A North Carolina resident claims Wells Fargo denied her government-mandated COVID-19 loss mitigation options, which resulted in the forced short-sale of her house. The plaintiff, Marian Elgin, lost her job in 2020 due to the pandemic and applied for CARES Act forbearance, but was denied by the bank, litigation filed in a federal court in California reads.
Subsequently in mid-2022, Wells Fargo sent notice to Elgin that it was offering her an opportunity to pursue a short sale of her home to avoid foreclosure, which she agreed to.
Three years later, in April 2025, Wells Fargo sent a notice to the plaintiff apologizing for previously denying her for loss mitigation options. Along with the letter, the bank also attached a check of almost $11,000, and offered the opportunity to mediate the situation, if necessary.
"During a review of the Wells Fargo account, we identified that when the loan was considered for payment assistance options, it may have been improperly denied," the bank's communication dated April 15 read. "As a result we are enclosing a check…we apologize for any inconvenience this may have caused."
Elgin, who wants the case to be certified as a class action, claims Wells Fargo's mistake cost her the house, equity of her home, costs associated with the sale of her home and a worsened credit score, as the bank allegedly reported her nonpayments to credit reporting agencies. Law360 first reported on the litigation.
The complaint, filed May 6, predicts there are "hundreds if not thousands" of Wells Fargo customers similarly affected by the bank's alleged negligence.
Wells Fargo declined to comment on the pending litigation Friday.
The plaintiff is accusing Wells Fargo of negligence and unjust enrichment. Elgin is seeking undisclosed damages sustained by her and others similarly impacted "as a result of Wells Fargo's negligence in charging plaintiff and class members improper interest and fees, during periods of forbearance."
Additionally, the plaintiff is demanding for Wells Fargo to admit it was negligent in reporting the status of mortgage accounts and to refund "all unjust benefits to Plaintiff and the Class Members, together with prejudgment interest."
Litigation regarding COVID-19 loss mitigation
The COVID-19 emergency and the federal government's response to it initially created widespread confusion in housing. A notable number of borrowers reported not understanding how to enter and exit COVID-19 related forbearance, per a survey released by the Consumer Financial Protection Bureau.
Meanwhile, financial institutions were also caught off guard by the fast pace of changing federal regulations pertaining to COVID-19. As a result, many mortgage firms were hit with litigation following the onset of the pandemic.
Mr. Cooper, for example, was accused in a class action of improperly denying borrowers with Federal Housing Administration-insured loans proper COVID-19 loss mitigation relief.
Late last year, a Pennsylvania federal judge sided with Mr. Cooper and tossed the litigation out with prejudice. Carrington Mortgage was also sued and fined $5 million by the CFPB for unlawfully withholding protections in the processing of COVID-19 forbearances.
