$3 million Punitive Damage award against Wells Fargo — Overcharged $24,000 on a mortgage.
Where does your mortgage payment really go? what have you really been charged? Are you entitled to an offset for improper accounting? Foreclosure defense, modification and reinstatement these days takes one into a brave new world. Many issues are being addressed in bankruptcy proceedings as well as in state foreclosure cases. A Louisiana Bankruptcy court lost its patience with Wells Fargo after continued stonewalling by the bank concerning the manner in which mortgage payments received are applied, or rather misapplied by the major servicer. Once disclosed, the bank dragged its feet in fixing the problem.
“Wells Fargo applied payments first to fees and costs assessed on mortgage loans, then to outstanding principal, accrued interest, and escrowed costs. This application method was directly contrary to the terms of Jones’ note and mortgage, as well as, Wells Fargo’s standard form mortgages and notes. Those forms required the application of payments first to outstanding principal, accrued interest, and escrowed charges, then fees and costs. The improper application method resulted in an incorrect amortization of loans when fees or costs were assessed. The improper amortization resulted in the assessment of additional interest, default fees and costs against the loan. The evidence established the utilization of this application method for every mortgage loan in Wells Fargo’s portfolio.” (emphasis added).
The Louisiana court said that Wells Fargo’s improper charges and improper amortization were admitted to be the result of the banks’ proprietary software.
The clear implication was that many, if not all, Wells Fargo loans are being handled the same way. Foreclosure defense attorneys have been saying this for some time, that banks misapply the monies that are received, violating the terms of the loan instruments and resulting in higher default amounts for the borrowers, most of whom are unaware of what has happened. In In Re Jones, insult was added to injury because the practice continued after the court had approved certain payments be made to the bank for principal and interest, and the monies were then used for other charges.
The court further noted how difficult it had been for the borrower to get even a simple loan history from Wells Fargo, and that the burden of extensive discovery and delay was overwhelming for the ordinary borrower. The Jones court said it was clear that Wells Fargo preferred to relied on the ignorance of the borrowers or their inability to fund a challenge to their demands.
[Many of the same practices may be happening in credit card debt collection cases].
This Louisiana bankruptcy ruling is significant to us here in Florida. The issues are the same . We just haven’t had a Florida court get this frustrated…yet.