Wells Fargo accepted borrowers' trial period plan (TPP) mortgage payments, then failed to either offer them a loan modification or notify them they were not entitled to a modification.
Since the HAMP program started in 2009, Wells Fargo and the other national banks have vigorously argued that TPP is not a legally binding contract.
In thousands of lawsuits across the country, the banks contended TPP allowed them the sole discretion to deny homeowners permanent loan modifications, regardless of whether homeowners met their obligations under the offers.
The Ninth Circuit Court of Appeals reversed dismissal of the borrowers' class action lawsuit against Wells Fargo and held HAMP offers are legally binding.
The Court followed the lead of the Seventh Circuit Court of Appeals in Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547 (7th Cir. 2012) by roundly rejecting Wells Fargo's reasoning.
Under Wells Fargo's interpretation of the TPP, banks are allowed to avoid their obligations to borrowers by simply failing to send out signed modification agreements. The Court reasoned that TPP "does not contemplate such an unfair result."
The Court also rejected Wells Fargo's argument that binding modification offers must be in writing, and agreed with borrowers that TPP constitutes "debt collection" under the Fair Debt Collection Practices Act.
The Court also rejected Wells Fargo's argument that binding modification offers must be in writing, and agreed with borrowers that TPP constitutes "debt collection" under the Fair Debt Collection Practices Act.
Read the full opinion for complete analysis: http://cdn.ca9.uscourts.gov/datastore/opinions/2013/08/08/11-16234.pdf
Commentary: To quote Joe Biden: "This is a big fucking deal!"
I jumped out of bed to read this opinion. While the homeowners' claims are still certainly at risk of dismissal down the road, this opinion vindicates literally hundreds of honest folks I've met with facing this exact scenario over the past few years.
Judge Noonan's quote really sums it up for me:
"No purpose was served by the document Wells Fargo prepared except the fraudulent purpose of inducing Corvello to make the payments while the bank retained the option of modifying the loan or stiffing him. 'Heads I win, tails you lose' is a fraudulent coin toss. Wells Fargo did no better."
Kudos to the homeowners' appellate team for painting such an accurate picture of reality to the panel.
