Borrowers Win Appeal Against Wells Fargo Over Mortgage Modifications

Borrowers Win Appeal Against Wells Fargo Over Mortgage ModificationsU.S. borrowers fighting Wells Fargo and other big lenders over denied mortgage modifications have been handed a significant victory by an appellate court, possibly opening the gates to more class-action lawsuits.
The 9th U.S. Circuit Court of Appeals ruled Thursday that Wells Fargo was required under the Obama Administration’s Home Affordable Modification Program, or HAMP, to offer loan modifications to borrowers who demonstrated their eligibility during a trial period.
The appellate panel reversed a San Francisco federal judge’s dismissal of two lawsuits seeking class-action status.
Wells Fargo is this nation’s largest mortgage lender.
The panel found that under HAMP Wells Fargo was “contractually required to offer the plaintiffs (borrowers)  a permanent mortgage modification” after they complied with the requirements of HAMP’s “trial period plan” (TPP).
The more “natural and fair interpretation of the TPP” is that the servicer must send a signed agreement offering to modify the loan once borrowers meet their end of the bargain, the court ruled.
In a strongly-worded concurring opinion, Judge John T. Noonan said the rules to which the bank adhered regarding the TPP made the benefits of mortgage reductions “illusory because they depend entirely on the will of Wells Fargo.”
Judge Noonan: “To Say, ‘I give $100 for your watch, but I will decide whether I pay you $100’ is not to make a contract but to engage in a flim-flam or, in plain words, to work a fraud. You promise so that the promise is empty, while you have gotten what you wanted from the promise.”
Reuters reports that while a federal appeals court in Chicago reached a similar ruling last year, this latest conclusion by the 9th Circuit applies in several western U.S. states – include California, Arizona and Nevada, some of the hardest hit by the foreclosure crisis.
“The 9th Circuit did not rule on the merits of the underlying cases, and found only that the district court should consider the arguments put forth by the plaintiffs,” Wells Fargo said in a statement. “Wells Fargo has strong defenses to those arguments, and is prepared to present its case.”
HAMP, a program criticized by many lawmakers, consumer advocates and a congressional watchdog for under-performing, is a final resort for many borrowers facing hardship and possible foreclosure.
Wells Fargo reported $352 million of loans under HAMP in a trial modification phase as of June 30.

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