Trial Period Plan Agreement With Mortgage Lender is a Conditional Agreement to Modify a Mortgage

Arias v. Elite Mortgage Group, Inc., 439 N.J. Super. 273 (App. Div. 2015). This opinion by Judge Reisner affirmed a grant of summary judgment in favor of the defendant bank and against the plaintiff mortgagors, applying the de novo standard of review. The parties had entered into a Trial Period Plan Agreement (“TPP”) under the federal Home Affordable Mortgage Program (“HAMP”). The TPP stated that if plaintiffs made three trial period payments, in specified amounts on specified dates, the bank would provide plaintiffs with a mortgage modification agreement. The TPP also made clear that if plaintiffs did not comply with their obligations under the TPP, “the Loan Documents will not be modified.”

Judge Reisner stated that there were no reported New Jersey cases that addressed the contractual status of a TPP. However, citing several federal cases and a California state court case, she concluded that the TPP created a “unilateral offer” by the bank to provide a loan modification “if and only if plaintiffs complied fully and timely with their obligations under the TPP” (emphasis in original). Judge Reisner observed that the federal cases rejected banks’ arguments that they had no obligation to provide loan modifications if borrowers made the required trial plan payments, a contention that relied on the notion that there was no consideration for the TPP in that the borrowers were merely making partial payments on debts they already owed. The bank’s position would have made the TPP a one-sided illusory agreement. Instead, an offer to modify, conditioned on the borrowers’ performance, arose.

That legal analysis of the TPP, a first in New Jersey, is apparently the reason why this decision was published. The facts of this particular case were that plaintiffs did not timely make all of their trial plan payments. Thus, they did not satisfy the conditions of the TPP. When the bank refused to issue a modification, plaintiffs sued. But the Law Division rightly entered summary judgment against plaintiffs, Judge Reisner ruled, though on different grounds than those relied on by the Law Division.