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Did Wells Fargo create bogus foreclosure document manual?

WFC denies lawsuit that claims blueprint for fraud

Wells Fargo

Wells Fargo (WFC) is being accused of developing a 150-page manual for generating bogus mortgage documents to justify home foreclosures, according to a lawsuit filed in federal court in New York last week.

The manual is attorney Linda Tirelli’s “smoking gun” in a lawsuit she filed on behalf of a homeowner. The story was first reported in the New York Post, and Tirelli does have some past experience bringing these kinds of lawsuits to court.

Wells Fargo counters that Tirelli is misrepresenting the manual in several ways. It's foreclosures are legal and customer-focused, Wells said in a statement to HousingWire.

The document – a copy of which can be downloaded or viewed here – provides step-by-step guides for Wells Fargo foreclosure attorneys and the “Default Docs Team.”

Tirelli’s lawsuit alleges that Wells Fargo used the manual – the copy she entered into evidence was dated February 24, 2012 – to falsely create evidence of ownership, known as the note, and on how to proceed with a foreclosure when crucial documents are missing.

It was used by outside attorneys to request retroactive documentation that a loan had been signed over to Wells Fargo, she said.

Such endorsements are required to prove a servicer owns a loan and has the legal standing and right to foreclose and borrowers have used “show me the note” as a defense to fight foreclosure. Bankruptcy attorneys and homeowner advocates have long alleged mortgage servicers have a system for creating improper paperwork to prove ownership of loans when it is questioned.

“The significance is the first time we have an internal document that is a blueprint for fraud,” Tirelli told HousingWire Monday morning. “If you need allonge, it’s these steps; if you need assignment of mortgage, follow these steps. It provides all these steps that don’t make any sense if an attorney hasn’t spoken to anyone, and there’s not a single procedure for lawyers outside of foreclosure. All roads lead to an endorsement on the note.

“This is an instrument by which they absolutely abused the process. It's fraud because Wells Fargo is endorsing the note on behalf of another party,” she said. “We attorneys have seen this for years – these ‘ta da!’ documents that appear magically at the last second, and we knew there was a playbook like this but we couldn’t provide it. Now we can.”

Wells Fargo denied wrongdoing.

A spokesperson for Wells Fargo provided the following statement to HousingWire:

“Wells Fargo’s foreclosure processes—today and back in 2012—are appropriate, legal and customer focused. To allege otherwise is simply misrepresenting the facts.  Wells Fargo’s Foreclosure Attorney Procedures Manual provides guidelines for outside attorneys to be compliant with state and regulatory requirements. We have and will continue to abide by sound processes that ensure we comply with the law and help our customers in these situations.”

Further, Wells Fargo says, the manual has been updated dozens of times since the copy that Tirelli entered into evidence in her client’s lawsuit.

That did not mollify Tirelli.

“They say they updated it since 2012, but how many people lost their homes in that time?” Tirelli asked.

The Consumer Financial Protection Bureau, the New York Department of Financial Services, the New York Attorney General and other regulators are aware of or are looking into the allegations in the lawsuit.

In the run up to the housing crash, loans were sold at such a frenzied pace documentation is often hard to track down, especially given the number of originating lenders who went out of business after the market collapsed.

Tirelli is also part of a lawsuit filed against Bank of America (BAC) in June 2013 where seven former BA employees allege that they were given bonuses to foreclose on borrowers.

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