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Wells Fargo Class Action Suit Survives Dismissal

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In addition to Wigod v. Wells Fargo, it seems that more Plaintiffs are surviving motions to dismiss in their lawsuits against the mortgage lender and servicer. A federal judge in Northern California recently denied Wells Fargo's attempt to dismiss a class action filed against it for failing to offer a permanent modification. This case has been brought as a class action, which means that the named Plaintiff also purportedly represents the interest of other similarly situated homeowners.

The order denying Wells Fargo's motion to dismiss can be found here. The facts of the case, Sutcliffe v. Wells Fargo, are similar to those of Wigod v. Wells Fargo. The Sutcliffe court even cites to Wigod in its analysis of the issues. The Sutcliffes were put into a trial loan modification by Wells Fargo. They made their payments in a timely manner, but never received a permanent loan modification. Instead, they continued to make the trial payments, as instructed by Wells Fargo.

Now comes the shocking part: Wells Fargo decided to initiate foreclosure proceedings instead. Actually, this is not very shocking at all. What would have once enraged and astounded me is now "business as usual." I do, however, remain hopeful that change is on the horizon.

Wigod and Sutcliffe both speak to the idea that trial loan modifications contain an explicit promise (contract). If the borrower makes timely payments, and if the borrower's financial statement remains true and accurate, then the lender will offer a permanent loan modification. The promise to offer the loan modification is important, people rely on these representations to their detriment.

I've seen many clients and potential clients over the years who were stuck in perpetual trial modifications. This uncertain and unpredictable position is a terrible one to be in. That courts are now recognizing the legitimacy of this breach of contract theory is a good thing. Instead of asserting the trial loan modification as a defense to a foreclosure, these decisions allow borrowers to bring counterclaims or file their own separate lawsuits. The only way to change "business as usual" is to force change by hitting banks where it hurts -- in the wallet.

I look forward to seeing this area of law develop over time -- I plan to use these cases to support my client's claims.