Wells Fargo on the hook for HAMP class actions

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Two class-action lawsuits against Wells Fargo are back on after a federal court ruled that the banking giant was obligated to offer permanent loan modifications to borrowers who met certain requirements.

The lawsuits accuse Wells Fargo of violating its contractual obligations under the Home Affordable Modification Program (HAMP). Created in 2009, HAMP was intended to help distressed homeowners avoid foreclosure. To apply for the program, borrowers submit proof of their finances and make trial payments for a time. If they don’t qualify for the program, lenders are supposed to notify them and work with them to find an alternative foreclosure prevention strategy.

The plaintiffs in the two lawsuits against Wells Fargo claim to have made all their payments during the trial period – but they allege that Wells Fargo never informed them whether they qualified for HAMP, according to a Court News report. Instead, the bank allegedly foreclosed on their homes and sold them.

A district court had dismissed the lawsuits, but a the 9th Circuit’s three-judge panel reversed the decision, saying that Wells Fargo was contractually obligated to offer permanent modifications to borrowers who met the right criteria.

“The district court should not have dismissed the plaintiffs' complaints when the record before it showed that the bank had accepted and retained the payments demanded by the TPP (trial period plan), but neither offered a permanent modification, nor notified plaintiffs they were not entitled to one, as required by the terms of the TPP,” the court stated. One judge also noted that HAMP “seems to have created more litigation than it has happy homeowners.”

The decision most likely means more expensive litigation for Wells Fargo’s already ailing mortgage operation, which on Wednesday announced the layoffs of 763 employees. The bank, which also eliminated 350 mortgage and retail lending positions last month, says that higher interest rates have lessened the demand for refinancing among homeowners, according to a Charlotte Observer report.

  • Sara brainard on 8/9/2013 9:24:23 AM

    This exact thing has happened to me with Citibank. I made the payments required, and gor jerked around for over three years. How can I make Citibank honor the hamp rules?

  • Wm Matz on 8/9/2013 12:24:50 PM

    This case is not groundbreaking, as it follows the 7th Circuit's [IL] 2012 decision in Wigod v. Wells Fargo. But it is important in extending the reasoning to the 9th Circuit [West Coast]. So the only two Federal Courts of Appeal to have decided this issue have ruled in favor of borrowers being able to sue for wrongfully-denied mods. That makes it very likely that Federal trial courts in other jurisdictions will follow, even if their circuit Court of Appeals has not yet ruled.

    While this case is welcome news for West Coast borrowers, the groundbreaking case came from the California Court of Appeals. in Glaski v. Bank of America [just approved for publication] an appeals court held for the first time in CA that borrowers who can show that their securitized loan was not transferred into the securitization trust in compliance with the trust terms [usually more than three months after trust creation] can stop a foreclosure, because the named beneficiary does not legally own the loan. More importantly, the court held that a completed foreclosure by the erroneous beneficiary, is VOID!!! That means affected foreclosed borrowers can recover their homes; however, they will be subject to a new foreclosure by the legal owner of the loan, if that can be determined. Borrowers may well be entitled to damages for the wrongful foreclosure that could be offset against the loan balance.

    This problem has already been addressed in judicial foreclosure states, such as MA, NY, and FL. But the problem in CA has been ignored by CA courts [despite vigorous protests by borrower attys] because all foreclosures have been done non-judicially [trustee sales]. This decision, which is clearly correct legally, will create a nightmare of litigation and confusion for CA real estate titles. E.g., many foreclosure/REO sales to flippers can legally reversed. There will be massive claims on title insurance and on sellers for bad title.

    It is important to remember that all of these problems are the direct result of Wall St/lenders failing to follow the rules they set up themselves to securitize these loans. And now we are even finally starting to see criminal charges around the securitization. Perhaps Wall St and the lenders will finally have to pay for a decade or more of unbridled greed.

  • Mary on 8/9/2013 2:59:00 PM

    They can't tag this one on the broker originator. Wells did this all on its own!

  • Patricia Whitman on 10/8/2013 6:57:20 AM

    Wells Fargo always made us start over with the paperwork. Their supervisors disappeared and when we were asking to modify the loan they seemed happy to send us more paperwork, but them never process it when we sent it back. We were never late with out payments 12 years and this is how they treat their customer.

  • Patricia Whitman on 10/8/2013 7:01:06 AM

    My husband and I tried several times to get Wells Fargo to process our application for Hamp. Every time we called there was a "new" supervisor. We were never late with our mortgage payment (12 yr.) and when my husband lost his job...we lost the house.

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