U.S. Court of Appeals: The Home Affordable Assistance Program Has Produced More Litigation Than Happy Homeowners

In Corvello v. Wells Fargo Bank NA (--- F.3d ----, C.A.9 (Cal.), August 8, 2013), the Ninth Circuit Court of Appeals held that Wells Fargo Bank was required to offer borrowers permanent loan modifications to their home mortgages if the borrowers fully complied with their trial period plans.

Facts

Wells Fargo Bank entered the U.S Treasury Department's Home Affordable Assistance Program (“HAMP”) and agreed to comply with Treasury guidelines with respect to borrowers who requested permanent loan modifications to their home mortgages under HAMP.  Plaintiffs sued Wells Fargo Bank demanding permanent loan modifications to their home mortgages and alleged in their consolidated complaints that they made payments to Wells Fargo Bank under their trial period plans (“TPPs”) provided for under HAMP.  Plaintiffs further alleged that Wells Fargo Bank accepted and retained the payments but never offered them permanent modifications to their home mortgages nor did Wells Fargo Bank notify them that they were not entitled to permanent modifications.  Wells Fargo Bank took the position that it was not required to offer permanent modifications to the borrowers' home mortgages because it had never provided the borrowers with fully executed modification agreements, as provided for by the language of their TPPs.

Decision

The Ninth Circuit Court of Appeals disagreed with Wells Fargo Bank's position considering it to be one-sided and unreasonable.  The Court held that Wells Fargo Bank was required to offer the borrowers permanent loan modifications to their home mortgages if they fully complied with their TPPs, unless it timely notified the borrowers that they were not qualified for a permanent loan modification.