by Brian Mahany
Anyone who regularly reads this blog knows we are not great fans of Wells Fargo. Ditto for Bank of America, Countrywide, Allied or Bank of New York. The lending and foreclosure practices of the giant banks are atrocious. That’s not to say that there aren’t many people at these institutions who still care – unfortunately in our opinion, the leadership of these lenders have lost touch with their mission. Apparently we aren’t alone in our opinion – last week a federal bankruptcy judge in New Orleans sanctioned Wells Fargo $3,171,154.00!
Sanctions like this are rare but recently judges have been getting increasingly concerned about the way big banks service loans. In the New Orleans case, Judge Elizabeth Magner found that Wells Fargo’s behavior was “reprehensible.” She found that the bank “has taken advantage of borrowers who rely on it to accurately apply payments and calculate the amounts owed… But perhaps more disturbing is Wells Fargo’s refusal to voluntarily correct its errors. It prefers to rely on the ignorance of borrowers or their inability to fund a challenge to its demands, rather than voluntarily relinquish gains obtained through improper accounting methods.”
Judge Megner originally ruled against the bank back in 2007 but Wells Fargo repeatedly appealed and fought the homeowner who brought the claims against the bank in her bankruptcy case. Specifically, after originally agreeing to relief, Wells Fargo suddenly changed its mind and forced the homeowner to litigate for an additional 5 years. In assessing fines against the bank, she said,
“While every litigant has a right to pursue appeal, Wells Fargo’s style of litigation was particularly vexing. After agreeing at trial to the initial injunctive relief in order to escape a punitive damage award, Wells Fargo changed its position and appealed. This resulted in:
1. A total of seven (7) days spent in the original trial, status conferences, and hearings before this Court;
2. Eighteen (18) post-trial, pre-remand motions or responsive pleadings filed by Wells Fargo, requiring nine (9) memoranda and nine (9) objections or responsive pleadings;
3. Eight (8) appeals or notices of appeal to the District Court by Wells Fargo, with fifteen (15) assignments of error and fifty-seven (57) sub-assignments of error, requiring 261 pages in briefing, and resulting in a delay of 493 days from the date the Amended Judgment was entered to the date the Fifth Circuit dismissed Wells Fargo’s appeal for lack of jurisdiction; and
4. Twenty-two (22) issues raised by Wells Fargo for remand, requiring 161 pages of briefing from the parties in the District Court and 269 additional days since the Fifth Circuit dismissed Wells Fargo’s appeal.
The above was only the first round of litigation contained in this case. After the District Court remanded based on Wells Fargo’s change of heart, Wells Fargo appealed the decision to remand. When that was denied, it took the legal position that the remand did not afford this Court the right to impose punitive damages in lieu of the Accounting Procedures it had both proposed and consented to undertake. That position if valid, would have allowed Wells Fargo to propose alternative relief to escape punitive damages; when the offer was accepted, challenge the relief it proposed; and avoid any punitive award, a position as untenable as it was illogical.”
While that might sound like a bunch of legal mumbo jumbo, Judge Megner is clearly displeased not only by the way the bank treats homeowners but also by the way it treats the court process.
While the multi-million dollar sanction in this case is huge, it will probably take many more before the big banks learn that their arrogance will no longer be tolerated.
Once homeowners miss a payment, many lenders are quick to slap borrowers with a wide variety of fees, default interest and late charges. Unless paid immediately, it becomes impossible for the homeowner to catch up. The homeowner winds up in foreclosure and ultimately on the street. Making a bad problem worse, many lenders do not properly credit payments made by the borrowers. We have seen once case where the homeowner actually made all required payments yet still wound up in foreclosure.
If that sounds impossible, unfortunately it happens frequently. Once the bank determines a loan is in default, it often becomes impossible to pay up or prove the bank wrong.
The mortgage fraud lawyers at Mahany & Ertl sue banks that mistreat borrowers and homeowners. Recently we brought the largest false claims action in the U.S. against Allied Home Mortgage a $2.4 billion action on behalf of HUD. Although not every case is that large, Judge Megner proved its possible to get sizeable damages against a rogue lender.
We have seen many horror stories regarding Wells Fargo (Bank of New York, Countrywide and Bank of America too). If you have a particularly tragic story to share, please let us know. Send it as a comment to this blog if you would like us to post it and by email if you would like to talk to us privately about a potential lawsuit. (If you are a former employee of a mortgage company or a current employee who wishes to become a whistleblower we certainly want to talk to you.)
Mahany & Ertl – Giving Homeowners a Voice. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine & Minneapolis, Minnesota. Services available in many jurisdictions.