On October 3, 2008, George W. Bush signed the Troubled Asset Relief Program (TARP) into law as part of the government’s efforts to combat the subprime mortgage crisis and shore up the faltering economy. In general terms, TARP allowed the U.S. Department of Treasury to purchase or insure up to $700 billion of troubled assets, which included collateralized debt obligations (i.e., mortgages). Since the enactment of TARP, the Eleventh Circuit has been silent as to whether the program gives individual borrowers a private right of action against institutions that participated in the TARP program. That has changed, however, as the Court has released two decisions since August holding that TARP does not create a private right of action.
First, in Nivia v. NationStar Mortg., LLC, 620 Fed.Appx. 822 (2015), borrowers commenced a Florida state court action alleging their mortgage servicer failed to comply with TARP and the Home Affordable Modification Program (HAMP) when the servicer did not modify plaintiffs’ mortgage following a judicial foreclosure judgment. The defendants removed the action to the United States District Court for the Southern District of Florida, which granted defendants’ motion to dismiss the HAMP and TARP claims, holding neither act provides a private right of action. The Eleventh Circuit affirmed the dismissal of the HAMP claim, citing to a prior decision. As to TARP it stated: “Although we have never held in a published opinion that TARP provides no private right of action against private entities, we reach that conclusion here. The Emergency Economic Stabilization Act of 2008 authorized the Secretary of the Treasury to establish TARP, under which it may ‘purchase … troubled assets from any financial institution’ and take other necessary actions. 12 U.S.C. § 5211. The Act provides for judicial review of the Secretary’s actions, but nowhere does it mention a private right of action against private entities. See id. § 5229. We can thus infer that Congress did not intend to create a private right of action for borrowers to sue lenders under TARP.” The Court thus unanimously affirmed the district court’s dismissal. The borrowers have filed a Petition for Certiori which is currently pending.
On December 2, 2015, the Court issued its ruling in Molina v. Aurora Loan Services, LLC, No. 15-10456, 2015 WL 7753215, which, like Nivia, involved a borrower who alleged that she was wrongfully denied a post-foreclosure judgment loan modification. Plaintiff’s claims also included purported violations of HAMP and TARP. Following removal by the defendants, the United States District Court for the Southern District of Florida held that it lacked subject-matter jurisdiction under the Rooker-Feldman doctrine and summarily dismissed the claims without addressing HAMP or TARP. On appeal, the Eleventh Circuit considered the HAMP and TARP claims and again unanimously held there is no private right of action, stating in part: “Even where a statute is phrased in explicit rights-creating terms, a plaintiff suing under an implied private right of action still must show that the statute manifests an intent to create not just a private right but also a private remedy.” (quotation marks and citation omitted). Because TARP does not provide a private right of action, we agree with the Sixth Circuit that no such right exists.” Citing Mik v. Fed. Home Loan Mortg. Corp., 743 F.3d 149, 160 (6th Cir. 2014).
Although the Nivia and Molina cases do not discuss TARP in great detail, these cases are significant as the Eleventh Circuit now joins the Sixth Circuit as the only circuits to directly address the issue. The decisions could possibly signal a narrowing by the Eleventh Circuit of homeowners’ claims under various governmental programs resulting from the mortgage crisis, particularly since the Molina Court took up the issue on its own volition.