The Ninth Circuit Court of Appeals for the United States is clearly displeased with some alleged mortgage servicing activities at Wells Fargo (WFC).
Earlier this month, the court reversed a dismissal argument previously granted to the financial institution and, in doing so, condemned its practices in dealing with distressed homeowners hoping to participate in the Home Affordable Modification Program. Wells is not discouraged by the setback, and said it's ready to go to court.
Earlier, a district court for the Northern District of California granted Wells Fargo a dismissal in a combined case brought by Phillip Corvello and Karen and Jeffery Lucia.
Both households believed they would receive a government-mandated HAMP mod, and sued when the process went South. Despite receiving a permanent mod, Wells Fargo foreclosed.
According to Wells Fargo spokesperson Tom Goyda, the Ninth Circuit did not rule on the overall merits of the case, which is ongoing. Instead the court ruled that the district court should include the argument put forth by Corvello and Lucia attorneys.
In the decision, the court states Corvello could prove he made his three necessary payments to his trial HAMP. Further, he had written proof, a promissory note, as evidence. Wells Fargo argued that, upon further review, Corvello did not meet the criteria in other places.
That argument from Wells was presented orally and the transcription is not yet available. The K&L Gates lawyer who presented the case for Wells, Irene Freidel, is on vacation currently and other attorneys declined to speak on her behalf.
"Wells Fargo has strong defenses to the plaintiff's arguments and is ready to present our case in district court," said Goyda.
However, creditor's rights attorneys familiar with the case say the ruling opens the door to potential damages. Attorneys for Corvello and Lucia were also unavailable to comment.
In the conclusion, the circuit judges said of the above promissory note: "No purpose was served by the document Wells Fargo prepared except the fraudulent purpose of inducing Corvello to make the payments while the bank retained the option of modifying the loan or stiffing him."
"'Heads I win, tails you lose' is a fraudulent coin toss. Wells Fargo did no better," the ruling states.