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Mortgage

Houston couple wins $5.4 million in foreclosure fraud suit against Wells Fargo

Sometimes David beats Goliath

It’s a story that’s been seen hundreds, if not thousands of times since the housing crisis. Homeowners fight back against foreclosure, saying that the lender or servicer has no legal authority to foreclose on their home.

And it usually ends the same way, with the little guy losing.

But one Houston couple took on one of nation’s biggest banks – and won. Big.

According to a report from the Houston Chronicle, David and Mary Ellen Wolf received a foreclosure notice in 2011 from Wells Fargo (WFC). There was one problem: They’d never done business with Wells Fargo or their assigned mortgage servicer, Carrington Mortgage Services.

After talking the situation through with a lawyer, W. Craft Hughes, who happened to be their neighbor, they determined that neither Wells Fargo nor Carrington had the legal right to foreclose on them.

And the Wolfs took Wells Fargo and Carrington to court and won.

From the Houston Chronicle:

A state district court jury in Harris County agreed last month and awarded the Wolfs $5.4 million after a four-day trial.

"It's very unusual," said Linda E. Fisher, professor of law at Seton Hall Law School who has testified before Congress on the effect of mortgage fraud on consumers. "Cases like this don't usually get in front of a jury."

Now the issue of mortgage notes being transferred between lien holders and servicers after the mortgage was originated is not a foreign concept at all, but the Wolfs, via their neighbor attorney, argued that Wells Fargo violated Texas law.

Again from the Houston Chronicle:

Hughes argued that when Wells Fargo retroactively attached the Wolfs' mortgage to a securitized trust that was closed and sold to investors three years earlier, the bank violated a Texas law that prohibits fraudulent real estate filings. The jury agreed, although State District Judge Mike Engelhart hasn't formally entered the verdict, and the bank and mortgage company haven't said whether they'll appeal.

The Wolfs’ house is currently on the market for $850,000, and no one seems to know who owns it now.

Again from the Houston Chronicle:

"That's a big question mark," said Hughes. The jury found that neither Wells Fargo nor Carrington owns the mortgage note. But the jury also determined the Wolfs owe $655,000 on the note they signed in 2006.

At least they can use some of that $5.4 million to pay off the note.

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