Elizabeth Magner, a Bankruptcy Judge in New Orleans’ Eastern District, ordered Wells Fargo to pay a homeowner more than $3.1 million in punitive damages in a scathing opinion issued in early April. Michael L. Jones v. Wells Fargo Home Mortgage, Inc., 06-1093, United States Bankruptcy Court for the Eastern District of Louisiana. This ruling was the culmination of more than five years of litigation with Mr. Jones, but more broadly the Court found that Wells Fargo had “taken advantage of borrowers who rely on it to accurately apply payments and calculate the amounts owed;” refused “to voluntarily correct its errors” and “when exposed, it revealed its true corporate character by denying any obligation to correct its past transgressions and mounting a legal assault [to] ensure it never had to.”
The evidence established that Wells Fargo violated the Bankruptcy Court’s orders by misapplying payments made by the debtor homeowner to “undisclosed postpetition fees and costs not authorized by the Court.” Furthermore, it was Wells Fargo’s standard practice for every loan in its portfolio to apply payments first to fees and costs assessed on mortgage loans and then to outstanding principal, accrued interest and escrowed costs which was “directly contrary to the terms of…Wells Fargo’s standard form mortgages and notes.” This improper application “resulted in the assessment of additional interest, default fees and costs against the loan.”
Even more galling to Judge Magner was the fact that Wells Fargo had done nothing to correct this practice and found that Wells Fargo’s conduct with regard to Mr. Jones was willful and egregious. “Wells Fargo admitted that these actions were part of its normal course of conduct, practiced in perhaps thousands of cases.” The Court also found that Wells Fargo’s “conduct is clandestine. Rather than provide Jones with a complete history of his debt on an ongoing basis, Wells Fargo simply stopped communicating with Jones once it deemed him in default…Only through litigation was this practice discovered. Wells Fargo admitted to the same practices for all other loans in bankruptcy or default. As a result, it is unlikely that most debtors will be able to discern problems with their accounts…”.
Judge Magner took Wells Fargo to task for its stubbornness and willful refusal to change its practices or correct its mistakes without the significant time and expense of a lengthy court battle. The attorneys at Jones, Swanson, Huddell & Garrison are committed to fighting battles like these for our clients, and are eager to confront companies like Wells Fargo for similar misconduct.
In particular, if your mortgage company foreclosed on your house while you had a loan modification application pending, please contact Katie Lasky at (504) 523-2500 to discuss your possible remedies and how JSHG might be able to help you.
