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Ninth Circuit to Wells Fargo: Keep Your Promises on Loan Modification

Business  (tags: dishonesty, economy, corporate, corruption, abuse, americans, business, consumers, debt, ethics, finance, foreclosures, government, goodnews, GoodNews, money, law, lies, usa )

- 1765 days ago -
Yesterday, the Ninth Circuit ruled in Corvello v. Wells Fargo that when a bank tells a borrower it will modify his loan if certain conditions are met under the Treasury Department's Home Affordable Modification Program ("HAMP"), that promise is enforceab

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JL A (281)
Thursday August 22, 2013, 6:28 pm
Friday, August 09, 2013
Ninth Circuit to Wells Fargo: keep your promises on loan modification

Yesterday, the Ninth Circuit ruled in Corvello v. Wells Fargo that when a bank tells a borrower it will modify his loan if certain conditions are met under the Treasury Department's Home Affordable Modification Program (“HAMP”), that promise is enforceable.

When Phillip Corvello applied for a home loan modification, Wells Fargo set up a trial period plan ("TPP") for him, under an agreement that "stated in the first line that if Corvello's representations were accurate and he complied with the terms of the trial plan, he would receive a modification offer." But then, although "Corvello alleges he complied with the TPP's terms, and made all three payments on time[,] Wells Fargo still never offered him a permanent modification, nor did it notify him that he did not qualify."

Seems like a straightforward breach of contract, right? But the district court threw the case out, holding that because the agreement stated that the loan wouldn't be modified “unless and until” the borrower received a “fully executed copy of a Modification Agreement,” the bank's promise to offer a modification was conditioned on the bank's own decision to provide a signed Modification Agreement later. In other words, the district court read the contract as giving the bank the power to undercut its own promise.

Reversing, the Ninth Circuit joined the Seventh Circuit in rejecting that reading of TPPs under HAMP:

As the Seventh Circuit put it, Wells Fargo's interpretation would allow it to “simply refuse to send the Modification Agreement for any reason whatsoever—interest rates went up, the economy soured, it just didn't like [the Borrower]—and there would still be no breach, turn[ing] an otherwise straightforward offer into an illusion.” Id. We believe the reasoning in [the Seventh Circuit's decision] is sound. Paragraph 2G cannot convert a purported agreement setting forth clear obligations into a decision left to the unfettered discretion of the loan servicer.

A nice victory for homeowners.

Posted by Scott Michelman on Friday, August 09, 2013

Alan Lambert (91)
Thursday August 22, 2013, 6:53 pm
Why should Wells Fargo or any other bank do something as drastic as keeping their promises? It's not like these banks are responsible for crashing the whole economy or anything.

Sheila D (194)
Thursday August 22, 2013, 6:55 pm
Agree with Alan - nice if All banks were forced to keep their promises. Noted with thanks.

Katie & Bill D (107)
Thursday August 22, 2013, 7:14 pm
Thank you JLA

JL A (281)
Thursday August 22, 2013, 7:25 pm
You are welcome GGma and Bill and Katie.

Barbara K (60)
Thursday August 22, 2013, 7:37 pm
In reading some of the horror stories of people being illegally evicted, just about all of them were in the process of refinancing their homes. My mortgage company keeps calling to see if I want to refinance, I just keep telling them no. But the interest is lower than when I took it out, so I'll get around to refinancing with my local bank here in town, don't trust the other one from out of state.

cathie S (154)
Thursday August 22, 2013, 11:45 pm
thank you for the story noted n shared

Inge Bjorkman (202)
Thursday August 22, 2013, 11:56 pm


Kit B (276)
Friday August 23, 2013, 7:10 am

There are some new laws and regulations to protect consumers from the same abuse as before the Great Recession, but they must be implemented and enforced or they are not worth any thing. I am pleased to see this ruling and hopeful that the court will use the full force of the law on those who so flagrantly violate laws and regulations. No one must be allowed to be an exception to the law or it has no meaning. Thanks J L.

JL A (281)
Friday August 23, 2013, 10:00 am
Good luck Barbara. You are welcome Cathie and Kit.
You cannot currently send a star to Kit because you have done so within the last day.

Jo S (619)
Friday August 23, 2013, 10:53 am
Well this is certainly some good news, let's just hope it continues!
Noted & shared. Thanks JL.

lee e (114)
Saturday August 24, 2013, 8:01 am
Alan couldn't have said it better -- thanks for the post!

JL A (281)
Saturday August 24, 2013, 8:21 am
You are welcome Joanne and Lee.
You cannot currently send a star to lee because you have done so within the last day.

Mitchell D (87)
Saturday August 24, 2013, 5:38 pm
Alan is, indeed, on the mark.
The banks screw up, we bail them out, and they then tell us to shove it:Business as usual.

Sherri G (128)
Tuesday August 27, 2013, 12:52 am
Thank You JL Noted. Now all we need is for all banks to be forced to honor their agreements. TY Ninth Circuit now let's make sure all banks comply with their agreements.

JL A (281)
Tuesday August 27, 2013, 6:51 am
You are welcome Sherri.
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