Wells Fargo Illegal Foreclosure Class Action Lawsuit

In December 2018, a number of plaintiffs filed this class action complaint, alleging that they lost their houses to foreclosure after being wrongfully denied loan modifications. They claim that Wells Fargo made a math error, causing some costs to be miscalculated, resulting in improper loan denials.

The judge rejected a proposed subclass of homeowners but opted to investigate the value of each homeowner’s lost equity on a countrywide basis. In their Wells Fargo class action case, the plaintiffs argue, “Losing your house through foreclosure is one of the most disruptive occurrences that you may face.”

The plaintiffs claim that Congress set aside $50 billion in financing for the Home Affordable Modification Program (HAMP), which was established to ensure that people could keep their houses and offer stability to homeowners during difficult economic times.

According to the Wells Fargo class-action lawsuit, the defendant collected $6.4 billion in HAMP financing and created its tool to determine the borrowers’ eligibility.

According to the plaintiffs, the bank conceded that their tool overestimated the claims, resulting in the denial of HAMP funds to more than 870 customers who qualified for the program.

The bank also acknowledges that it foreclosed on 545 customers who were eligible for HAMP support.

Plaintiff Alicia Hernandez says her home was foreclosed on despite the fact that she should have been eligible for the HAMP loan modification program. She claims the bank sent her a check for $15,000, informing her of the bank’s miscalculation error, which resulted in the loan modification being denied.

The plaintiff says that the cheque was accompanied by a letter from Wells Fargo detailing how the check’s value was decided and assuring her that the amount would “put things right.”

Other plaintiffs, including Debora Granja and Sandra Campos, are described as typical of the proposed class by the judge in his order. According to the court, Granja signed a Fannie Mae/Freddie Mac contract, while Campos signed a Federal Housing Administration (FHA) mortgage contract.

According to the judgment, they were damaged because Wells Fargo failed to inform them that they could remedy their defaults with a HAMP loan modification and then foreclosed on their homes.

DEFENDANT(S)

Wells Fargo Bank, N.A. is a bank headquartered in San Francisco, California. The Supplemental Settlement of $21.8 million was approved on January 14, 2022. A $21.8 million supplemental settlement for the proposed class action outlined on this page has received final approval, bringing the total settlement amount to $40.3 million.

On January 9, 2022, United States District Judge William H. Alsup approved the amended agreement, making more than $18.1 million available to 740 additional persons protected by the original settlement but not included on Wells Fargo’s initial list of 505 borrowers. Attorneys’ costs will cost more than $3.6 million.

According to the revised approval order, each additional qualifying borrower will receive a payment of at least $14,000. According to the directive, those who made a claim for mental distress with medical evidence will be eligible for an additional payout from a separate $1.45 million fund.

Preliminary approval of the settlement was given on May 6, 2020.

The $18.5 million settlement between Wells Fargo and more than 500 qualified mortgage borrowers has been granted preliminary approval by United States District Judge William Alsup.

A settlement has been reached as of March 27, 2020.

Last month, Wells Fargo and the plaintiffs in the case described on this page reached an agreement to settle charges that the bank wrongfully denied loan modifications to over 500 mortgage borrowers owing to a software glitch.

According to court filings, each of the 512 borrowers whose houses were wrongfully foreclosed on due to Wells Fargo’s error will get between $14,000 and $120,000 without having to fill out a claim form. According to the document, each borrower’s share of the $18.5 million settlement fund will be calculated by parameters such as their outstanding principal balance, length of delinquency, and the amount previously received as reparation from Wells Fargo. The proposed settlement also includes a $1 million fund for class members who claim to have experienced severe mental anguish due to their homes being foreclosed on.

The plaintiffs’ attorneys recognized the settlement as “among the biggest monetary judgments in a negotiated compromise over similar charges.” On April 16, 2020, they hoped to have the judge’s preliminary approval of the deal.

According to a proposed class action, the bank’s voluntary remediation for clients who were wrongfully refused home loan modifications for which they should have qualified is insufficient to recompense the borrowers for their losses.

The lawsuit revolves around federal funds given to Wells Fargo as part of the Home Affordable Modification Program (HAMP), which incentivizes the bank to modify the mortgage loans of qualified borrowers in financial distress. According to the case, homeowners who participate in the program will have lower monthly payments and interest rates on their mortgages, which will help them avoid foreclosure.

Rather than using a Fannie Mae-designed HAMP tool, Wells Fargo developed its own program to determine a borrower’s loan modification eligibility, according to the lawsuit. Unfortunately, the program “generated systematic miscalculations,” according to the lawsuit, resulting in at least 870 customers being wrongfully rejected loan modifications while being qualified. In early November 2018, Wells Fargo revealed that it had wrongfully foreclosed on 545 borrowers who should have received mortgage modifications instead.

According to the complaint, the bank contacted “a considerable majority” of the impacted customers in an attempt to “set things right,” according to the complaint. It offered them remediation in the form of a check worth between $1,400 and $25,000. Wells Fargo allegedly failed to explain how the figures were arrived at. According to the complaint, the bank merely admitted that some borrowers were wrongly denied loan modifications due to a “faulty calculation” in the letters sent with the checks. Still, it provided no further explanation of the issue or how it occurred.

According to the lawsuit, the plaintiff claims the $15,000 check she received from the defendant after losing her New Jersey home to foreclosure is insufficient to compensate her for the loss of her condo and the other consequences of Wells Fargo’s actions.

“The check does not compensate [the plaintiff] for the severe financial and other consequences of Wells Fargo’s calculation error,” the complaint states, “including the money and equity she lost as a result of the foreclosure, the damage to her credit rating, and other serious consequences for her and her family.”

Are You Entitled to Compensation Because Wells Fargo Wrongfully Foreclosed on Hundreds of Homes?

A Wells Fargo computer error resulted in hundreds of individuals missing out on loan modifications and perhaps losing their houses to foreclosure.

Plaintiffs who lost their homes after Wells Fargo rejected their modification applications due to an error in the servicer’s software were found to have properly alleged a claim under the Washington Consumer Protection Act on October 18, 2019, by the United States District Court for the Eastern District of Washington. If you lost your Washington home after Wells Fargo denied your modification request during the period shown below, speak with an attorney to learn about your rights and whether you may join the class action complaint.

Due to a computer problem, Wells Fargo revealed on Friday, August 3, 2018, that it failed to provide modifications to around 625 mortgage-loan borrowers, despite the fact that they qualified for relief. Four hundred of the homeowners were eventually foreclosed on by the bank. Wells Fargo upped these numbers to 870 and 545, respectively, in November 2018.

Wells Fargo made an error in denying modifications.

According to an internal study, between April 13, 2010, and October 20, 2015, an underwriting program used by Wells Fargo to make loan modifications routinely made a calculation error that harmed certain accounts. Wells Fargo then amended its prior statement, claiming that the problems persisted until April 2018.

What had gone wrong? When analyzing borrowers for a possible loan modification, the modification tool automatically computed attorneys’ fees incorrectly. Some borrowers were judged ineligible for a HAMP modification or a modification through a government-sponsored enterprise program like Fannie Mae or Freddie Mac due to the error.

How many people have been impacted? Wells Fargo first stated that approximately 600 customers were mistakenly rejected loan modifications or were not changes provided in circumstances where they would have otherwise qualified. The bank subsequently foreclosed in about 400 of these cases. Wells Fargo upped these numbers to 870 and 545 in November 2018.

Borrowers’ Compensation

Wells Fargo has put aside $8 million to reimburse borrowers who were harmed by the error, which works out to about $13,000 per person. This amount appears insultingly inadequate, especially for borrowers who lost their homes, given that most properties have appreciated significantly in value between 2010 and 2018. Furthermore, the cost of foreclosure to a homeowner is not solely financial.

Wells Fargo has been distributing apology letters and compensation payments to affected borrowers since November 2018. According to the bank, the majority of the affected customers have been contacted and offered no-cost, independent mediation if they believe the compensation is insufficient. A spokesman for Wells Fargo said that consumers who have been affected could seek mediation even if they cash the checks that Wells has sent them. Other legal options, such as filing a lawsuit, are also available to you.

Some borrowers who have been harmed are seeking class certification.

Some present and past borrowers who had Wells Fargo as their mortgage servicer are requesting a judge to certify a class and many subclasses in their case against the servicer in the United States District Court for the Northern District of California. Wells Fargo informed the judge in the case in January 2020 that it was unwilling to settle the dispute.

Servicer Errors are a Common Occurrence

You might be startled to learn that errors like this frequently occur in the mortgage-servicing industry, particularly while executing loan modifications.

State regulators and the Consumer Financial Protection Bureau have examined numerous servicers in recent years and discovered significant issues of noncompliance with state and federal rules. These investigations uncovered servicers’ violations with different laws, such as federal mortgage servicing requirements and other notable flaws. Still, the corrective efforts are taken to reform their internal systems frequently fell short of the regulator’s expectations. (Learn about some of the most typical blunders servicers make when dealing with customers’ debts.)

What to Do If You Don’t Want to Lose Your House

Here are some strategies to be proactive in the foreclosure process if you’re trying to rescue your property from foreclosure:

Keep in touch with your service provider. Call your servicer as soon as you suspect you’ll have difficulties paying your monthly payment (or as soon as you fall behind). Don’t ignore your servicer’s phone calls or letters, either. Your servicer will most likely contact you and explain any options you have to avoid foreclosure and how to apply for them.

Seek assistance. People facing foreclosure should seek help from a HUD-approved housing counselor and, in many situations, a foreclosure lawyer to learn about their legal rights and options for their specific situation.

Participate in the mediation process. Many states allow borrowers to participate in mediation before a foreclosure proceeding. During mediation, debtors are frequently able to work out a modification or other alternative to foreclosure.

If your servicer makes a mistake, file a complaint. The Real Estate Settlement Procedures Act (RESPA) is a federal statute that allows borrowers to challenge errors with their mortgage servicer and obtain account information. You can submit a letter—called a “notice of error” or a “request for information” under RESPA amendments—and the servicer must answer within a certain amount of time. If the servicer hasn’t already initiated the foreclosure, sending this type of letter is an excellent strategy to try to remedy a servicer issue. (Writing a letter to the servicer to dispute an error is unlikely to stop an already underway foreclosure.) If you find yourself in this circumstance, speak with an attorney to learn about your choices.)