Wells Fargo COVID-19 Mortgage Forbearance Policy Sparks Suit

Wells Fargo is facing two class action lawsuits from customers who thought they were signing up to get information about their mortgage forbearance options and ended up getting actual forbearances instead.

The customers are suing because they say the bank’s actions put their credit ratings at risk and prevented them from refinancing their home loans now that interest rates have been lowered due to the coronavirus pandemic and national financial crisis. The most recent of the class action lawsuits was filed on Aug. 26.

Congress passed the Coronavirus Aid, Relief, and Economic Security or CARES Act in March, which, among other things, allowed those with federally backed mortgages to have their home loans placed in forbearance – meaning the mortgage would be frozen and payments suspended without penalty. The default length of a mortgage forbearance under the act is 180 days. Customers may request the forbearance be shortened at any time, or lengthen after the first 180 days.

Shortly after the CARES Act was passed, Wells Fargo began receiving phone calls and online requests for detailed information about the mortgage forbearance option.

According to the plaintiffs, the bank began automatically placing the mortgages of countless of those callers into forbearance without the customers realizing it, let alone wanting it.

Mortgage holders Samara Green of Georgia and Brett Jacob of New York joined forces in filing the first class action lawsuit against Wells Fargo on July 31 in the U.S. District Court of California. The second class action lawsuit was filed at the same court by Pamela Delpapa of California.

All three plaintiffs claim their mortgages were placed in forbearance by Wells Fargo without their express consent. Both mortgage forbearance class action lawsuits refer to several complaints to the U.S. Consumer Financial Protection Bureau by even more customers who told of similar experiences.

One of those customers reportedly said a Wells Fargo employee admitted that the bank’s system was set up “like a hair trigger,” automatically placing loans into forbearance, “even though I did nothing to start a forbearance,” the Delpapa class action lawsuit says.

Although the CARES Act was meant to be helpful to borrowers in a time of serious financial hardship brought on by the coronavirus pandemic, the mortgage forbearance policy at Wells Fargo wound up “hurting the very people Congress intended to help,” Delpapa says.

In her case, Delpapa said she lost her job and then, because of the automatic forbearance, was unable to refinance her home loan with a lower interest rate.

In her class action lawsuit, Green said her mortgage had also been placed in forbearance without her knowledge or consent and the bank had failed to apply at least one Wells Fargo mortgage payment she’d submitted before finding out the loan was frozen. Plaintiff Jacob told of a similar experience.

The Delpapa and Green class action lawsuits also claim Wells Fargo stood to benefit from the automatic forbearances though the collection of fees.

“In the spirit of providing assistance, we may have misinterpreted customers’ intentions in a small number of cases,” Mary Eshet, a spokeswoman for Wells Fargo, said according to a report by NBC News. “In those limited cases, we are working directly with customers to ensure they are receiving the assistance they need and make any corrections to their accounts that may be required.”

The Wells Fargo spokeswoman went on to say that all customers who had their mortgages placed in forbearance in error were notified and then able to request the forbearance be lifted.

However, the plaintiffs argue that “Wells Fargo’s blunder is not an inconsequential administrative glitch.”

“Forbearance can have grave impacts on a borrower’s credit history or access to credit,” the Delpapa class action lawsuit says.

The Wells Fargo class action lawsuit goes on to note that two U.S. senators who became aware of the Wells Fargo mortgage forbearance situation wrote a letter of concern to the bank’s top executive because they considered it a serious matter,

“As Sen. Elizabeth Warren (D- Mass.) and Sen. Brian Schatz (D-Hawaii) wrote in a letter to Wells Fargo CEO Charles Scharf, the bank was ‘putting consumers at risk of greater financial hardship amidst one of the worst economic downturns in our country’s history,’” the Delpapa class action lawsuit says.

Are you a Wells Fargo customer whose mortgage has been placed in forbearance by the bank without your knowledge or consent? Has your mortgage with another bank been put in forbearance against your wishes? Tell us about your experience in the comment section below.

Class Members in the Delpapa class action lawsuit are represented by Matthew J. Preusch, Derek W. Loeser and Gretchen Freeman Cappio of Keller Rohrback LLP. Class Members in the Green class action lawsuit are represented by Abbas Kazerounian, Yana A. Hart and Jason A. Ibey of Kazerouni Law Group APC.

The Wells Fargo Mortgage Forbearance Class Action Lawsuits are Delpapa, et al. v. Wells Fargo Bank, Case No. 3:20-cv-06009, and Green, et al. v. Wells Fargo & Co., et al., Case No. 3:20-cv-05296, both in the U.S. District Court for the Northern District of California.

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