Wells Fargo Loan Modification Class Action

The Pivtorak Law Firm, as lead co-counsel, has filed a class action lawsuit against Wells Fargo as a result of an allegedly deceptive forbearance-to-loan modification program.  This action was commenced in the federal district court for the Northern District of California on April 19, 2010.

The lawsuit alleges that Wells Fargo deceitfully attempted to collect payments from defaulted California residential mortgage borrowers by sending them a letter evidently promising to stop foreclosure proceedings and to approve them for a loan modification if they showed that they could make three monthly trial plan payments.  In reality, however, the letter promised nothing and most borrowers who made all three payments according to the agreement were not offered a loan modification but were subsequently foreclosed on by Wells Fargo, the suit says.  Plaintiffs allege that this program was initiated by Wells Fargo in order to circumvent the protections of California’s anti-deficiency laws, which prevent banks for pursuing homeowners’ personal money or property after a foreclosure sale.

The form letter sent to borrowers by Wells Fargo said that the bank had “good news.”  The letter also said that, according to financial information provided by the homeowner, they were qualified for a trial program showing they can make regular payments.  The suit alleges that the letter also contained other language that easily led borrowers to believe that their long and difficult struggle to make their mortgage payments was over.  Unfortunately, according to the lawsuit, their nightmare was just beginning.

Plaintiffs argue that instead of offering a three-month trial plan that is supposed to convert into a loan modification like the government’s Home Affordable Modification Program (“HAMP”), Wells Fargo intentionally gave borrowers the wrong impression that they were being offered such a program.  Instead, the suit says, Wells Fargo collected as many payments as it could from California residential borrowers before foreclosing on their homes.

On Jan. 3, 2011, Judge Joseph C. Spero ruled against Wells Fargo in its motion to dismiss Plaintiffs’ Rosenthal Fair Debt Collection Act and unfair competition law claims.  This ruling means that Plaintiffs have standing to pursue statutory damages against Wells Fargo for its unfair debt collection practices and restitution for payments borrowers made as a result of the bank’s collection letter as well as injunctive and declaratory relief, pending class certification.

UPDATES:

February 22, 2011 – Managing Partner, Steve Berman, and his colleague Tom Loeser of the law firm of Hagens Berman Sobol Shapiro, LLP, associated into the case and will serve as co-lead counsel, representing homeowners in the case against Wells Fargo.

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