Wells Fargo Loses Bid to Dismiss Mod-Fraud Claims

Wells Fargo Loses Bid to Dismiss Fraud Claims

Wells Fargo Loses Bid to Dismiss Fraud Claims

(CN) – Homeowners who say Wells Fargo Bank duped them into loan-modification programs to stave off foreclosure survived a legal challenge to their case in San Francisco federal court.
U.S. District Judge Joseph Spero pared the class’s suit on Monday, rejecting claims for breach of contract but upholding allegations that the bank’s debt-collection practices were unfair, deceptive and fraudulent. He also permitted the plaintiffs to seek restitution for an installment payment they made in March 2010, since the bank had already foreclosed upon them by that point.
Lead plaintiffs Gustavo Reyes and Maria Teresa Guerrero claimed that, after they defaulted on their mortgage payments, Wells Fargo offered to freeze foreclosure proceedings against them if they signed a modified loan agreement.
But after they signed the loan and made payments over four consecutive months, the bank still foreclosed on their home.
Wells Fargo asked the district court to throw out the suit, arguing that the homeowners’ breach contract and fraud claims were fatally flawed.
Spero instead found that the homeowners may be entitled to damages under California’s Rosenthal Act, which protects consumers from improper debt-collection practices.
“The court cannot say, as a matter of law, that the statements made in the offer letter would not have been misleading to the least sophisticated buyer in light of: the words ‘good news’ at the beginning of the letter; the language in the letter indicating that the agreement was being offered based on a review of the recipient’s financial information; the statement that foreclosure counsel would be instructed to delay foreclosure proceedings as long as the recipients made timely payments under the agreement; and  the use of the words ‘trial period’ to describe the agreement,” the ruling states.
While Spero tossed the homeowners’ contract claims for failure to state a claim, he upheld the homeowners’ claims under state law for unfair, unlawful and fraudulent business practices.
“Because plaintiffs in this case made payments to Wells Fargo as a result of the business practice that is the subject of their unfair competition law claim, the court concludes that they have standing to assert such a claim,” Spero wrote. 

13 Responses

  1. M.Soliman,

    Understand your concern, I was originally concerned too — as terminology utilized in the Safe Harbor rule is misleading. However, spoke with many very knowledgeable corporate attorneys regarding this issue. The focus on FDIC ruling is of concern to investors — and does not change the foreclosure defense as summarized by courts such as MA.

    And, non-performing securities — as you say — are technically not removed — instead the collection rights are swapped out by prearranged agreements/contracts. The original securities, by these contracts, do no change hands. While securities could remain on books until all derivative contracts are executed — and due to crisis — sometimes takes longer — it does not change the current foreclosure challenge as to execution and validity of transfer of mortgage loans and contract rights.

    Survey say’s – “Bring it down!”

    By M. Soliman

    In its recently released ruling , U.S. Bancorp and Wells Fargo & Co., suffered from having lost a foreclosure case before Massachusetts’s highest court. Some believe this will guide lower courts in that state and may influence others in bank disputes involving state real-estate law.

    Many will recall our position earlier last year regarding the government’s likely preemption against the potential and now, existing claims against trust assets. This included claims brought by depositors.

    The claims stem from FDCI insured member bank deposits held in receivership under the name “Hold Co” (know who your suing) and for losses suffered from mortgage backed securities.

    The state Supreme Judicial Court Friday upheld a judge’s decision saying two foreclosures were invalid because the banks didn’t prove they owned the mortgages, which he said were transferred into two mortgage-backed trusts without the recipients’ being named.

    We say nothing there and for good reason.
    Few seemed to get the meaning of the shocking news of late October that detailed the FDIC announcement to repeal the safe harbor rule for mortgage claims filed against private label registrations. As early as this time last year my assessment was something would need to be done to settle the anticipated volume of litigation brewing in the minds of investors.

    Consider how basis or accrual accounting is the accumulation of something. In finance, the accountant is adding together interest or different investments over a period of time. It holds specific meanings in accounting for mortgage loans that are deemed charged and written to zero basis.

    That is a problem, bigger than the court where the decision looks foolish – there is nothing to transfer out of trust. Herein is the reason for Fannie Maes unprecedented enhancing into the mortgage “investor” versus insurer market.

    Now attorneys must see the desperate need to jump on board a winning argument or abandon this fight and breach of trust strategy that has taken homeowners nowhere.

    First consider what does this all mean for homeowners who really must catapult past the assignment argument. Soliman said ” think ahead and think thorough the deeper issues impacting your defenses or plainiffs pleading .

    The homeowner’s defenses have suffered a carpet bombing of regulatory relief favoring the lenders and Trusts registered by the lender. Litigant’s endured two years if judicial abusiveness targeting enhanced government avoidance powers.

    To date are the loss of Sarbanes Oxley, delisting the trust from SEC enforcement and department of treasury dire efforts to change accounting rules.

    Now the list includes avoidance from frivolous litigation and the ability to “stay” any decision’s related to a matter as repudiated by the FDIC as conservator or receiver for a failed bank. Yet with the repeal of the FDIC Blue sky rule has come another “jolt” making the bankrupt insulate trust a Teflon coat.

    Maybe this court’s decision would have better served us back in January this time last year?
    Litigants who question the breach of the pooling and servicing agreement, underwriting agreements, servicing rights transfers, QWR and assignments, ROBO docs, and other side twists are best served to deal with the issues at hand.

    Essentially, the ability to remove the trust from investor and homeowner claims is what the Massachusetts decision is echoing in chamber of the FDIC preemptive move in September under the Blue sky repeal.

    We already knew this!

    Expert witness .com

    [Please write us if you have further questions]

  3. Dear Mr. Garfield (or any good attorneys in Georgia): I purchased my home in 1987 and lost it on the courthouse steps in June 2010. According to Wells Fargo, I still owed $60K on a $110 morgage after 23 years (no refi, no 2nd). The current interest rate on my ARM was 3.75% and the calculated monthly payment was approx. $850, which included approximately $3000/yr that went to pay the taxes and insurance. What I could never figure out or could ever get an answer for was how that payment could pay off the loan in the 7 years remaining on the loan. There was no mention of a final balloon payment in the note, so…how can this be? Although my numbers are very rough, it appears that I would have only paid back around $45-50K of the $60K principal they said I still owed, even at 0% interest. I was suspicious when over the 36 months prior to my “default”, that only about $10K of the $30K+ in payments I made over that period were actually applied to the principal. I was concerned at the time, but my wife was fighting cancer and financial matters were not my biggest concern. Can anyone direct me to a good place to start…perhaps some kind of “financial audit”…to find some answers to my concerns. The house is in the Georgia, and there do not appear to be many attorneys willing to take up the fight without a lot of money up front. So far, the bank and the foreclosure attorneys have refused to return even the $30K in surplus funds from the foreclosure sale (they said I owed $60K, the house sold for $90K). Are there any services you provide, Mr. Garfield, that might answer some of these questions and give me a better idea of how to proceed? The only attorney I have spoken to wants $5000 up front…money I do not have…to begin any research into the matter…and he is on the list of attorneys in Georgia that “Get it”. Any suggestions would be very much appreciated.

  4. Thanks John, but how can a Servicer (CHASE) foreclose on your home and they are not able to show you the original note and the the case is in Federal Court. I will assume there that is also a violation or is the best thing to do is request a TRO asap

  5. T Chayo….Yes a trustee can and will sell your house even if your in litigation.

  6. A new study just in shows that, Las Vegas will possibly regain it’s former glimmer in 2032.

    Phoenix will come back around by 2034. Naples Fla into 2038.

    Folks, I hope you’re getting what this report is saying here. Real estate is done. Like tinder in a log fire. Like bringing a knife to a gunfight. Tell me why I’m wrong here….

    Maybe another 20% down before the bottom is hit. Bond market tanks, more pain.

    What does this all mean? The end of everything we’ve ever known to be true for several generations. Housing strength would amount to savings which would allow us to:

    1) Retire comfortably….

    Only if we both get up every morning, scrub our teeth, unzip the flap, and leave tent city to go and work at Burger King, because Wall Street took all of of our life’s savings.

    Real estate, as we’ve always been told and experienced, would allow us to borrow to invest in our children’s education. For what good is a world without educated kids?

    2) Children’s education =0

    Tax base for governemt offices? From failing townships, cities, counties, states, with Geithner and Bernanke already saying don’t expect help from them, as the presses are running full tilt for Wall street bankers.

    We are so screwed.

  7. leapfrog

    Love it!!!

  8. @Leapfrog, brilliant, now if some of the more astute bloggers out there could post the links/ defaults on property and loans of “Fannie Mae” Foreclosure Mill purveyor’s Stern in Florida and Shapiro in Illinois that would be interesting!

  9. Can a lender/Trustee sale your home if you are in Federal Court litigation? or State Court

  10. “Ohio Judge Peter Sikora was looking to take advantage of the lowest mortgage interest rates in decades and refinance his eight-bedroom, lakefront Cleveland home, so he contacted his bank, JPMorgan Chase. With property values in decline in Cleveland, Chase said no to refinancing but told the judge to apply for a loan modification instead. The judge followed JPMorgan Chase’s advice to the letter and as a result has fallen a year behind on his nearly $1 million mortgage… hasn’t paid his property taxes… and now has ended up in foreclosure.

    So, all I can think of to say is… don’t you just hate these irresponsible sub-prime borrowers who should never have been allowed to buy their homes in the first place and now think they’re entitled to loan modifications? I know I sure do. Maybe if the judge had called a scammer and paid an up front fee… he would have gotten his loan modified… no, wait… that’s not right… maybe if he had called a lawyer he would have… wait, no… he is a lawyer, right. Well, maybe if he… oh wait, I know… MAYBE IF HE HAD NOT BELIEVED THE LIES TOLD BY JPMORGAN CHASE… yeah, that’s sure as shootin’ where he went wrong.”


  11. And THANK YOU usedkarguy, or (I forget the other “name” used) for that notice. It was just in time for an amended complaint!

  12. When WFB declared the only option to stop the foreclosure process was to agree to enter the modification promise, my response was, “It is nothing more than creating false hope. I don’t want or need a modification, especially in light of the reports that homes are being foreclosed on, while in the process of awaiting an approval that may not arrive, if ever at all.”

    Anyway, the Reyes v. WFB ruling is another building block of fraud removed from the WFB’s collapsing predatory servicing, wrongful foreclosures, and unlawful business practices in California.

    If and when California Courts begin ruling in favor of consumers, then WFB will be boxed in from the east, thanks to Ibanez.

    I do believe the rulings and advancements in 2011 will be sway the courts, generally, to consider the plausibility that the the court is being hoodwinked by WFB and its agents.

  13. I put this up yesterday. You’re welcome.

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