Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca3-16-03069/USCOURTS-ca3-16-03069-0/pdf.json

Nature of Suit Code: 430
Nature of Suit: Banks and Banking
Cause of Action: 

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PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

________________

No. 16-3069

________________

GINNINE FRIED

v.

JP MORGAN CHASE & CO;

JP MORGAN CHASE BANK NA, d/b/a/ Chase,

Appellants

________________

Appeal from the United States District Court

for the District of New Jersey

(D.C. Civil Action No. 2-15-cv-02512)

District Judge: Honorable Madeline C. Arleo

________________

Argued January 18, 2017

Before: AMBRO, VANASKIE, and SCIRICA, Circuit Judges

(Opinion filed: March 9, 2017)

Leonard A. Gail, Esquire

Paul Berks, Esquire

Massey & Gail

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50 East Washington Street, Suite 400

Chicago, IL 60602

Jonathan S. Massey, Esquire (Argued)

Massey & Gail

1325 G Street, N.W., Suite 500

Washington, DC 20005

Counsel for Appellants

Robert M. Brochin, Esquire

Morgan Lewis & Bockius

200 South Biscayne Boulevard

5300 Southeast Financial Center

Miami, FL 33131

Allyson N. Ho, Esquire

Morgan Lewis & Bockius

1717 Main Street, Suite 3200

Dallas, TX 75201

Judd E. Stone, Esquire

Morgan Lewis & Bockius

2020 K Street, N.W.

Washington, DC 20006

Counsel for Amicus Appellants:

American Bankers Association; 

Consumer Mortgage Coalition;

Housing Policy Council; 

Independent Community Bankers of America;

Mortgage Bankers Association

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James E. Cecchi, Esquire

Lindsey H. Taylor, Esquire

Carella Byrne Cecchi Olstein Brody & Agnello

5 Becker Farm Road

Roseland, NJ 07068

Antonio Vozzolo, Esquire (Argued)

345 Route 17 South

Upper Saddle River, NJ 07458

Counsel for Appellee

________________

OPINION

_______________

AMBRO, Circuit Judge

Ginnine Fried bought a home in 2007 for $553,330. It

was near high tide in the real estate market, but she had to 

believe she was getting a bargain, as an appraisal estimated 

the home’s value to be $570,000. Fried borrowed $497,950 at 

a fixed interest rate to make her purchase and mortgaged the 

home as collateral. Because the loan-to-purchase-price ratio 

($497,950 / $553,330) was more than 80%, JPMorgan Chase

Bank, N.A. (“Chase”), the servicer for Fried’s mortgage (that 

is, the entity who performs the day-to-day tasks for the loan, 

including collecting payments), required her to obtain private 

mortgage insurance. Fried had to pay monthly premiums for 

that insurance until the ratio reached 78%; in other words, the 

principal of the mortgage loan needed to reduce to $431,597, 

which was projected to happen just before March 2016.

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We now know that the housing market crashed in 

2008, and the value of homes dropped dramatically. Fried, 

like many homeowners, had trouble making mortgage

payments. Help came when Chase modified Fried’s mortgage 

under a federal aid program by reducing the principal balance 

to $463,737. The rub was that Chase extended Fried’s

mortgage insurance premiums an extra decade to 2026. 

Whether it could do this depends on how we interpret the 

Homeowners Protection Act (“Protection Act”), 12 U.S.C. 

§ 4901 et seq. Does it permit a servicer to rely on an updated 

property value, estimated by a broker, to recalculate the 

length of a homeowner’s mortgage insurance obligation 

following a modification or must the ending of that obligation

remain tied to the initial purchase price of the home? We 

conclude the Protection Act requires the latter.

I. BACKGROUND

Mortgage insurance protects the owner or guarantor of 

mortgage debt—typically the Federal National Mortgage 

Association (“Fannie Mae”) or Federal Home Loan Mortgage 

Corporation (“Freddie Mac”)—from a borrower’s risk of 

default. Traditional underwriting standards require 

homebuyers to pay at least 20% of a home’s purchase price in 

cash—that is, they require the homebuyer to obtain 20% 

equity in the home at the time of purchase and finance 80% of 

the home’s purchase price. If homebuyers cannot pay at least

20%, then they must purchase mortgage insurance. Once the 

balance due on a home loan falls below 80% of the home’s 

purchase price, mortgage insurance is no longer necessary

because “excessive [mortgage insurance] coverage does not 

benefit the homeowner . . . and provides little extra protection 

to a lender.” S. Rep. No. 105-129, at 3 (1997).

Before Congress took action by passing the Protection 

Act in 1997, many lenders would continue to collect 

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mortgage insurance payments after a homeowner had gone 

below the 80% loan-to-value mark. H.R. Rep. No. 105-55, at 

6 (1997). In the Act Congress set national standards for 

mortgage insurance termination. It requires mortgage 

servicers to (1) provide periodic notices to a 

borrower/mortgagor1regarding mortgage insurance

obligations, (2) automatically terminate mortgage insurance

on a statutorily defined schedule, and (3) grant a borrower’s 

request to cancel her mortgage insurance once certain 

conditions are met. 12 U.S.C. §§ 4901-03.

Under the Protection Act, mortgage servicers must 

automatically terminate mortgage insurance for a fixed-rate 

loan like Fried’s on “the date on which the principal balance 

of the mortgage . . . is first scheduled to reach 78 percent of 

the original value of the property securing the loan.” 12 

U.S.C. § 4901(18)(A). The “original value” of a home is “the 

lesser of the sales price of the property securing the mortgage, 

as reflected in the contract, or the appraised value at the time 

at which the subject residential mortgage transaction was 

consummated.” 12 U.S.C. § 4901(12). As noted, the purchase 

price of Fried’s home was less than its appraised value, so her 

home’s “original value” is $553,330. Seventy-eight percent of 

that figure—the key value for mortgage insurance

termination—is $431,597.40. Under her loan’s amortization 

schedule, Fried’s unpaid principal balance was set to reach 

$431,597.40 just before March 1, 2016, and therefore her 

mortgage insurance obligation would terminate on that date.

 

1 The Protection Act defines “mortgagor” as the 

“original borrower under a residential mortgage or his or her 

successors or assignees.” 12 U.S.C. 4901(11). We therefore 

use “borrower,” “mortgagor,” and “homeowner”

interchangeably throughout this opinion.

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When Fried ran into financial trouble following the 

financial crisis of 2008, she and Chase agreed on January 10, 

2011, to modify her mortgage under the Home Affordable 

Mortgage Program (“HAMP”). The HAMP was enacted as 

part of the Emergency Economic Stabilization Act of 2008 in 

response to the financial and housing crisis of that time. See 

Spaulding v. Wells Fargo Bank, N.A., 714 F.3d 769, 772 (4th 

Cir. 2013). Under the HAMP, participating mortgage 

“servicers agreed to identify homeowners who were in default

or would likely soon be in default on their mortgage 

payments, and to modify the loans of those eligible under the 

program. In exchange, servicers would receive a $1,000 

payment for each permanent modification, along with other 

incentives.” Id. at 773 (quoting Wigod v. Wells Fargo Bank, 

N.A., 673 F.3d 547, 556 (7th Cir. 2012)). Per the modification 

agreement she reached with Chase, the principal balance of 

Fried’s loan was reduced to $463,736.98.

The Protection Act provides for the treatment of 

mortgage modifications in 12 U.S.C. § 4902(d):

If a mortgagor and mortgagee (or holder of the 

mortgage) agree to a modification of the terms 

or conditions of a loan pursuant to a residential 

mortgage transaction, the cancellation date, 

termination date, or final termination shall be 

recalculated to reflect the modified terms and 

conditions of such loan.

Accordingly, Chase was required to update Fried’s 

termination date to reflect the “modified terms and 

conditions” to which the parties “agree[d.]” Pursuant to the 

loan’s modified amortization schedule (modified, that is, to 

account for the reduced principal), Fried’s outstanding 

principal balance would reach 78% of her home’s original 

value ($431,597) in July 2014. Compl. ¶¶ 47, 50.

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After receiving the modification, Fried asked Chase 

when she would be relieved of her obligation to make 

monthly mortgage insurance payments. On August 31, 2012, 

Chase responded that her mortgage insurance obligation 

would automatically terminate on November 1, 2026. This 

date was ten years later than her mortgage insurance

termination date before the modification and twelve years

later than the recalculated date based on her decreased 

principal balance. Her monthly mortgage insurance premium

is approximately $252.83, so a ten-year extension of those 

premiums would cost her an additional $30,339.60. See

Compl. ¶ 6.

With this in mind, Fried wrote Chase to question the 

new termination date and ask how the bank reached its 

conclusion. It responded on October 10, 2012, and April 9, 

2013, stating that November 1, 2026, is “when the loan will 

reach 78% based on the modified terms and conditions.” 

Compl. ¶ 53. Seventy-eight percent of what exactly Chase did 

not say, so Fried wrote again.

Chase’s response on October 4, 2013, clarified how it 

arrived at the 2026 termination date. In order to participate in 

the HAMP program, it was required to obtain a Broker’s 

Price Opinion (“BPO”) estimating the value of Fried’s home 

at the time of the modification. A BPO is a much less 

rigorous estimate of a property’s market value than is an 

appraisal. See In re Thomas, 344 B.R. 386, 393 (Bankr. W.D. 

Pa. 2006) (“Full appraisals, not just the ‘drive by’ Broker’s 

Price Opinion, are used . . . when the matter is contested.”);

see also In re Kasbee, 466 B.R. 719, 723 (Bankr. W.D. Pa. 

2010) (bank “realized that the comparables utilized in the 

BPO were inadequate and that as a result it was obtaining a 

full appraisal to determine the true value”).

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In any event, Chase explained that it had substituted its 

BPO of $420,000 for the home’s $553,330 original value. 

Because the BPO was much smaller, Fried would not pay 

down her outstanding principal balance to 78% of the BPO

(78% x $420,000 = $327,600) until November 1, 2026.

It is worth pausing for a moment to understand the 

math behind Chase’s purported extension of Fried’s mortgage 

insurance obligation. Remember that the mortgage insurance 

obligation ends when Fried has paid down the principal 

balance owed on her mortgage to 78% of her home’s original 

value. That is, she must pay down her mortgage balance to 

78% of $ 553,330, which is $431,597.

In this way, the Protection Act’s mortgage insurance 

termination date sets a finish line that homeowners go toward 

by paying down their mortgage debts. Fried started with a 

mortgage debt of $497,950 and would reach her finish line 

once the outstanding principal debt was $431,597. Put 

differently, she would cross this threshold after making 

$66,353 of payments toward her mortgage’s principal 

balance, which, according to her initial amortization schedule, 

she would do in 2016. When her mortgage was modified, 

Fried leapt forward toward her goal: the modification 

decreased her outstanding principal balance to $463,737, so 

she would reach the $431,597 finish line sooner, in 2014, by 

making just $32,140 in principal payments. But when Chase 

substituted the BPO for the original value of Fried’s home, it

moved the finish line. Seventy-eight percent of the $420,000 

BPO is $327,600. According to her modified amortization 

schedule, Fried would not pay down her mortgage debt to 

Chase’s new $327,600 finish line—more than $136,137 in 

mortgage principal payments away—until 2026.

In April 2015, Fried filed a complaint on behalf of 

herself and similarly situated individuals. She asserted that by 

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relying on the BPO to calculate her mortgage insurance

termination date, rather than her home’s original value, Chase 

violated the Protection Act. Chase filed a motion to dismiss, 

contending that its substitution of the BPO for the original 

value did not violate the Protection Act and that Fried’s 

action was barred by the Act’s two-year statute of 

limitations.2

The District Court denied Chase’s motion but certified 

its appeal to our Court, recognizing that whether Chase 

violated the Protection Act is a controlling question of law 

with substantial ground for difference of opinion that is likely 

to advance this case’s resolution. See 28 U.S.C. § 1292(b);

Katz v. Carte Blanche Corp., 496 F.2d 747, 754 (3d Cir. 

1974) (en banc). We agreed to hear the appeal.

II. ANALYSIS

Chase contends that it was entitled to recalculate 

Fried’s termination date by substituting the BPO it obtained at 

the time of the modification for her home’s original value. It

equivocates on whether it could do this only because of 

certain HAMP rules or whether the Protection Act would 

permit the substitution more generally. In either case Chase is 

 

2 The complaint names both Chase and its parent 

company, JPMorgan Chase & Co. (“JPMC”), as defendants. 

While the District Court did not address the issue in its 

opinion, parent companies are not, merely by dint of 

ownership, liable for the acts of their subsidiaries. Pearson v. 

Component Tech. Corp., 247 F.3d 471, 484 (3d Cir. 2001). At 

oral argument, Fried’s counsel acknowledged that the 

complaint did not allege any wrongdoing by JPMC itself and 

that the claims against JPMC should be dismissed. Oral 

Argument Jan. 18, 2017, at 25:10-13.

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wrong: the Protection Act required calculation of Fried’s 

termination date on the basis of her home’s original value, 

which under the Act is its purchase price.

Whether Fried knew or should have known of Chase’s 

violation of the Protection Act outside of the statute-oflimitations period is not clear on the face of her complaint, 

and thus the District Court was correct not to dismiss on this 

ground.

A. The Homeowners Protection Act

1. The Statute’s Text

Under the Protection Act a homeowner’s obligation to 

pay mortgage insurance premiums ends on the “termination 

date if, on that date, the mortgagor is current on the payments 

required by the terms of the residential mortgage 

transaction[.]” 12 U.S.C. § 4902(b)(1). For a fixed-rate 

mortgage, like Fried’s, the termination date is

the date on which the principal balance of the 

mortgage, based solely on the initial 

amortization schedule for that mortgage, and 

irrespective of the outstanding balance for that 

mortgage on that date, is first scheduled to 

reach 78 percent of the original value of the 

property securing the loan[.]

12 U.S.C. § 4901(18)(A). Simply put, a homeowner’s 

termination date is when she will have paid down her loan’s 

principal balance to the point that it equals 78% of her home’s 

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original value.3 All agree that the original value of Fried’s 

home in 2007 was its purchase price of $553,330.

When Fried and Chase agreed to modify her mortgage

in 2011, another provision of the Protection Act came into 

play. Section 4902(d) provides that “[i]f a mortgagor and 

mortgagee . . . agree to a modification of the terms or 

conditions of a loan . . . [, the] termination date . . . shall be 

recalculated to reflect the modified terms and conditions of 

such loan.” The process envisioned by § 4902(d) is that we 

ask which terms or conditions of Fried’s loan she and Chase 

agreed to modify; then we recalculate her termination date to 

reflect the modified terms and conditions.

Recall that to calculate initially the termination date

for mortgage insurance payments we must determine when 

the principal balance of the mortgage is first scheduled to 

reach 78% of the original value of the property securing the 

loan. 12 U.S.C. § 4901(18). There is no question that Fried’s 

agreement with Chase modified the outstanding principal 

balance of her mortgage by reducing it to $463,737, so her 

termination date needed to be recalculated to account for that

change. Reducing a homeowner’s principal balance moves 

her closer to the finish line established by the termination 

date—in Fried’s case, the date at which her outstanding 

principal balance would reach $431,597. According to the 

modified amortization schedule reflecting the reduced 

principal balance, the termination date, per 12 U.S.C. 

§ 4902(d), would be recalculated to occur in 2014.

 

3 A homeowner’s mortgage insurance obligation will 

not end per § 4902(b)(1) on her termination date if she is not

“current on the payments required by the terms of the 

residential mortgage transaction[,]” but that issue is not raised 

in this case.

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But Chase went one step further. It replaced the 

original value of Fried’s home with its BPO estimating the 

home’s value at the time of the 2011 modification. The 

BPO’s estimate was substantially less than her home’s 

original value. So the substitution had the effect of moving 

Fried’s finish line further away: she was not scheduled to pay 

down her debt to 78% of the BPO’s $420,000 value (as noted,

$327,600) until 2026.

According to Fried’s complaint, her written agreement 

with Chase did not explicitly mention or change the original 

value of her home as defined by § 4901(12).4 Compl. ¶ 51. 

 

4

Indeed, it is not obvious that even an explicit

agreement could depart from § 4901(12)’s definition of 

“original value.” The Protection Act sets a timeline for 

terminating mortgage insurance premiums on the basis of 

specific facts about the property and elements of the mortgage 

transaction: the purchase price or appraised value of the home 

and the loan’s amortization schedule. 12 U.S.C. § 4901(18).

Section 4902(d) updates that timeline with respect to terms 

and conditions of the loan, like the amortization schedule, that 

have been modified. But a home’s purchase price and 

appraised value are not terms of the loan; they are facts that 

do not change with the loan’s provisions.

Moreover, permitting lenders and servicers to modify 

at will the mortgage insurance termination date set by the 

Protection Act by redefining “original value” would arguably 

undermine the Act’s purpose—to safeguard consumers from 

overpaying mortgage insurance premiums by setting a 

consistent and predictable termination date. If lenders and 

servicers could contract around the Act’s timeline by 

redefining key terms, the Act would be no more than a 

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Chase does not contend otherwise, but instead responds that

substitution of the BPO for the home’s original value was 

permissible because it was a “term” or “condition” of Fried’s 

modification under § 4902(d) that the HAMP rules required.

Hence we turn to those rules.

The Making Home Affordable Program Handbook for 

Servicers of Non-GSE Mortgages (the “HAMP Handbook”) 

states that “[s]ervicers must obtain an assessment of the 

current value of the property securing the mortgage loan 

being evaluated for HAMP.” HAMP Handbook, 6.8 Property 

Valuation, Version 3.0, 73, available at 

https://www.hmpadmin.com/portal/programs/docs/hamp_serv

icer/mhahandbook_30.pdf (December 2, 2010). It goes on to 

specify that “[s]ervicers may use either an automated 

valuation model (AVM), . . . a broker’s price opinion (BPO),

or an appraisal” to measure the property’s value at the time of 

modification. Id. The Handbook, however, says nothing about 

using the BPO to calculate the period of a homeowner’s 

mortgage insurance obligation. HAMP rules told Chase to get 

the BPO, but they did not require Chase to substitute that 

value for the “original value” that the statute, § 4901(18), 

relies on to compute the mortgage insurance termination date.

Chase responds that, even if not required by the 

HAMP, use of the BPO for the termination date calculation 

was a “condition” of the modification because Chase would 

not have modified the loan without first getting an updated 

property valuation. This argument suffers from the same 

logical flaw as Chase’s argument tied more closely to the 

HAMP Handbook: even if Chase’s obtaining a BPO was a 

prerequisite to Fried’s mortgage modification, that cursory 

calculation does not replace under the Protection Act the 

 

contractual default rule that a few lines of boilerplate could 

override. This issue, however, we need not decide.

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original value of Fried’s property for mortgage insurance 

purposes.

Should we interpret “conditions” expansively to 

include any necessary precursors to the modification of 

Fried’s loan? We think not, as § 4902(d) relies on changes to 

the terms and conditions of the loan itself. No matter what led

to the modification, the key inquiry is which of the loan’s

terms and conditions were modified, not any conditions 

precedent.

Most significantly, however, the Protection Act

updates the termination date only with respect to the loan 

provisions that the parties “agree” to modify: “If a mortgagor 

and mortgagee . . . agree to a modification of the terms or 

conditions of a loan . . . [, the] termination date [for mortgage 

insurance payments] . . . shall be recalculated to reflect the 

modified terms and conditions of such loan.” 12 U.S.C. 

§ 4902(d). Here we come full circle to what did Fried and 

Chase actually agree.

The obvious objection is that if courts must look to 

each modification agreement to determine which terms and 

conditions the borrower agreed to modify in order to calculate 

the mortgage insurance obligation, the inquiry will be so 

individualized and factually intensive as to destabilize the 

mortgage market. But calculation of an updated termination 

date always requires reference to the modification agreement. 

There is no other way to know which terms and conditions of 

the loan have been modified. At the least, the updated 

principal balance and interest rate (whether fixed or variable) 

will depend on the agreement. Moreover, as Fried points out, 

inquiry into the terms of modification agreements likely will 

be a routine exercise, as servicers like Chase use an industry 

standard form for modifications. See, e.g., Rice v. Green Tree 

Servicing, LLC, No. 3:14-CV-93, 2015 WL 5443708, at *5 

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(N.D.W. Va. Sept. 15, 2015) (“Under the Servicing 

Guidelines, servicers are directed to use Form 3157, a 

standard form, during the loan modification process . . . .”).

Chase retorts that, regardless what its written 

agreement with Fried might say, its reliance on the BPO was 

justified because “all applicable or relevant laws must be read 

into the agreement of the parties just as if expressly provided 

by them, except where contrary intention is evident.” 

Williams v. Stone, 109 F.3d 890, 896 (3d Cir. 1997) (quoting 

Wright v. Commercial & Sav. Bank, 464 A.2d 1080, 1083 

(Md. 1983)). According to Chase, Fried impliedly agreed to 

substitute the BPO’s estimate for her home’s original value 

because the HAMP Handbook provided the background law 

for the modification agreement.

We disagree, for (as already discussed) nothing in the 

HAMP’s requirements (even assuming they are “applicable or 

relevant laws”) required substitution of the BPO for original 

value. And, in any event, § 4902(d) updates a homeowner’s 

termination date to reflect the terms and conditions of her 

loan she agreed to modify and does not incorporate the 

provisions of a handbook that guides her servicer.

What is ironic is that Chase advocates a heads-I-win, 

tails-you-lose, interpretation of the HAMP. As the Seventh 

Circuit observed, when “homeowners [have] tried to assert 

rights arising under HAMP itself [against servicers,] [c]ourts 

have uniformly rejected these claims because HAMP does not 

create a private federal right of action for borrowers against 

servicers.” Wigod, 673 F.3d at 559 n.4; see also Senter v. 

JPMorgan Chase Bank, N.A., 810 F. Supp. 2d 1339, 1350–51 

(S.D. Fla. 2011) (“Plaintiffs’ reliance on the HAMP 

Guidelines[,] rather than a formula contained in their 

[agreements with Chase] to provide the terms of their 

permanent modifications[,] is an improper attempt to assert a 

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private right of action under the HAMP.”); Puzz v. Chase 

Home Fin., L.L.C., 763 F. Supp. 2d 1116, 1123 (D. Ariz. 

2011) (“Even assuming that HAMP guidelines encourage 

lenders to provide [certain benefits] to their debtors, there is 

no authority for the proposition that HAMP or its regulations 

or guidelines create a private right of action against lenders 

who begin foreclosure without doing so.”); Coulibaly v. J.P. 

Morgan Chase Bank, N.A., No. CIV.A. DKC 10-3517, 2011 

WL 3476994, at *15 (D. Md. Aug. 8, 2011) (“Plaintiffs may 

not establish liability by relying on Chase’s alleged violations 

of certain servicing guidelines promulgated by the U.S. 

Department of the Treasury in connection with HAMP.”).5

The proverb “what is good for the goose is good for the 

gander” applies: the HAMP’s provisions do not bind the 

parties to a mortgage modification only when they benefit 

Chase.

Moreover, courts have held—at least twice at Chase’s 

behest—that the HAMP’s rules are not themselves the terms 

of modification agreements between borrowers and servicers.

E.g., Short v. Chase Home Fin. LLC, No. CV-11-133-PHXDGC, 2011 WL 9160941, at *3 (D. Ariz. Aug. 22, 2011)

(“HAMP is not a contract between Plaintiffs and Chase, and 

did not amend Plaintiffs’ loan documents.”); Wright v. Chase 

Home Fin. LLC, No. CV-11-0095-PHX-FJM, 2011 WL 

2173906, at *2 (D. Ariz. June 2, 2011) (“HAMP is not a 

contract between plaintiff and defendants, did not amend 

plaintiff’s loan contracts, and does not contain a private right 

of action.”); see also Grona v. CitiMortgage, Inc., No. 3-12-

0039, 2012 WL 1108117, at *5 (M.D. Tenn. Apr. 2, 2012)

 

5 Where courts have allowed HAMP-related actions, the 

substantive “claims [were] based on contract, tort, and/or 

state consumer fraud statutes[,]” rather than the provisions of 

the HAMP itself. Wigod, 673 F.3d at 559 n.4.

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(“HAMP is not a contract between Plaintiff and Defendant. 

HAMP did not modify Plaintiff's Loan Documents, and 

HAMP does not contain a private right of action.”).

For these reasons, the Protection Act’s text does not 

support replacement of the $553,330 original value of Fried’s 

home with Chase’s $420,000 BPO.

2. Statutory Structure and Legislative History

Chase looks to the Protection Act’s statutory structure 

and legislative history to counter the result we reach, but 

these guides to the Act’s intent only strengthen our 

conclusion. Congress amended in 2000 the Protection Act

with respect to loan modifications and refinancing

transactions. See Private Mortgage Insurance Technical 

Corrections and Clarification Act (the “Corrections Act”), 

P.L. 106-569, 114 Stat. 2944 (2000) (amending 12 U.S.C. §§ 

4901, 4902, 4903, 4905). The purpose of the Corrections Act 

was, among other things, to eliminate “uncertainty relating to 

the cancellation and termination of [mortgage insurance] for . 

. . loans whose terms or rates are modified over the life of the 

loan.” 146 Cong. Rec. H. 3578-02, H3579 (May 23, 2000).

With respect to mortgage refinance transactions, which 

are distinct from mortgage modifications, Congress amended 

the definition of “original value” such that “[i]n the case of a 

residential mortgage transaction for refinancing the principal 

residence of the mortgagor, [original value] means only the 

appraised value relied upon by the mortgagee to approve the 

refinance transaction.” 12 U.S.C. § 4901(12). Thus, when a 

homeowner refinances her home mortgage loan, the “original 

value” of her home will become the appraised value relied on 

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by the mortgagee.6 And, accordingly, her termination date 

will reflect the new “original value.” See 12 U.S.C. 

§ 4901(18).

But for mortgage modifications Congress did not make 

any such provision to update a home’s original value. Instead, 

with respect to modifications like Fried’s, Congress added the 

language discussed above that “[i]f a mortgagor and 

mortgagee . . . agree to a modification of the terms or 

conditions of a loan pursuant to a residential mortgage 

transaction, the . . . termination date . . . shall be recalculated 

to reflect the modified terms and conditions of such loan.” 

Corrections Act, PL 106–569, 114 Stat 2944 (2000); 12 

U.S.C. § 4902(d). Unlike the refinance provision, the 

language Congress chose for mortgage modifications does not 

change the “original value” of a home when the modification 

occurs. Only the “terms and conditions” of the loan modified 

by the parties’ agreement are updated, and, for the reasons 

detailed earlier, replacement of the original value with some 

other value is not necessarily one of them.

Chase contends that “Congress used different language 

and different statutory provisions with respect to loan 

modifications and refinanc[ings], but it provided that updated 

property valuations be used for [both modifications and 

refinancing transactions].” Chase’s Reply at 14. Of course,

 

6 Notably, even for a refinance transaction the “original 

value” is not necessarily the value of the home at the time of 

refinancing. Section 4901(12) incorporates the “appraised 

value relied upon by the mortgagee to approve the refinance 

transaction.” Id. (emphasis added). If the mortgagee relied on 

the appraisal performed at the time of the home’s initial sale, 

that appraised value would remain the “original value” of the 

home even after the refinancing.

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when Congress uses different language in the same act, we 

usually presume the opposite—that different language points 

to a different result. INS v. Cardoza-Fonseca, 480 U.S. 421, 

432 (1987) (“Where Congress includes particular language in 

one section of a statute but omits it in another section of the 

same Act, it is generally presumed that Congress acts 

intentionally and purposely in the disparate inclusion or 

exclusion” (internal brackets, quotation marks, and citation 

omitted)).

Here the distinction Congress drew makes sense. 

When a borrower refinances her mortgage, she pays off her 

old debt with a new loan, often from a different lender. A

refinancing is a new “residential mortgage transaction.” 12 

U.S.C. § 4901(15) (“a transaction . . . in which a mortgage . . .

or . . . security interest is created or retained . . . to finance the 

acquisition, initial construction, or refinancing of that 

dwelling”). The new lender thus should not be bound by the 

property valuation relied on by the initial lender.

A modification, on the other hand, is merely “an 

alteration or amendment” to the existing mortgage contract, 

see Modification, Black’s Law Dictionary (10th ed. 2014), 

and is not a new “residential mortgage transaction,” see 12 

U.S.C. § 4901(15). While the Protection Act presumes that a 

lender will rely on an appraisal before completing a 

refinancing transaction, see 12 U.S.C. § 4901(18), the HAMP 

Handbook makes clear an appraisal is not a prerequisite to a 

mortgage modification. HAMP Handbook, at 73 (“Servicers 

may use either an automated valuation model (AVM), . . . a 

broker’s price opinion (BPO), or an appraisal.”).

Chase directs us to several passages of the 

Congressional Record to support its contention that 

§ 4902(d)—despite its text—permits substitution of an 

updated property value at the time of modification for a 

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home’s original value.

7 Not one of the passages it points to 

actually says that, nor do they overcome § 4902(d)’s text, 

structure, or amendment history.

Congress reasonably chose to treat mortgage 

modifications and refinancing transactions differently. Its 

explicit command to update the original value of a home 

when a mortgage is refinanced is strong evidence that it 

declined to permit such an update impliedly for mortgage 

modifications.

3. Fannie Mae Servicing Guidelines

Chase next argues that the Fannie Mae Servicing 

Guidelines support its position. Unlike the sources discussed 

above, they do permit what Chase did. However, we decline 

to follow the Servicing Guidelines because the Protection Act

explicitly overrides them, and Fannie Mae’s interpretation of 

the Protection Act is not entitled to deference.

Taken together, Fannie Mae and Freddie Mac “own or 

guarantee close to half of the home loans in the United 

 

7 For example, both in its brief and at oral argument 

Chase brought our attention to a statement of the Corrections 

Act’s sponsor that the bill “clarifies that[,] in the case of . . . 

loan modifications, [loan-to-value] calculations are made 

based on the most recent amortization schedule, not based on 

an outdated schedule.” 146 Cong. Rec. H. 3578-02, H3580

(May 23, 2000). But Fried does not dispute that an updated 

amortization schedule must be used to calculate her 

termination date. The amortization schedule was necessarily 

altered when her principal balance was decreased as agreed in 

the mortgage modification. Chase’s mistake was its reliance

as well on an updated value for her home.

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States.” See Town of Babylon v. Fed. Hous. Fin. Agency, 699 

F.3d 221, 225 (2d Cir. 2012). Even for mortgages not owned 

or guaranteed by them, mortgage lenders and servicers “are 

guided in their decisions by Fannie Mae and Freddie Mac 

requirements.” Id. (internal quotation marks omitted). As is 

typical in the secondary mortgage market, the pooling-andservicing agreement between Chase and the owners of Fried’s 

mortgage debt incorporates the Fannie Mae Servicing

Guidelines.8

The Guidelines provide that servicers must calculate 

“[mortgage insurance] termination eligibility . . . [by] us[ing] 

the amortization schedule of the modified mortgage loan and

the property value at the time of the mortgage loan 

modification.” Fannie Mae Servicing Guide, B-8.1-04: 

Termination of Conventional Mortgage Insurance,

https://www.fanniemae.com/content/guide/servicing/b/8.1/04.

html (Jan. 18, 2017) (emphasis added). The Guidelines add 

that servicers must “adhere to applicable state law related to 

the type of valuation to use to determine the property value at 

 

8 Chase does not argue that the pooling-and-servicing 

agreement or the Fannie Mae Guidelines it incorporates are

directly binding on Fried. See e.g., Fellows v. CitiMortgage, 

Inc., 710 F. Supp. 2d 385, 405 (S.D.N.Y. 2010) (Servicing 

Guidelines are not incorporated into contracts between 

borrowers and lenders). It relies on the Fannie Mae Servicing 

Guidelines only as an interpretive guide to the Protection Act. 

See Oral Argument Jan. 18, 2017, at 34:14-22 (“[W]e’re not 

contesting that the statute obviously ranks higher than . . . the 

Fannie Mae guide, but in trying to understand what 4902(d) 

means, we would look to Fannie Mae’s consistent 

interpretation since 2010[.]”).

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the time of the mortgage loan modification[,]” but that 

generally “[a] BPO or a new appraisal may be used[.]” Id.

According to Chase, the Servicing Guidelines provide 

the definitive interpretation of the Protection Act’s 

requirements. But Congress anticipated the possibility of 

conflicts between the Act and pooling-and-servicing 

agreements that rely on the Servicing Guidelines and 

explicitly provided that the Protection Act would take 

precedence:

The provisions of this chapter shall supersede 

any conflicting provision contained in any 

agreement relating to the servicing of a 

residential mortgage loan entered into by the 

Federal National Mortgage Association, the 

Federal Home Loan Mortgage Corporation, or 

any private investor or note holder (or any 

successors thereto).

12 U.S.C. § 4908(b). If the Servicing Guidelines would 

produce a result that departs from the Protection Act’s text, 

there is a conflict, and per § 4908(b) the statute prevails.

Chase contends that we should defer to Fannie Mae’s 

interpretation of the Protection Act under the doctrine of

Skidmore v. Swift & Co., 323 U.S. 134 (1944), which offers 

deference according to the “‘thoroughness evident in [the 

agency’s] consideration, the validity of its reasoning, its 

consistency with earlier and later pronouncements, and all 

those factors which give it power to persuade, if lacking 

power to control.’” Gonzales v. Oregon, 546 U.S. 243, 268

(2006) (quoting Skidmore, 323 U.S. at 140). But Fannie 

Mae’s Guidelines are not entitled to deference. First, they 

simply do not square with the text of the Protection Act.

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Second, Skidmore deference is available only to 

agencies interpreting the statutes they administer. See Mead 

Corp., 533 U.S. at 228. Fannie Mae and Freddie Mac are not 

administrative agencies. They “are federally-chartered but 

privately owned corporations that issue publicly traded 

securities.” Delaware Cty., Pa. v. Fed. Hous. Fin. Agency, 

747 F.3d 215, 219 (3d Cir. 2014).9

Nor does it administer the Protection Act. When 

Congress passed the Act it did not designate a regulator to 

interpret it. 146 Cong. Rec. H. 3578-02, H3581 (May 23, 

2000) (“Unfortunately, when we passed the Homeowner’s 

Protection Act, we were unable to prevail on one issue, and 

that was to actually have a regulator to work out some of the 

details of the statute and the underlying policy.” (Rep. 

Vento)). Indeed, if deference to any entity would be 

appropriate under the Protection Act, we would owe it to the 

several financial regulatory agencies that Congress authorized 

to enforce the Act. See 12 U.S.C. § 4909(b).

Fourth, application of the Servicing Guidelines in this 

context would conflict with guidance issued by the Consumer 

Financial Protection Bureau (“CFPB”), one of the agencies 

 

9 When Fannie Mae and Freddie Mac were in desperate 

financial distress in 2008, “Congress created [an agency 

called the Federal Housing Finance Agency] to act as 

conservator for Fannie and Freddie.” Delaware Cty., 747 F.3d 

at 219 (internal quotation marks and citation omitted). “A 

conservatorship is like a receivership, except that a 

conservator, like a trustee in a reorganization under Chapter 

11 of the Bankruptcy Code, tries to return the bankrupt party 

to solvency, rather than liquidating it.” Id. (internal quotation 

marks and citation omitted).

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authorized to enforce the Protection Act. A CFPB

Compliance Bulletin provides as follows:

Many mortgage loans are owned by 

Government-Sponsored Enterprises, or GSEs, 

such as Fannie Mae or Freddie Mac. These and 

other loan investors often create their own 

internal [mortgage insurance] cancellation 

guidelines that may include [mortgage 

insurance] cancellation provisions beyond those 

that the [Protection Act] provides.

The CFPB cautions servicers to implement 

investor guidelines in a way that does not lead 

them to violate consumer financial law. Both 

the [Protection Act] and some investor 

requirements contain similar [loan-to-value]

thresholds for [mortgage insurance] cancellation 

and termination, and use similar measures of the 

property’s value. Servicers should nonetheless 

remember that investor guidelines cannot 

restrict the [mortgage insurance] cancellation 

and termination rights that the [Protection Act]

provides to borrowers.

CFPB Bulletin 2015-03, Compliance Bulletin: Private 

Mortgage Insurance Cancellation and Termination, at 5, 

http://files.consumerfinance.gov/f/201508_cfpb_compliancebulletin-private-mortgage-insurance-cancellation-andtermination.pdf (Aug. 4, 2015) (emphasis in original). Chase 

relied on the Servicing Guidelines to extend Fried’s mortgage 

insurance obligation and thereby limited her termination 

rights, things (as the Bulletin advises) they cannot do.

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Finally, as noted above, Fannie Mae and Freddie Mac 

own or guarantee nearly half the home mortgage loans in 

America. Mortgage insurance covers against loss to a loan’s 

owner or guarantor from a borrower’s default, and Fannie 

Mae is the beneficiary of mortgage insurance. See 12 

U.S.C. § 1717(b)(2) (Fannie Mae charter provision requiring 

mortgage insurance when the outstanding principal balance of 

the mortgage at the time of purchase exceeds 80% of the 

value of the property securing the mortgage). Consequently, 

when it sets mortgage-insurance-related guidelines, Fannie 

Mae is not acting as an administrative agency neutrally 

interpreting laws for the marketplace; it is a market 

participant interpreting laws for the benefit of its shareholders

and is not entitled to deference.

For these reasons, the Fannie Mae Servicing 

Guidelines are not persuasive and do not alter our conclusion 

that, taking the facts alleged in Fried’s complaint as true,

Chase violated the Protection Act.

4. Purpose and Consequences

Hoping to avoid the result dictated by the Protection 

Act’s text, Chase contends that the statute’s purpose and the 

consequences of the District Court’s interpretation support 

reversal. We disagree.

Chase notes that the purpose of the Protection Act is to 

protect consumers from continuing to pay mortgage insurance

premiums after they have accrued 20% equity in their homes, 

at which point mortgage insurance is no longer necessary.

Our interpretation of the Protection Act is at odds with this

purpose, Chase contends, because Fried (whose home’s value

dropped) may stop paying mortgage insurance premiums 

before she reaches 20% equity, while other consumers (whose 

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26

home values have risen) may continue paying after obtaining 

20% equity.

When Congress enacted the Protection Act, however, 

it chose to prioritize predictability of consumers’ mortgage 

insurance obligations over economic precision. The Act sets a 

homeowner’s mortgage insurance termination date as the day 

her outstanding principal balance “is first scheduled to reach 

78 percent of the original value of the property securing the 

loan[.]” 12 U.S.C. § 4901(18). Because housing values can 

fluctuate with national economic trends (as Fried’s example 

demonstrates), the Protection Act’s timeline does no more 

than approximate the economic need for mortgage insurance 

in any particular case. This sacrifice of precision for 

predictability allows the Act to provide both consumers and 

lenders with certainty as to their respective mortgage 

insurance obligations from the moment the original value is 

known and the amortization schedule is set.

Chase contends that, while Fried is harmed by the 

replacement of her home’s original value with an updated 

value, most consumers would benefit from such a 

substitution. Its rationale is that, because most home values 

rise over time, we can safely assume that most borrowers 

seeking mortgage modifications will see the value of their 

homes increase between purchase and modification, and thus

substitution of new for old home values will lead to shorter 

mortgage insurance obligations for most borrowers.

Based on recent history, the links in Chase’s logical 

chain are weak. It is far from obvious that most homeowners 

seeking mortgage modifications would have seen their 

individual homes follow this upward trend. Indeed, if most 

homeowners receiving modifications bought during the recent 

housing bubble and modified after the burst, substitution of 

updated housing values for original values would 

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substantially increase their premium burdens if mortgage 

insurance termination dates change as Chase claims. It is 

exactly this narrative that Fried’s case represents.

When it passed the Protection Act, Congress made a

tradeoff between precision and predictability that we are not

free to rebalance. Accordingly, we affirm the District Court’s 

holding that Fried has adequately stated a claim that Chase 

violated the Act.

B. Statute of Limitations

This case is before us because the District Court 

certified interlocutory review of the controlling question of 

law discussed above. However, “once leave to appeal is 

granted the court of appeals is not restricted to a decision of 

the question of law which in the district judge’s view was 

controlling.” Katz, 496 F.2d at 754. Thus our Court may 

consider the other ground for dismissal Chase asserted in the 

District Court.

The Protection Act’s statute of limitations provides 

that “[n]o action may be brought by a mortgagor . . . later 

than 2 years after the date of the discovery of the violation 

that is the subject of the action.” 12 U.S.C. § 4907(b). Chase 

contends that Fried discovered its alleged violation of the 

Protection Act more than two years before she filed her 

complaint and that it therefore must be dismissed.

“Technically, the Federal Rules of Civil Procedure 

require a defendant to plead an affirmative defense, like a 

statute of limitations defense, in the answer, not in a motion 

to dismiss.” Schmidt v. Skolas, 770 F.3d 241, 249 (3d Cir. 

2014). “In this circuit, however, we permit a limitations 

defense to be raised by a motion under Rule 12(b)(6) only if 

the time alleged in the statement of a claim shows that the 

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cause of action has not been brought within the statute of 

limitations.” Id. (internal quotation marks and citation 

omitted). “Since the applicability of the statute of limitations 

usually involves questions of fact for the jury,” Van Buskirk 

v. Carey Can. Mines, Ltd., 760 F.2d 481, 498 (3d Cir. 1985), 

“if the bar is not apparent on the face of the complaint, then it 

may not afford the basis for a dismissal of the complaint 

under Rule 12(b)(6)[,]” Schmidt, 770 F.3d at 249 (internal 

quotation marks, brackets, and citation omitted). 

Chase argues that the statute of limitations began to 

run in August 2012 when Fried received its letter with the 

2026 mortgage insurance termination date. But, after 

receiving that letter, Fried wrote back to ask how Chase 

arrived at the new date. It responded in October 2012 that 

“November 1, 2026 . . . is the date when the loan will reach 

78% based on the modified terms and conditions.” Compl. ¶ 

53. Even then, the denominator of the fraction (78% of 

what?) remained a mystery. It was only in October 2013, 

following additional inquiries, that Chase specified that it 

used the BPO estimate of $420,000 obtained at the time of the

mortgage modification to calculate Fried’s termination date. 

Fried filed her complaint less than two years later in April

2015.

Whether Fried knew or should have known of “the 

violation that is the subject of [her] action[,]” 12 U.S.C. 

§ 4907(b), when she received notice of the new termination 

date or notice of the basis of its calculation is a factual 

question. She asserts that she did not know, and could not 

have known, of the violation until she knew why Chase had 

said that her mortgage insurance obligation would 

automatically terminate in 2026. Indeed, the argument 

continues, until she knew the basis of Chase’s move-back of 

the mortgage insurance finish line, she could not have known

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whether it was Chase’s conduct (or some other entity’s) that 

may have violated the Act.

Moreover, when she received Chase’s letters, Fried 

had not yet suffered the sort of injury that ordinarily would 

put one on notice of a legal violation. Her initial mortgage 

insurance obligation ran through March 1, 2016 (and her 

correctly modified termination date would have fallen in July 

2014). Thus, when Fried received Chase’s letters in 2012 and 

2013, she was still paying mortgage insurance premiums as 

expected and had not yet been required to pay premiums she 

did not owe.

Fried’s plausible contentions are enough to defeat 

Chase’s motion to dismiss. Which of Chase’s letters would 

have led Fried to discover her action is a factual question, and 

the answer to it is not clear from the face of the complaint. 

See Schmidt, 770 F.3d at 249. It is ripe for our remand.

* * * * *

The Protection Act sets the finish line (i.e., the 

termination date) for each homeowner’s mortgage insurance 

obligation on the basis of her home’s original value and 

measures her progress toward it by looking to her outstanding 

principal balance. Fried’s mortgage modification decreased 

her principal balance, but her home’s original value under the 

Act did not change. The modification thus moved her toward 

the finish line per § 4902(d) of the Act, but, although her 

home had dropped in value, it did not move the line itself.

Fried’s termination date is the day her mortgage’s outstanding 

principal balance was scheduled to reach $431,597. If she was 

current on her mortgage payments at that date, her mortgage 

insurance obligation ended then.

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In this context, we affirm the District Court’s 

determination declining to dismiss Fried’s claim against 

Chase and remand for further proceedings consistent with this 

opinion.

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