Wells Fargo and JPMorgan Chase have been sued by the law firm Baron and Budd alleging that the financial institutions illegally levied excessive and deceptive default service fees against borrowers who were late on mortgage payments.
The lawsuit claims that Wells Fargo and JPMorgan Chase, who combined service approximately 25% of all mortgages in the country, allegedly defrauded hundreds of thousands of borrowers out of a billion dollars or more by charging unnecessary default fees.
“Wells Fargo and Chase executives conspired to increase profits in any way they can, even if that meant deceiving homeowners who were losing out on the American dream,” said Roland Tellis, an attorney at the Dallas-based firm who is leading this case. “In addition to charging unnecessary and marked-up fees, the banks concealed the fees through cryptic wording.”
According to the suit, the amount of the inflated or unnecessary charges can vary, from $20 for some services to as much as $135. As part of the banks’ efforts to hide the charges, these fees are typically listed on a borrower’s monthly statements as “other charges,” “miscellaneous fees” or “corporate advances,” the lawsuit says.
The fees are supposedly charged when a borrower is late on a payment and the bank’s computer programs begin the default process by levying fees against the borrower. One of these fees is used to conduct a broker’s price opinion to help the lender price the property for foreclosure.
Federal law allows lenders to charge these BPO fees, but they are not allowed to mark up the charges or perform unnecessary services and make a profit, which is what Wells Fargo and Chase have done, the lawsuit said.
“Our investigation has revealed that as a result of these practices, banks often make more money from loans that are in default than loans that are current,” said attorney Mark Pifko, who is also leading this case. “Loan agreements require that default-related services must be reasonable and appropriate. Banks are not allowed to mark-up the charges so they can make a profit, but that is exactly what they have done. In many cases, the banks are overcharging by as much as 300%.”
A Wells Fargo spokesperson said the bank is currently reviewing the complaint to better understand the facts of the filing.
JPMorgan Chase had no comment regarding this lawsuit.
