Court Rules Borrowers Can Fight Bank’s Decision to Deny Modification

Homeowners who are denied a modification under the Home Affordable Modification Program (HAMP) even after completing a trial period plan (TPP) have legal standing to sue their lender, the 9th U.S. Circuit Court of Appeals in San Francisco ""ruled"":http://cdn.ca9.uscourts.gov/datastore/opinions/2013/08/08/11-16234.pdf Thursday.

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The ruling reversed a lower district court dismissal that concluded Wells Fargo was not required to offer borrowers a modification if the bank did not send a signed modification agreement.

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The federal appeals court decision, however, ruled that Wells Fargo actually was contractually required to offer the plaintiffs a permanent mortgage modification since the plaintiffs submitted accurate financial documents and completed their trial period plan.

""The panel held that the district court should not have dismissed the plaintiffs' complaints when the record before it showed that the bank had accepted and retained the payments demanded by the TPP,"" the court opinion stated.

The ruling was based on two lawsuits from borrowers who filed separate actions against Wells Fargo. In _Corvello v. Wells Fargo Bank, NA_ and _Lucia v. Wells Fargo Bank, NA_, the plaintiffs alleged that the bank offered them a trial period plan with the promise of a permanent modification, but after they completed the trial, the bank did not offer them a permanent modification or send them a notification of ineligibility.

The panel in the federal appeals court also cited a prior case, ""_Wigod v. Wells Fargo Bank, NA,_"":http://media.ca7.uscourts.gov/cgi-bin/rssExec.pl?Submit=Display&Path=Y2012/D03-07/C:11-1423:J:Hamilton:aut:T:fnOp:N:877179:S:0 in its ruling. In _Wigod_, the 7th Circuit Court of Appeals found Wells Fargo's interpretation of the trial period plan could allow banks to avoid obligations to modify borrowers simply by deciding not to send a signed modification agreement even if the borrower submitted accurate financial documents and the required trial payments.