Wells Fargo Agrees to Settle Class Action After Wrongfully Foreclosing On Hundreds of Homeowners After the Financial Crisis

A judge has rejected Wells Fargo’s effort to stay a class action lawsuit, saying the bank did not notify some borrowers about mortgage modification options.

The bank attempted to pause the claims while a court of appeals heard the bank’s plea that the Class of mortgage borrowers be reconsidered.

The decision to keep the mortgage modification class action lawsuit was made by U.S. District Judge William Alsup in the Northern District of California. The judge decided to deny Wells Fargo’s request for a stay, believing that the bank did not meet its burden to show that a stay was warranted.

The judge based his decision on four essential factors — the likelihood that the appeal would succeed based on merit, harm that would be done to the defendant if a stay were not granted, harm that would be done to plaintiffs if a stay were granted, and general public interest.

A federal judge in California has certified a national Class of Wells Fargo mortgage customers who claim the bank denied them mortgage modifications, despite meeting the requirements for the Home Affordable Modification Program (HAMP.)

Numerous plaintiffs filed this class action lawsuit in December 2018, claiming they lost their homes to foreclosure after they were unfairly denied the loan modifications.

They allege that a calculation error by Wells Fargo caused certain fees to be misstated, which resulted in incorrect loan denials.

The judge rejected a proposed subclass of homeowners but decided that the court will look into the value of the equity lost by each homeowner on a nationwide Class basis.

“Losing your home through a foreclosure is one of the most disruptive events that you could experience,” the plaintiffs state in their Wells Fargo class action lawsuit.

The plaintiffs argue that Congress set aside $50 billion in funding for HAMP, which was created to make sure people were able to keep their homes and provide stability to homeowners during dark economic times.

The Wells Fargo class action lawsuit claims that the defendant accepted $6.4 billion in HAMP funding and developed its own tool to calculate the eligibility of the borrowers.

The bank admitted that their tool miscalculated the claims which led to more than 870 borrowers to be denied HAMP money, even though they qualified for the modification program, according to the plaintiffs

The bank also admits that it foreclosed on 545 borrowers who should have been granted HAMP funding.

Plaintiff Alicia Hernandez claims her house was foreclosed, although she should have qualified for a loan modification program under HAMP. She alleges the bank sent her a check for $15,000, which informed her of the bank miscalculation error denying her the loan modification.

The plaintiff claims that the check was accompanied by a letter explaining how Wells Fargo determined the amount of the check and assured her that the amount should “make things right.”

The judge in his order states that other plaintiffs, notably Debora Granja and Sandra Campos, are typical of the proposed Class. The court notes that Granja signed a Fannie Mae/Freddie Mac contract and Campos signed a Federal Housing Administration (FHA) mortgage contract.

The judge notes they were harmed when Wells Fargo did not tell them that they could fix a default on their homes with a HAMP loan modification, and then foreclosed on their homes.

The judge certified the following nationwide Class: “All persons in the United States who between 2010 and 2018 (i) qualified for a home loan modification or repayment plan pursuant to the requirements of government-sponsored enterprises (such as Fannie Mae and Freddie Mac), the Federal Housing Administration (FHA), the U.S. Department of Treasury’s Home Affordable Modification Program (HAMP); (ii) were not offered a home loan modification or repayment plan by Wells Fargo due to excessive attorney’s fees being included in the loan modification decision process; and (iii) whose home Wells Fargo sold in foreclosure.”

The complaint alleges breach of contract, intentional infliction of emotional distress, violation of California’s Homeowners Bill of Rights, and violation of California’s unfair competition law.

The plaintiffs are represented by Michael L. Schrag, Joshua J. Bloomfield and Linda P. Lam of Gibbs Law Group LLP and Richard M. Paul III, Ashlea G. Schwarz and Laura C. Fellows of Paul LLP.

The Wells Fargo Mortgage Class Action Lawsuit is Hernandez, et al. v. Wells Fargo Bank NA, et al., Case No. 3:18-cv-07354, in the U.S. District Court for the Northern District of California.