Wells Fargo in New Scandal – This Time Over Unauthorized Mortgage Modifications
Wells Fargo is back in court. According to attorney Theodore Bartholow III, who represents the plaintiffs Christopher and Allison Cotton, Wells Fargo has secretly modified his client’s mortgage resulting in an extension of the mortgage term by over 25 years. According to the lawsuit, if the clandestine modifications had not been caught, the interest payments alone would have reached over $140,000, $85,000 more than what was already owed.
The modified mortgage payment changes were sent to the bankruptcy trustee, who, thinking the borrowers had authorized it, made the change in the bankruptcy payments. This meant that the mortgage was being seriously underpaid, and could have resulted in foreclosure, according to the Cotton’s attorney. Bartholow believes there are thousands of other Wells Fargo customers who received the same treatment; that is why he launched the class action earlier in June.
Wells Fargo continues to attempt to rebuild its dented reputation in the wake of discovery of unauthorized account openings. This newest case can only further erode consumer trust in the 165-year-old institution. In its response Wells Fargo spokesman emailed a statement which insisted “modification offers were clearly outlined in letters” sent to borrowers or their attorneys. “In no event would we finalize a modification without receiving signed documents from the customer and, where required, approval from the bankruptcy court.” In instances where the bankruptcy trustee received the new payment notice, it was due to a “trial modification”.
It is unclear how widespread the practice of reducing the monthly payments, while extending the term of mortgages in bankruptcy is. Attorneys filing the recent suits have mentioned they are aware of other occurrences in Louisiana, New Jersey, Pennsylvania and Texas. Until people in bankruptcy the actual number will remain in question, and the true risk of foreclosure will be hidden.
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