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Friday, May 11, 2012

Wells Fargo Accused of Giving "Illusionary Loans" to Financially Stressed Family

Posted By on Fri, May 11, 2012 at 2:53 PM

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A Missouri couple is taking Wells Fargo to court, attempting to recover money on behalf of all the folks out there who were duped into taking temporary loan modifications from the San Francisco-based bank.

According to a lawsuit filed in San Francisco this week, Vicki and Richard Sutcliffe claim Wells Fargo stepped in and offered them the option for a temporary loan modification after they fell behind on their mortgage payments. The couple accepted the offer and subsequently made the reduced payments as required. However, when the trial period was over, they received no paperwork from Wells Fargo informing them they were no longer on the reduced rate. Therefore, they continued to pay the lesser amount agreed upon during the trial period.

What the Sutcliffes did get was a letter informing them they had defaulted on their loan, and thus they were not going to permanently modify their loan.

A month later, they received another offer from the bank, which allowed them to make reduced payments on their mortgage. Not long after they accepted that offer, they received another letter stating that their loan was in default. The next call came from an attorney, informing them that the firm had been retained to start foreclosure proceedings.

When they contacted the bank, Wells Fargo agreed again to a reduced payment plan, only to send the couple yet another letter claiming they defaulted. The bank then informed them that their house would be sold.

"Plaintiffs accuse Wells Fargo of unfair competition, breach of contract and bad faith," the claim states.

A judge partially dismissed the claims that Wells Fargo breached its contract and violated debt collection terms, but did allow the unfair competition claims to remain.

According to the ruling:

While the [trial period plan] did not set forth the specific terms of repayment, Wells Fargo was required to offer a modification that was consistent with HAMP (Home Affordable Modification Program) guidelines and therefore, the agreement did not give Wells Fargo unlimited discretion as to the repayment terms... Because Wells Fargo was required to comply with HAMP guidelines in determining the terms of repayment under a modification agreement, the Court concludes, at least at the pleading stage, that the terms of the TPP are sufficiently definite to support the existence of a contract.

However, the judge did dismiss the claim for breach of contract, agreeing with the bank that the only alleged damages are the reduced payments made under the trial period plan, and these payments do not constitute damages because "plaintiffs had a pre-existing duty to make payments on their loan."

The court is allowing the couple to amend that part of the complaint.

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About The Author

Erin Sherbert

Erin Sherbert

Erin Sherbert was the Online News Editor for SF Weekly from 2010 to 2015. She's a Texas native and has a closet full of cowboy boots to prove it.


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