The lawsuits, which were first reported by the New York Times, allege that Wells Fargo sent letters to the trustees handling the borrowers’ debt payments to notify them that the mortgage payments had been adjusted because of a trial loan modification. Some trustees changed the payments on the assumption that the modifications had been authorized by the borrower, even though the homeowner may not have requested or approved the adjustment, the suits say.
The bank, which is the country’s largest mortgage lender by share of new loans, strongly denied the allegations and disputed the way the modifications were described in the complaint. Tom Goyda, a spokesman for Wells Fargo, said in an emailed statement that the “modification offers were clearly outlined in letters” sent to borrowers or their attorneys. “In no event would we finalize a modification without receiving signed documents from the customer and, where required, approval from the bankruptcy court,” he said, adding in a subsequent interview that the borrowers’ loans were not modified.
The alleged loan changes may not have become immediately apparent to homeowners because mortgage payments for consumers going through bankruptcy are typically handled by a trustee, a third party responsible for handling all of their debt payments, the lawsuit claims. Some of the trustees may have started making smaller mortgage payments after receiving a notice from the bank.
As a result, some borrowers underpaid their mortgages by hundreds or thousands of dollars, putting them at risk of foreclosure, said Karen Kellett, a lawyer with Kellett & Bartholow, which is representing the plaintiffs in the lawsuits.
Some of the modifications also called for dramatically extending the life of the mortgage, which would lead the borrower to owe substantially more in interest. Christopher Cotton and Allison Cotton, the lead plaintiffs in a proposed class-action suit filed in North Carolina last week, claim their mortgage payments were reduced last year under a trial loan modification that they never requested. The agreement also would have extended their mortgage from 14 years to 40 years, a change that would have increased the amount of interest they owe by $85,000, according to the lawsuit.
The loan adjustments would have been made around the same time that the bank was dealing with the fallout from a scandal in which branch employees created more than 2 million of unauthorized accounts in customers’ names. In September 2016, the bank agreed to pay $185 million in fines and said that more than 5,300 employees had been fired because of the problematic behavior.