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Wells Fargo Accused Of Offering Deceptive Mortgage Modifications

The Huffington Post  |  By Posted: Updated: 05/14/2012 12:23 pm

Wells Fargo Lawsuit
On Jan. 18, 2011, a customer exits a Wells Fargo bank branch in Los Angeles. A lawsuit accusing Wells Fargo of having no intention of making mortgage modifications permanent has been partially dismissed by a judge in San Francisco.

Wells Fargo has been sued by a group of struggling homeowners, who say the bank worked with them in bad faith.

Vicki and Richard Sutcliffe, a couple in Kansas City, have filed a class action lawsuit against Wells Fargo, accusing the bank of offering temporary mortgage modifications with no intention of making them permanent, according to Courthouse News Service and a court document. The couple alleges that Wells Fargo allowed them to make lower mortgage payments multiple times, only to later inform them that the mortgage was in default and that the bank would foreclose on their home.

U.S. Magistrate Judge Joseph Spero dismissed some of the lawsuit's claims on Wednesday, but gave the plaintiffs leave to amend their complaint about the alleged breach of contract. He also let the unfair competition claims stay.

The Sutcliffes aren't the only homeowners struggling to secure a permanent loan modification. A number of banks have already been proven guilty of "dual-tracking," or evaluating homeowners for mortgage modifications while simultaneously initiating foreclosure proceedings on them.

Under the national mortgage settlement announced in February, Wells Fargo, JPMorgan Chase, Citigroup, Bank of America and Ally Financial promised to stop dual-tracking as well as "robo-signing," or false documentation that rushed homes into foreclosure. But those promises last only into 2015, and it is unclear how the government will monitor the banks to make sure they're complying.

U.S. bank regulators reached a similar agreement with 16 mortgage lenders and servicers last year. At the time, banks, including Bank of America, Citigroup, JPMorgan Chase and Wells Fargo, agreed to compensate homeowners that had been wrongly foreclosed upon and to overhaul their mortgage operations.

Roughly one in five homeowners with mortgages are underwater on their mortgages, or owe more on their mortgage than their home is worth.

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