A federal judge in New Jersey recently denied a motion seeking to dismiss a homeowner’s breach of contract claim after the mortgage holder failed to grant a mortgage modification despite the homeowner having fulfilled the requirements of a trial modification agreement, according to news reports.

The breach of contract claim was denied after U.S. District Judge Freda Wolfson found the elements of breach of contract were fulfilled by the plaintiff’s successful completion of the trial modification agreement and the defendants’ subsequent refusal to modify terms of the mortgage.

The Nov. 1, 2016 ruling in Block v. Seneca Mortgage Servicing, which was designated for publication, could put the lid on a common practice in the mortgage industry, according to plaintiff’s attorney Joshua Denbeaux: a homeowner complies with the requirements of a trial modification agreement, also known as a trial payment plan, only to see the mortgage company refuse to modify the mortgage terms.

The facts of the case, according to The New Jersey Law Journal, include that the homeowner, who defaulted on a $580,000 loan, was named in a foreclosure action in January 2013. In May 2014, she reached an agreement with Seneca Mortgage Servicing that would lower her monthly payment if she made a deposit and six monthly payments on time.

By all accounts, the homeowner completed her obligations under the agreement by November 2014, but the next month her loan was sold and the servicing of the loan was transferred to another mortgage servicer, Ocwen Loan Servicing.

Ocwen initially refused to provide a modification but said it would reconsider if the homeowner provided proof of compliance with the previous mortgage servicer’s trial modification agreement. However, according to the homeowner, Ocwen failed to credit $32,543 in trial modification payments loan balance, she claims.

Ocwen never followed through and in March 2015 a third servicer took over managing the mortgage. That company, Fay Servicing, refused the homeowner’s request for a loan modification, but provided a new trial modification agreement requiring a down payment and six monthly payments.

Block filed suit against all three servicers as well as the mortgage holder, ARLP Securitization Trust, Series 2015-1 in January of this year. She raised breach of contract claims and also raised claims under the Fair Debt Collection Practices Act, Real Estate Settlement Procedures Act and a New Jersey state law protecting consumers against fraud. The defendants moved to dismiss all four counts.

The motion to dismiss FDCPA claims against Ocwen were granted in part and denied in part, according to court documents: Motions to dismiss RESPA and FDCPA claims against Fay were granted, but the judge denied the motion to dismiss the Consumer Fraud Act claim against Seneca.

In refusing to dismiss the breach of contract claims, the judge found the plaintiff properly alleged a contract between the parties, a breach of the contract, damages flowing from the breach and that the party stating the claim performed its own contractual obligations. She rejected the defendants’ argument that the Seneca trial modification agreement is a valid contract due to lack of proper consideration by the plaintiff.

“There are tens of thousands of people in this situation. The district courts throughout the country have gone in different directions on this issue,” attorneys for the plaintiff told The New Jersey Law Journal. “We laid out all the facts and [Wolfson] had a full record in front of her for the first time anywhere in the country as to what happens with this trial modification nonsense.”