In an opinion filed on August 8, 2013 in the case of Corvello vs. Wells Fargo Bank (combined with the companion case of Lucia v. Wells Fargo), the Ninth Circuit Court of Appeals ruled that Wells Fargo had to meet its obligations involved in a federal Making Homes Affordable Program (also known as HAMP).
Mr. Carvello, (the homeowner) was provided with a trial period plan (TPP) that required the homeowners to provide documentation so that Wells Fargo could determine eligibility for HAMP. The homeowners were also required to make trial payments to Wells Fargo. The TPP also specified that if Wells determined the homeowners did not qualify for modifications, Wells would be required to notify them and end the trial payments. If Wells determined that the homeowners did qualify and trial payments were made, then Wells would offer the homeowners permanent mortgage modifications.
The homeowner provided the documentation and made the trial payments, but Wells did not notify him that he failed to qualify for HAMP, and did not offer him a permanent modification. In the Lucias case, Wells Fargo actually foreclosed on the home after similar facts occurred.
Wells argued to the court that it was not contractually obligated to offer a permanent loan modification. The Ninth Circuit Court of Appeals did not agree and held that under the HAMP program the bank was contractually required to offer the homeowners a permanent mortgage modification after they complied with the trial plan. In his concurring opinion circuit Judge Noonan had some candid assessments about the actions of Wells Fargo and stated in part:
“Wells Fargo drafted this document, and Wells Fargo must be held responsible for it. The document promises a substantial benefit to Corvello if he meets its terms. The document then makes these benefits illusory because they depend entirely on the will of Wells Fargo. To say, “I give $100 for your watch but I will decide whether I pay you $100” is not to make a contract but to engage in a flim-flam or, in plain words, to work a fraud. You promise so that the other will perform. You reserve your promise so that the promise is empty while you have gotten what you wanted from the promise.
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.”