A federal appellate court has ruled that a Chicago homeowner can continue suing Wells Fargo for breach of contract and promissory fraud challenging the Home Affordable Modification Program.
The Seventh Circuit Court overturned a District Court’s dismissal of this class-action complaint claiming that Wells Fargo “made and broke promises of permanent modifications” through HAMP not only against the plaintiff but thousands of other distressed homeowners.
According to Senior Circuit Judge Kenneth Ripple, this decision could impact future challenges made by homeowners against HAMP, which was implemented by the Department of the Treasury in 2009 to help homeowners avoid foreclosure during the housing crisis. However, expectations for this federal program have not been satisfied a thousands of borrowers have not qualified for reduced payments like they were assured.
“Prompt resolution of this matter is necessary not only for the good of the litigants but for the good of the country,” Ripple said after making the ruling.
In September 2007, Lori Wigod obtained a home mortgage loan for $728,500 from Wachovia Mortgage, which ultimately merged with Wells Fargo. Due to financial distress, she requested a modification in April 2009.
Wells Fargo granted Wigod a four-month trial loan modification, under which it agreed to permanently modify the loan if she qualified under HAMP guidelines. By providing the bank with proper documents proving her need for a modification, Wells Fargo determined the plaintiff was eligible for HAMP.
After the plaintiff made all four modified trial period plan payments, Wells declined to offer Wigod the permanent HAMP modification as promised. Wells Fargo told the plaintiff she was no longer qualified for HAMP because it was “unable to get you to a modified payment amount that you could afford per the investor guidelines on your mortgage.”
When the trial payment period expired, Wells Fargo warned the plaintiff that she owed the outstanding balance and late fees and that she was also in default on her home mortgage loan.
Wigod claimed in the lawsuit that Wells Fargo improperly reevaluated her for HAMP after it had already determined she qualified by miscalculating her property taxes.
Over 80 lawsuits have been filed nationwide challenging HAMP practices of several major banks. District courts have stopped the majority of the cases because the banks argued that as part of the servicer participation agreement, HAMP prevents borrowers from suing for alleged violations of federal law.
“This is an important decision for homeowners who have been subjected to Wells Fargo’s home loan modification abuses,” said Steven Edelson, an attorney at Edelson McGuire LLC who is representing the plaintiff in this case.
“For tens of thousands of homeowners, it’s been nothing but a nightmare of lost paperwork, endless hours on the phone with the bank, inconsistent explanations and ultimately, unjustified denials followed by threats of foreclosure,” Edelson added. “The court should be commended for standing up for the rights of borrowers.”
