We Know

New York Real Estate

Mortgage modifications lawsuits

On Behalf of | Nov 8, 2021 | Residential Real Estate

Banks have a lot of power when it comes to managing mortgages, and consumers can often feel that they are at the mercy of the bank when it comes to setting the rules and the features of the mortgage. However, a recent lawsuit altered this arrangement by allowing some mortgage customers to sue their bank for not approving mortgage modifications.

Wells-Fargo mortgage case

The Home Affordable Modification Program, or HAMP, is a piece of Obama-era legislation that lets homeowners apply to have the terms of their mortgage changed if they are in financial hardship. However, Wells Fargo refused to approve the applications of their borrowers. The bank thought it would be more profitable to let the mortgages go into default and then foreclose. The homeowners went to court and the court ruled that Wells-Fargo had to allow them to make the modifications.

Mortgage modifications were permitted so that borrowers could lower payments or take other actions to make their mortgage easier to manage. They were supposed to be able to get these changes made as long as they met the federal eligibility requirements, but Wells Fargo would stall and block applications without good reason, leading to the lawsuit. The HAMP program has led to other lawsuits as well, as both homeowners and lenders have struggled to understand and execute the provisions in the program.

The lawsuit was not a precedent for all mortgages, but it does create an opportunity for Wells Fargo mortgage borrowers who believe they should have been eligible for a modification under HAMP to sue their lender, depending on where they live, the time they applied for a modification, and other factors.