himself and all others similarly situated,
CLASS ACTION COMPLAINT
Plaintiff,

v. JURY TRIAL DEMANDED

CITIMORTGAGE, INC.,

Defendant.
Case 2:11-cv-02318-ER Document 1 Filed 04/01/11 Page 2 of 35

TABLE OF CONTENTS

I. NATURE OF THE CASE ......................................................................................... 1


II. JURISDICTION AND VENUE ................................................................................ 6
III. PARTIES ................................................................................................................... 7
A. PLAINTIFF............................................................................................................. 7

B. DEFENDANT......................................................................................................... 7

IV. FACTUAL ALLEGATIONS .................................................................................... 7


A. THE FORECLOSURE CRISIS .............................................................................. 7

B. THE ROLE OF LOAN SERVICERS..................................................................... 9

C. THE HAMP PROGRAM ..................................................................................... 11

D. CITI’S OBLIGATIONS UNDER HAMP ............................................................ 12

E. CITI’S PRACTICES ............................................................................................. 18

F. PLAINTIFF’S EXPERIENCE WITH CITI ......................................................... 21

V. CLASS ALLEGATIONS ........................................................................................ 25


VI. CAUSES OF ACTION ............................................................................................ 29
COUNT I – BREACH OF CONTRACT / BREACH OF DUTY OF GOOD FAITH
AND FAIR DEALING ............................................................................................ 29
COUNT II – PROMISSORY ESTOPPEL, IN THE ALTERNATIVE ....................................... 30
COUNT III – VIOLATIONS OF THE PENNSYLVANIA UNFAIR TRADE PRACTICES
AND CONSUMER PROTECTION LAW, 73 P.S. § 201-2(xxi) ........................... 31
VII. PRAYER FOR RELIEF .......................................................................................... 32
VIII. JURY TRIAL DEMANDED ................................................................................... 33

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I. NATURE OF THE CASE

1. Plaintiff William T. Whiting brings this action on behalf of himself and all

similarly situated Pennsylvania homeowners who have been wrongfully denied a permanent

modification of their mortgages by CitiMortgage, Inc. (“Citi” or “Defendant”). Citi entered into

standardized written temporary loan modification contracts (TPP Contracts, as defined below)

with certain borrowers who were either pre-qualified for loan modifications under the U.S.

Department of the Treasury’s Home Affordable Modification Program (“HAMP”), or were

presumed to have been prequalified since Citi was only supposed to enter into TPP Contracts

with borrowers it pre-qualified. These TPP Contracts promised that if borrowers made the

reduced monthly loan payments set forth in the contract for a trial period of three months and

submitted the requested documentation, then their loans would be permanently modified in the

fourth month and, thereafter, they would only need to pay the reduced amount. Even though the

borrowers lived up to their end of the bargain and fulfilled all of their obligations under their

respective TPP Contracts, Citi breached its contractual obligations by failing to permanently

modify these borrowers’ loans.

2. The class represented here consists of:

a. All Pennsylvania 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 as required by their TPP Contract and complied
with Citi’s requests for documentation, and (ii) have not received or have been
denied a permanent Home Affordable Modification Agreement that complied
with HAMP rules.

b. All Pennsylvania 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 as required by their TPP Contract and complied
with Citi’s requests for documentation, (ii) but were improperly reported to
credit reporting agencies as delinquent during the TPP (“Credit Reporting
Class”).
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c. All Pennsylvania 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 as required by their TPP Contract and complied
with Citi’s requests for documentation, (ii) but were improperly placed in
foreclosure and/or charged for various foreclosure-related fees (“Foreclosure
Class”).

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

Troubled Asset Relief Program (“TARP”). By accepting these payments, Citi agreed in writing

with the Treasury Department that it would participate in one or more programs that TARP

authorized the Secretary of the Treasury to establish to minimize foreclosures.

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

Mac”).

5. On April 13, 2009, Citi signed a Servicer Participation Agreement (“SPA”) with

the Treasury Department, which Plaintiff incorporates herein by reference, in which it agreed to

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 qualifies for a loan modification under
HAMP;

c. Institute a modified loan pursuant to a written agreement with the


homeowner that sets forth a reduced payment amount as per a mandated
formula, which is effective for a three-month trial period for borrowers
that are eligible for a modification; and

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d. Provide a permanently modified loan to those homeowners who comply


with the requirements of the written agreement 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)

instituting or continuing foreclosures during the trial period (HAMP FAQs Q2000 at 19); (ii)

charging late fees and prepayment and other penalties during the trial period (HAMP FAQs

Q1308 at 8); and (iii) restricting the way a servicer may report the borrower to credit reporting

agencies during the trial period (HAMP FAQs Q2004 at 20).

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 HAMP’s directives and has regularly and repeatedly violated its prohibitions. Rather than

honoring its duties arising from its acceptance of billions of dollars in federal bailout funds under

TARP, Citi has intentionally set up its loan modification program to fail. It instituted the

program in order to feign compliance with TARP’s conditions, but never had any intention to

allow widespread modification for homeowners in need.

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 of financial

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

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 loan originator

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

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

servicer.

9. Economic factors that discourage Citi from meeting its obligations under HAMP

to facilitate permanent 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 service 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 servicer’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 of loans in danger of default by establishing permanent modifications, Citi has serially

strung out, delayed, and otherwise hindered the modification processes that it obligated itself to

facilitate when it accepted billions of dollars in TARP funds. Citi’s uniform pattern of delay and

obstruction tactics have resulted in homeowners with loans serviced by Citi, who are eligible for

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permanent loan modifications and who have met all of the requirements for participation in the

HAMP permanent loan modification program, who have not received the permanent loan

modifications to which they are entitled.

11. Pursuant to its SPA contract with the Treasury Department, Citi entered into a

standardized written contract with Plaintiff and thousands of homeowners for a temporary trial

modification of their existing loan. This written modification contract is titled “Home

Affordable Modification Trial Period Plan” (“TPP Contract”). Each such TPP Contract promises

that if the borrower complies with its terms and the borrower’s representations on which the TPP

Contract’s offer of a loan modification was based continue to be true in all material respects,

then the borrower will receive a permanent modification on the same terms.

12. The TPP Contract requires that the borrower make at least three monthly loan

payments of a reduced amount as set forth in a schedule in the TPP Contract. If the borrower

fulfills his or her obligation to make the payments required by the TPP Contract and submits the

required documentation, Citi must offer the borrower a permanent modification. Specifically,

the HAMP guidelines provide:

Following underwriting, NPV evaluation and a determination, based on verified


income, that a borrower qualifies for HAMP, servicers will place the borrower in
a trial period plan (TPP). The trial period is three months in duration ...
Borrowers who make all trial period payments timely and who satisfy all
other trial period requirements will be offered a permanent modification.

Making Home Affordable Handbook version 3.0 (“HAMP Handbook”), at 77 (emphasis added).

The TPP Contract further states that “TIME IS OF THE ESSENCE.”

13. The HAMP guidelines specifically state that the TPP Contract need not be signed

by the borrower and that the TPP is an offer that is accepted when the borrower makes the first

reduced payment due under the TPP Contract. Id.

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14. Plaintiff and a similarly situated class of Pennsylvania borrowers have accepted

their TPP Contracts by making the first required modified loan payment and have complied with

their TPP Contracts in all respects by submitting all of the required documentation asked of them

and by making all of the required loan payments on time. Despite Plaintiff’s and the Class

members’ efforts, Citi has ignored its contractual obligation to permanently modify the loans.

Citi’s actions violate its contractual obligations, thwart the purpose of HAMP, and are unfair and

deceptive under Pennsylvania state law.

II. JURISDICTION AND VENUE

15. 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

or value of $5,000,000, exclusive of interest and costs, and members of the Class are citizens of a

State different from the Defendants.

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

1331 and 1367 in that the Plaintiff 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 of TARP.

17. 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

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.

18. 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,

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Defendant receives substantial fees and interest from borrowers who hold 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.

III. PARTIES

A. PLAINTIFF

19. Plaintiff William T. Whiting is and at all times mentioned herein was a resident of

Philadelphia, Pennsylvania. Plaintiff was and is the rightful sole owner of a home in

Philadelphia, Pennsylvania, which at all pertinent times has been, and continues to be, Plaintiff’s

primary residence.

B. DEFENDANT

20. 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.

IV. FACTUAL ALLEGATIONS

A. THE FORECLOSURE CRISIS

21. Over the last three years, the United States has been in a foreclosure crisis. In late

2009, a congressional oversight panel noted that one in eight U.S. mortgages was in foreclosure

or default.1

22. For the third quarter of 2010, foreclosure filings-default notices, scheduled

auctions and bank repossessions were reported on 930,437 properties in the 3rd quarter. One in

every 139 U.S. housing units received a foreclosure filing in this quarter.2

1
Congressional Oversight Panel, Oct. 9, 2009 report at 3. Available at
http://cop.senate.gov/reports/library/report-100909-cop.cfin.

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23. Increased foreclosures have a detrimental effect not just on the borrowers who

lose their homes, but also on the surrounding neighborhoods that suffer decreased property

values and municipalities that lose tax revenue.

24. Pennsylvania has been hard hit by this crisis. The Associated Press reported on

September 16, 2010:3

The number of Pennsylvania homeowners falling behind on mortgage payments and the
number of homes seized by banks hit five-year highs in August.

New figures out Thursday from foreclosure listing firm RealtyTrac Inc. showed 6,500
Pennsylvania homes received at least one foreclosure filing in August, while banks
repossessed 2,300 properties.

Both numbers are the highest recorded by RealtyTrac since it began tracking them in
2005. Pennsylvania now has seen those numbers spike in August for three straight years.

25. According to Realtytrac, Pennsylvania ranked 17th highest on the state

foreclosure list in the United States for February 2011, with 3110 foreclosure properties, which

represents 1 in every 1774 housing units.4

26. The foreclosure crisis “continues unabated,” as a Congressional oversight panel

stated in April 2010. 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 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1458413,

last visited February 25, 2011).

2
Reality Trac Staff, Foreclosure Activity Increases 4% in Third Quarter (October 14, 2010).
Available at http://www.realtytrac.com/content/press-releases/q3-2010-and-september-2010-
foreclosure-reports-6108.
3
http://www.pennlive.com/midstate/index.ssf/2010/09/pennsylvania_home_foreclosure.html
4
http://www.realtytrac.com/trendcenter/

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B. THE ROLE OF LOAN SERVICERS

27. 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 or, more commonly today, the loans are 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.

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

lucrative role. Loan servicers compete for the right to service loans 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.

29. 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 PSAs provide no meaningful restrictions 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.

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30. 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.

31. Servicers also receive interest income on 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 turn over funds, such as

by paying taxes and insurance at the last moment possible.

32. 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.

33. 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.

34. 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

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and inspection fees; (2) capitalize arrears to increase principal balances; and (3) create additional

float income by putting borrowers in foreclosure.

C. THE HAMP PROGRAM

35. 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 of 2009, Pub. L. No. 111-5, 123 Stat. 115, on February 17, 2009 (collectively, the “Act”).

36. 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.

37. 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. Id. Congress allocated up

to $700 billion to the Treasury for TARP. See 12 U.S.C. § 5225.

38. 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.” Id.

39. 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

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Affordable (“MHA”) initiative to help at-risk homeowners avoid foreclosure by restructuring

their mortgages.

40. HAMP is the portion of the MHA initiative that provides mandatory directives for

implementation, and with which Citi has not complied. HAMP 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 billion is TARP money, to keep up to “3 to 4 million homeowners” in their

homes by 2012.

D. CITI’S OBLIGATIONS UNDER HAMP

41. Because Citi accepted billions 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 Citi executed the SPA, which is incorporated herein by reference, with the federal

government on April 13, 2009, making official Citi’s participation in HAMP, and binding it to

comply with the HAMP procedures.5

42. 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 HAMP. These documents together are

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 I.A., 2.A.5.

5
A copy of the SPA signed by Citi on April 13, 2009, as modified, can be found at
http://www.treasury.gov/initiatives/financial-stability/housing-
programs/mha/Documents_Contracts_Agreements/093010citimortgageincSPA(incltransmittal)-r.pdf (last
visited February 25, 2011).

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43. Fannie Mae issued the first “Supplemental Directive” (“SD 09-01”) in April,

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

“for all mortgage loans it services.” SPA § 2.A.

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

includes:

• Supplemental Directive 09-01 (“SD 09-01”), Apr. 6, 2009,


https://www.hmpadmin.com/portal/programs/docs/hamp_servicer/sd0901.pdf;

• Supplemental Directive 09-03 (“SD 09-03”), July 6, 2009,


https://www.hmpadmin.com/portal/programs/docs/hamp_servicer/sd0903.pdf;

• Supplemental Directive 09-07 (“SD 09-07”), Oct. 8, 2009,


https://www.hmpadmin.com/portal/programs/docs/hamp_servicer/sd0907.pdf;

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


https://www.hmpadmin.com/portal/programs/docs/hamp_servicer/sd0908.pdf;

• Supplemental Directive 10-01 (“SD 10-01”), Jan. 28, 2010,


https://www.hmpadmin.com/portal/programs/docs/hamp_servicer/sd1001.pdf;

• Supplemental Documentation – Frequently Asked Questions – Home Affordable


Modification Program (“HAMP FAQs”), Apr. 2, 2010,
https://www.hmpadmin.com/portal/programs/docs/hamp_servicer/hampfaqs.pdf;

• Supplemental Documentation – Frequently Asked Questions – Home Affordable


Modification Program 2009-2010 Conversion Campaign (“HAMP Conversion FAQs”),
Jan. 8, 2010,
https://www.hmpadmin.com/portal/programs/docs/hamp_servicer/hampconversionfaqs.p
df;

• Checklist for Getting Started and Participating in HAMP for Non-GSE Loans, Guidance
Effective for Verified Trial Period Plans, Feb. 22, 2010 (“HAMP Checklist”),
https://www.hmpadmin.com/portal/programs/docs/hamp_servicer/hampchecklistverified.
pdf; and

• Home Affordable Modification Program Base Net Present Value (NPV) Model
Specifications (“NPV Overview”), June 11, 2009,
https://www.hmpadmin.com/portal/programs/docs/hamp_servicer/npvoverview.pdf.

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(all last visited February 25, 2011).6 These documents together describe the basic activities

required under HAMP.

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

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

basic eligibility criteria, set forth 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;

• 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.

46. Next, the servicer is required to calculate whether, by applying certain successive

modification steps enumerated in the Program Documentation to the loan in the stated order of

succession, the borrower’s total monthly housing payment can be reduced to 31% of the

borrower’s monthly income. See SD 09-01 at 8-10; HAMP Checklist at 6. This process is

known as the “waterfall.” These steps include capitalizing accrued interest and escrow advances,

reducing the interest rate, extending the term and re-amortizing the loan (if necessary), and

providing a principal forbearance (if necessary). See SD 09-01 at 8-10.

47. If application of the successive steps enumerated in the Program Documentation

produces terms that yield the target 31% monthly mortgage payment, the servicer must offer the

borrower a TPP Contract if the modification provides a net present value benefit to the mortgage

6
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 (“Servicer Handbook”), which
can be found at https://www.hmpadmin.com/portal/programs/docs/hamp_servicer/mhahandbook_30.pdf
(last visited February 25, 2011).

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holder. This determination, to be performed prior to the tender of a TPP Contract and known as

the “net present value” (“NPV”) test, compares the net present value of cash flow from these

modified loan terms to the net present value of the loan without modification. See SD 09-01 at

4-5; NPV Overview; HAMP FAQs at 27-29, Q2314.

48. If the NPV test yields a “positive” outcome (i.e., the value of a performing

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

trial modification through aTrial 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 at 2-3.

49. 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.

50. Citi offers TPPs to eligible homeowners through theTPP Contract, which

describes the homeowner’s duties and obligations. The TPP Contract promises a permanent

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

fulfill the documentation requirements.

51. The HAMP regulations make it clear that a servicer such as Citi must prequalify

borrowers for eligibility for a permanent mortgage loan modification under HAMP before

entering into a TPP Contract. Specifically, HAMP guidelines provide:

Servicers must verify a borrower’s eligibility for HAMP using the documentation
provided by the borrower in the Initial Package prior to offering the borrower a
TPP.

Servicer Handbook at 59 (emphasis added); see also Servicer Handbook at 77 (quoted at ¶ 53

below). The actions cited in paragraphs 45-48 above, including the income test and NPV

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evaluation, are precisely the steps the HAMP rules mandate a servicer to take to prequalify a

borrower.

52. Once a borrower is prequalified as required by HAMP rules and then offered a

TPP, under the HAMP regulations the borrower need only fulfill the precise terms of the TPP

Contract, such as making reduced loan payments for the three month trial period and supplying

the required documentation, to receive a Modification Agreement which formalizes the

permanent loan modification. HAMP regulations utilize prequalification to create a seamless

transition from the TPP to the permanent modification, so that the permanent modification

becomes effective on the first day of the month following the final trial period month.

53. Thus, under HAMP rules Citi is required to send TPP Contracts only to borrowers

who have been prequalified for a permanent mortgage loan modification. Specifically, the

HAMP guidelines state:

8 Trial Period Plans

Following underwriting, NPV evaluation and a determination, based on verified income,


that a borrower qualifies for HAMP, servicers will place the borrower in a trial period
plan (TPP). The trial period is three months in duration ... Borrowers who make all trial
period payments timely and who satisfy all other trial period requirements will be offered
a permanent modification.

Servicer Handbook at 77.

54. If the homeowner makes all three of the TPP monthly payments and complies

with the documentation requirements, then the second stage of the HAMP process is triggered

and the homeowner must be offered a permanent modification. See SD 09-01 at 18; SD 10-01 at

8. Specifically, the HAMP guidelines provide:

9 Permanent Modification

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A borrower in a TPP may receive a permanent modification as long as the


servicer has received all required trial period payments timely and all other
required documentation from the borrower.

9.1 Modification Agreement

A servicer should prepare the Modification Agreement early enough in the trial
period to allow sufficient processing time so that the modification becomes
effective on the first day of the month following the final trial period month.

Servicer Handbook at 80. The HAMP FAQs further provide:

The trial period plan is considered to be successful if the borrower has made all of
the trial period plan payments no later than the last business day of the month in
which the last trial period plan payment is due, the borrower has provided all
required documentation, the borrower has complied with all other requirements of
the trial period plan and the certifications set forth in the Hardship Affidavit or the
MHA Request for Modification and Affidavit, as applicable, remain true and
correct.

HAMP FAQs, Q2001 at 19.

55. HAMP directives mandate specific protections for borrowers applying for

modification under the program. Borrowers are protected against foreclosure both during the

time when the borrower is being evaluated for a permanent modification and during the trial

period. See SD 09-01 at 14. Servicers cannot force borrowers to waive their legal rights,

paylate fees imposed during the trial period or reimburse to Citi administrative processing costs

incurred in connection with HAMP. See SD 09-01 at 2, 22.

56. Finally, servicers are required to report a “full file” status report to credit

reporting agencies during the TPP trial period. “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.

57. 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

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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, HAMP rules

direct servicers to prepare the permanent HAMP modification agreement early enough to allow

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.

58. HAMP rules mandate that servicers “comply with HAMP requirements” and

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

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.

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

complaints about HAMP. See Id. at 13. Servicers must retain documents and keep detailed

records.

E. CITI’S PRACTICES

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

HAMP.

60. Citi regularly fails to evaluate borrowers’ eligibility for a permanent modification

under the HAMP program in a timely manner, if at all. Despite Citi’s obligation under HAMP

rules to prequalify borrowers for loan modification prior to issuing a TPP, in some cases Citi

waits to underwrite the loan and evaluate borrowers’ eligibility until months after the

homeowner is given a TPP and begins making trial payments. Homeowners thus make months

of trial payments (and comply with stressful and burdensome documentation requirements)

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without any assurance that Citi will comply with HAMP’s guidelines and offer a permanent

modification.

61. Throughout the HAMP application process and during the trial period, 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 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. Citi’s demands that borrowers submit

duplicative or unnecessary documentation creates opportunities for Citi to reject otherwise

eligible borrowers for permanent modifications. The requests for documents are unnecessary,

duplicative, burdensome, and harassing.

62. Citi has routinely failed to comply with HAMP’s guidelines and offer permanent

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

modifications, or with no guidance whatsoever.

63. Citi has routinely failed 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

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

opportunity for borrowers denied a modification to dispute or appeal the denial.

64. Citi’s failure to comply with its obligations under HAMP and its TPP contracts

have serious consequences for borrowers.

65. A homeowner’s total unpaid principal balance increases each month that he or she

is making trial payments pursuant to a TPP. Trial payments are less than the amount ordinarily

due under the 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 of the 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. If the 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 Citi’s failure to timely implement permanent HAMP modifications or timely

denials, Citi’s servicing fees increase.

66. Although borrowers are 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 HAMP directives require Citi to report borrowers who

were previously current when they entered the trial period as “current but on a modified

payment.” HAMP FAQs, Q2004 at 20. However, Citi improperly reports such borrowers as

delinquent. Thus, the more months a borrower spends in the trial period and in limbo, the more

months they are reported as delinquent, and the more months they suffer derogatory credit

reporting.

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67. Citi’s conduct has also run afoul of the prohibition in HAMP regulations against

proceeding with a foreclosure sale during the trial period. Any foreclosure sale must be

suspended and no new foreclosure action may be initiated during the trial period. If the borrower

fails the trial period, any foreclosure sale must be suspended and no new foreclosure action may

be initiated until the borrower has been considered and found ineligible for other available

foreclosure prevention options. HAMP FAQs, Q2000 at 19. In addition, Citi charges those TPP

compliant borrowers it unlawfully subjects to foreclosure variuous foreclosure-related fees.

68. 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.

F. PLAINTIFF’S EXPERIENCE WITH CITI

69. Plaintiff’s experience with Citi epitomizes the foregoing problems. Plaintiff

purchased his home in 1996 for $75,000. He financed the purchase price of his home with a

mortgage loan, which he refinanced in 2004 for $199,000. He again refinanced on July 8, 2008

with Provident Funding Group, Inc. in the amount of $200,500 through a 30 year loan with an

interest rate of 6.5%. Monthly payments of interest only in the amount of $1,086.04 were due

for the first 10 years, and monthly payments of fully amortizing principal and interest in the

amount of $1,494.87 were due for the remaining 20 years.

70. Plaintiff’s loan from Provident Funding Group, Inc. was serviced at all relevant

times hereto by Defendant Citi.

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71. Plaintiff was injured during his employment as a mount-maker for the University

of Pennsylvania Museum of Archeology and Anthropology in 2009 and subsequently, in January

2010, his employment was terminated. Due to Plaintiff’s financial situation, by September 2009

servicing his mortgage was becoming an increasingly difficult and uneconomical burden.

72. Plaintiff first inquired in writing about a modification of his mortgage in early

October 2009 and applied to Citi for modification shortly thereafter. Plaintiff met all of the

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

request in accordance with the HAMP guidelines and, in August 2010, rejected his permanent

modification in writing. The following timeline summarizes Plaintiff’s experiences.

73. In or around January 2010, Citi sent Plaintiff a formal TPP contract, pursuant to

which the trial period commenced on February 1, 2010. The TPP opens by stating:

If I 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 contract is attached hereto as Exhibit A.

74. In or around January 2010, Plaintiff signed and returned a copy of the TPP

Contract to Citi using the self-addressed Federal Express envelope that Citi provided. However,

the HAMP regulations specifically state that “Borrowers are not required to sign or return the

TPP Notice” (¶ 8.1) and that “[t]he servicer’s receipt of the first payment due under the TPP

Notice on or before the last day of the month in which the first payment is due (TPP Offer

Deadline) is evidence of the borrower’s acceptance of the TPP Notice and its terms and

conditions.” (¶ 8.3).

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75. The TPP Contract called for Plaintiff to make four (4) trial period payments of

$875.13 each, on February 1, 2010, March 1, 2010, April 1, 2010 and May 1, 2010.

76. Citi’s TPP Contract offered to Plaintiff and other Class Members a permanent

loan modification in return for making timely trial period payments and complying with Citi’s

documentation requests.

77. Plaintiff accepted Citi’s offer and made each of the four (4) trial period payments

in full prior to the date each payment was due. Citi accepted each of these payments pursuant to

the terms of the TPP. Thus, the representations Plaintiff made in Section 1 of the TPP remained

true in all material respects.

78. Plaintiff also sent Citi all requested and required documentation. Plaintiff sent

each such document to Citi several times because Citi claimed on at least several occasions that

it did not receive these documents. Plaintiff sent, inter alia, tax returns, Form 4506T, bank

statements, W-2 statements, P&L statements for freelance work and a Hardship Affidavit.

79. Despite making the four (4) required revised monthly payments under the TPP

and sending to Citi all of the requested and required documentation, Citi failed to grant Plaintiff

a permanent loan modification as it was required to do.

80. Plaintiff’s trial period payments and his additional performance, including

supplying required documentation, constitute consideration. By performing, Plaintiff gave up his

ability to pursue other alternatives to prevent default and foreclosure and other living

arrangements. Plaintiff and Citi therefore formed a valid and binding contract to modify his

mortgage loan.

81. After the four (4) month trial period, Plaintiff heard nothing from Citi concerning

his mortgage loan. Rather, Citi failed to comply with HAMP’s guidelines and offer Plaintiff a

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permanent modification, and instead strung him along for another three months in a trial

modification with no guidance whatsoever.

82. In fact, in the summer of 2010, a Citi representative phoned Plaintiff and

informed him (erroneously) that Citi had not received any of his four monthly trial period

mortgage payments. Plaintiff was then required to fax to Citi confirmations of each of those

payments, which proved he had indeed made the four monthly trial period mortgage payments

on time. Due to Citi’s incompetence and failure to follow HAMP regulations, he was forced to

fax those confirmations to Citi several times.

83. Then, on August 12, 2010, despite making all payments required under the TPP,

Citi sent a letter to Plaintiff advising him that Citi had rejected his application for a permanent

loan modification. A copy of Citi’s August 12, 2010 letter is attached hereto as Exhibit B.

84. The reason given by Citi in its August 12, 2010 letter for denying Plaintiff’s

HAMP modification was because Plaintiff “did not provide us with the documents we

requested.” This explanation was nothing more than a pretext for denying Plaintiff’s loan

modification, and was utterly false and without any basis. In fact, Plaintiff had provided all of

the requested and required documentation.

85. By failing to permanently modify Plaintiff’s loan after Plaintiff performed under

the TPP contract, Citi breached the terms of the TPP contract.

86. At the end of the trial period, Plaintiff continued and has continued until this day

making his monthly mortgage loan payment of $875.13 to Citi. By continuing to make those

payments, Plaintiff has shown that he remains ready, willing and able to perform under the TPP

contract.

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87. Moreover, throughout Plaintiff’s TPP, Citi improperly instituted and/or continued

to pursue foreclosure on Plaintiff’s residence, in violation of HAMP. On August 10, 2010, two

days before Citi informed Plaintiff that Citi had rejected his application for a permanent loan

modification, Citi sent Plaintiff an Act 91 Notice (attached hereto as Exhibit C), informing

Plaintiff that Citi intended to foreclose on his property. On or around October 14, 2010, Citi

filed a Complaint in Mortgage Foreclosure Action in the Court of Common Pleas, Philadelphia

County. As a result of Citi’s failure to timely grant a permanent HAMP modification and other

violations of HAMP alleged herein, the foreclosure proceedings against Plaintiff has continued

unabated.

88. Also during Plaintiff’s TPP, Citi improperly charged Plaintiff late fees in the

amount of $271.45 and other penalties, in violation of HAMP.

V. CLASS ALLEGATIONS

89. Plaintiff repeats and re-alleges every allegation above as if set forth herein in full.

90. Plaintiff brings this action pursuant to Fed. R. 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 Pennsylvania 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 as required by their TPP
Contract and complied with Citi’s requests for documentation, and (ii)
have not received or have been denied a permanent Home Affordable
Modification Agreement that complied with HAMP rules.

b. All Pennsylvania 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 as required by their TPP
Contract and complied with Citi’s requests for documentation, (ii) but
were improperly reported to credit reporting agencies as delinquent during
the TPP (“Credit Reporting Class”).

c. All Pennsylvania 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 as required by their TPP

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Contract and complied with Citi’s requests for documentation, (ii) but
were improperly placed in foreclosure and/or charged for various
foreclosure-related fees (“Foreclosure Class”).

91. 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.

92. Plaintiff does not know the exact size or identities of the members of the proposed

Class, since such information is in the exclusive control of Defendant. Plaintiff believes that the

Class encompasses many hundreds and perhaps thousands of individuals whose identities can be

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

numerous that joinder of all members is impracticable.

93. Based on the size of the modifications at issue, Plaintiff believes the amount in

controversy exceeds $5 million.

94. All members of the Class have been subject to and affected by a uniform course

of conduct by Citi that was designed to evade the requirements of HAMP and avoid permanent

loan modifications in an effort to increase Citi’s income through, inter alia, maintaining high

service fees on larger principal balances, collecting additional late fees and process management

fees and avoiding increased fixed overhead costs.

95. This course of conduct includes: (1) prequalifying a borrower for a permanent

loan modification under HAMP or failing to properly and timely conduct the required pre-

qualification analysis, (2) making the borrower an offer for a permanent modification by sending

him or her a TPP Contract, and then (3) failing to permanently modify the loan after the

borrower accepts the contract and makes the three required monthly modified loan payments,

thus fulfilling all of his or her contractual obligations under it.

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96. This course of conduct also includes: stringing out, delaying or otherwise

hindering the modification process in violations of HAMP rules by:

(1) instituting or pursuing foreclosure actions while borrowers are in the trial period or

instituting foreclosure actions after the trial period despite the fact that borrowers have fully

complied with the TPP Contract,

(2) reporting borrowers to credit agencies for delinquency while they are on the trial

period,

(3) repeatedly requesting that borrowers send the required documentation over and over

again,

(4) failing to allocate adequate resources such as sufficient trained staff to facilitate the

modification process,

(5) failing to establish proper communication between internal corporate departments

necessary to facilitate borrowers’ modification requests,

(6) failing to timely notify borrowers at the end of the three month trial period that they

have been provided or have been denied a permanent HAMP modification, and

(7) denying permanent HAMP modifications for reasons that are false, untrue and/or

entirely inaccurate.

97. The claims are based on standardized written form contracts (the TPP Contracts)

and the uniform HAMP rules contained in the Servicer Handbook which govern the entirety of

the Making Home Affordable Program and all aspects of loan modification under HAMP. 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.

98. These questions include, but are not limited to the following:

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


homeowners under HAMP;

b. Whether Defendant engaged in the course of conduct set forth in ¶¶ 94-96.

c. 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 HAMP modification;

d. Whether Defendant’s failure to provide permanent HAMP modifications


in the circumstances described herein where the borrower has timely made
the requisite 3 monthly payments pursuant to the TPP Contract and
supplied the necessary documentation amounts to a breach of contract
and/or a breach of the covenant of good faith and fair dealing;

e. Whether Defendant’s conduct violates Pennsylvania’s Unfair Trade


Practices and Consumer Protection Act and corresponding regulations;
and

f. Whether the Court can order damages and enter injunctive relief.

99. The claims of the individual named Plaintiff 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 Plaintiff

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.

100. The individual named Plaintiff will fairly and adequately represent the interests

of the Class. Plaintiff is committed 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.

101. 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.

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

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

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103. Citi has acted or 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.

VI. CAUSES OF ACTION

COUNT I – BREACH OF CONTRACT / BREACH OF DUTY OF GOOD FAITH AND


FAIR DEALING

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

105. Plaintiff brings this claim on their own behalf and on behalf of each member of

the Class described above.

106. Plaintiff and members of the Class entered into written TPP Contracts with Citi.

107. Plaintiff and members of the Class formed binding and enforceable agreements

when they executed written TPP Contracts, and/or when they made the first required payment

under the TPP offered in writing by Defendants.

108. Payments in accordance with an executed TPP Contract constitute consideration.

109. Citi failed to perform under the TPP Contracts with Plaintiff 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.

110. Citi breached the TPP Contracts with Plaintiff and members of the Class by

failing to offer Plaintiff and members of the Class permanent HAMP modifications after they

made the required TPP payments and submitted the required documentation.

111. Plaintiff 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 Citi.

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112. As a result of Citi’s breach of the TPP Contracts, Plaintiff and members of the

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

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.

113. Plaintiff and the Class have been damaged by Citi’s breach of the TPP Contracts

in an amount to be proven at trial.

COUNT II – PROMISSORY ESTOPPEL

114. Plaintiff repeats and re-alleges every allegation above as if set forth herein in full.

115. Citi entered into the TPP Contracts described above with Plaintiff and the Class

that obligated Citi to provide Plaintiff and other members of the Class a permanent loan

modification under HAMP if all trial period plan payments as set forth in the TPP Contract were

timely made and required documentation was submitted.

116. In the alternative, under the theory of promissory estoppel, Citi is estopped from

denying the existence of an agreement between itself and Plaintiff and with other Class Members

because Citi’s TPP Contracts were intended to and did induce Plaintiff and the Class to rely,

Plaintiff’s and the Class’ reliance on the TPP Contracts was reasonable and justified, and that

reliance was to the detriment of Plaintiff and the Class.

117. Citi’s TPP Contracts were intended to induce Plaintiff and the Class to rely on

them and make monthly TPP payments and Plaintiff and the Class did, indeed, rely on Citi’s

representations, by submitting TPP payments.

118. Given the language in the TPP Contract, Plaintiff’s and the Class’ reliance was

reasonable and justified.

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119. Plaintiff’s 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, higher principle balances, higher service fees, and extended payoff time

periods. They have been deterred from seeking other remedies to address their default and/or

unaffordable mortgage payments, have incurred damage to their credit, costs and expenses to

prevent or fight foreclosure and other damages and have been subject to additional income tax

liability.

120. Plaintiff and the Class have been damaged by Citi’s actions and representations in

an amount to be proven at trial.

COUNT III – VIOLATIONS OF THE PENNSYLVANIA UNFAIR TRADE PRACTICES


AND CONSUMER PROTECTION LAW, 73 P.S. § 201-2(xxi)

121. Plaintiff repeats and re-alleges every allegation above as if set forth herein in full.

122. Plaintiff brings this claim on his own behalf and on behalf of all other members of

the Class described above.

123. This is a claim for violation of the Pennsylvania Unfair Trade Practices And

Consumer Protection Law (“UTPCPL”), 73 P.S. § 201-2(xxi).

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

within the meaning of the UTPCPL.

125. Plaintiff and the Class are “persons” as defined and construed under the UTPCPL.

126. Defendant’s conduct as set forth herein constitutes and unconscionable

commercial practice comprised of deceptive acts or practices in violation of the UTPCPL, 73

P.S. § 201-2(xxi), including its practice of leading borrowers to believe that Citi would offer

permanent HAMP modifications of their mortgages upon successfully completing a TPP and due

to Citi’s illegal collection of late fees and penalties in violation of HAMP regulations.

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127. 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 Pennsylvania greatly outweighs any benefits associated with those practices.

128. Plaintiff and the Class suffered actual and ascertainable losses of money or

property as a result of Defendant’s unconscionable, deceptive and/or unfair trade practices,

including but not limited to: payment of increased interest and service fees, 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.

VII. PRAYER FOR RELIEF

WHEREFORE, the Plaintiff respectfully requests the following relief:

a. Certify this case as a class action and appoint the named Plaintiff to be a
Class representative and his counsel to be Class counsel;

b. Enter a judgment declaring the acts and practices of Citi 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
Class members on the terms promised in class members’ temporary
modifications, together with an award of monetary damages and other
available relief on those claims;

c. Grant a permanent or final injunction enjoining Citi’s agents and


employees, affiliates and subsidiaries, from continuing to harm Plaintiff
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. Award actual and statutory damages to the Plaintiff and the Class in
amounts to be proven at trial;

g. Award restitution and prejudgment interest;

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h. Award Plaintiff the costs of this action, including the fees and costs of
experts, together with reasonable attorneys’ fees; and

i. Grant Plaintiff and the Class such other and further relief as this Court
finds necessary and proper.

VIII. JURY TRIAL DEMANDED

Plaintiff demands a trial by jury on all issues so triable.

DATED: April 1, 2011 BERGER & MONTAGUE, P.C.

By /s/ Sherrie R. Savett


Sherrie R. Savett
Russell D. Paul
Eric Lechtzin
1622 Locust Street
Philadelphia, PA 19103
Telephone: 215-875-3000
Facsimile: 215-875-4613
E-mail: ssavett@bm.net
E-mail: rpaul@bm.net
E-mail: elechtzin@bm.net

Attorneys for Plaintiff and the Class

kal672285_920_2 (2).docx

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