HAMP Trial Period Plans – Wells Fargo’s Fraudulent Coin Toss

Posted by NCBRC - August 9, 2013

Yesterday, the Ninth Circuit Court of Appeals held in Corvello v. Wells Fargo Bank, N.A., No. 11-16234, that Wells Fargo was contractually obligated under the terms of a HAMP trial period plan (TPP) to offer permanent modifications to borrowers who complied with the TPP by submitting accurate documentation and making trial payments.  Such an interpretation of the TPP, the Court stated, “avoids the injustice that would result were Wells Fargo’s position accepted and Wells Fargo allowed to keep borrowers’ trial payments without fulfilling any obligations in return.  The TPP does not contemplate such an unfair result.”  More scathing was Judge Noonan’s concurrence in which he stated that:

“No purpose was served by the document Wells Fargo prepared except the fraudulent purpose of inducing Corvello to make the payments while the bank retained the option of modifying the loan or stiffing him. “Heads I win, tails you lose” is a fraudulent coin toss. Wells Fargo did no better.”

The Court rejected arguments that Wells Fargo’s failure to return a signed copy of the TPP to the borrower precluded liability.  For purposes of the decision, the Court assumed that the borrowers fulfilled all of their obligations under the TPP, as alleged.   The Court noted, however, that Wells Fargo could still raise factual disputes during the litigation.


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