Homeowners in a Dozen States Say Wells Fargo Wrongly Paused Their Mortgages

Banking giant Wells Fargo is once again making headlines for lawsuits, but this time, it isn’t about alleged racial discrimination or fraudulent accounts — it’s about wrongly paused mortgage payments.

Attorneys for Troy Harlow, a Virgina man who is suing Wells Fargo over wrongly putting his mortgage into deferral, have identified other mortgages in at least 12 states that were deferred without a request by the homeowners, according to a recent article by NBC News.

According to the court filings, Wells Fargo placed Harlow’s mortgage payments in deferral without his knowledge or permission. Harlow told the court that he has continued to make his mortgage payments each month, but the paused payments have caused some complications for the homeowner, who is in the process of filing for personal protection from bankruptcy following a 2017 kidney transplant that placed him on full disability.

Per the NBC article, “On April 29, without Harlow’s knowledge or permission, Wells Fargo told the bankruptcy court overseeing his payment plan that he had asked the bank to pause his mortgage payments because he had been hurt by COVID-19. Harlow, 48, of Buchanan, Virginia, made no such request and had continued to forward the full amount owed on his mortgage to Wells Fargo.”

Harlow’s attorneys didn’t learn of the deferral until late May, though, and immediately objected to it in bankruptcy court. According to NBC, the bank’s request put Harlow’s court-approved bankruptcy repayment plan at risk and hurt the homeowner’s credit reports. In this case, the wrongfully paused payments are also causing unnecessary legal costs.

“Erroneous forbearance filings in Chapter 13 bankruptcy cases can put borrowers’ homes at risk of foreclosure and represent a fraud against the bankruptcy court,” Thad Bartholow, a lawyer at Kellett & Bartholow who has sued the bank on behalf of wronged borrowers, told NBC.

But it’s not just Harlow who’s dealing with the issue of wrongfully paused payments. His attorneys told NBC that they’ve identified more than a dozen similar cases of erroneous deferral in Harlow’s home state of Virginia, along with cases in Alabama, Arizona, Florida, Kansas, Louisiana, Michigan, Missouri, New Jersey, North Carolina and Texas.

According to article, none of the homeowners involved in the lawsuit said they had been affected by COVID-19 when contacted by NBC News, nor had they requested the bank’s assistance or loan modifications — and all claimed not to have been contacted by Wells Fargo about the changes to their mortgages.

Harlow’s attorneys also noted that they’ve found evidence of Wells Fargo submitting secondary requests for forbearance after homeowners — who initially asked to have their mortgages paused — no longer wanted to be part of the program.

This is hardly the first time Wells Fargo has gotten kickback for its internal practices related to banking or lending products. The bank agreed to pay $175 million in 2012 to resolve allegations by the Department of Justice regarding racial discrimination in mortgage lending. According to the U.S. Justice Department, Wells Fargo was being probed over allegations that it charged African-Americans and Hispanics higher rates and fees on mortgages — even when they qualified for better deals during the housing boom.

In 2019, Wells Fargo settled another discrimination lawsuit — this time by the city of Philadelphia for $10 million. The city alleged in the lawsuit, filed in 2017, that Wells Fargo discriminated against minorities in its lending practices, causing high foreclosure rates in minority neighborhoods, which lowered the city’s tax revenues as a result. Wells Fargo did not admit guilt as part of the settlement.

Other cities, including Sacramento, California, and Oakland, California, have sued Wells Fargo over allegations of similar discriminatory practices in mortgage lending.

And, the banking giant agreed in early 2020 to pay $3 billion to settle its long-running civil and criminal probes regarding the charges that Wells Fargo employees opened millions of savings and checking accounts for customers without their knowledge or approval to meet products, sales and revenue quotas. About $500 million of the $3 billion fine will be allocated to the Securities and Exchange Commission.

According to Department of Justice documents in the case, the bank admitted to pressuring employees to meet “unrealistic sales goals that led to thousands of employees opening millions of accounts for customers under false pretenses or without customer consent often by misusing customers’ identities.” 

The bank has also been accused in recent years of making unauthorized changes to some borrowers’ mortgages. Borrowers in that case, filed in 2017, accused Wells Fargo of extending loan terms and increasing the total amounts owed to the bank by homeowners. Wells Fargo settled the case for almost $14 million.

In this case, though, it’s unclear what the purpose of placing homeowners into deferment involuntarily would be for Wells Fargo. Unlike some of the other cases against Wells Fargo, the bank isn’t likely to reap any significant financial benefits from the unauthorized deferment filings, other than the nominal amounts offered for work done on forbearance programs under the CARES Act.

Mary Eshet, a spokesperson for Wells Fargo, gave a statement to NBC News regarding these new allegations, stating:

“During this unprecedented time, we’ve focused on ensuring that our customers who need assistance receive the benefits of available relief programs. In the early days of the pandemic, we provided immediate payment relief to customers in bankruptcy if a review of their court filings indicated they were impacted by COVID-19 or if they had a loan modification review in process. In those cases, we notified the customers or their attorneys and filed a notice with the court. We followed up with customers in these circumstances after some raised questions and, in the majority of cases, those we have contacted wanted the payment relief. If a customer does not want a forbearance, we remove it and notify the bankruptcy courts.”

Angelica Leicht

Mortgage Researcher

Angelica Leicht is a writer and editor who specializes in everything mortgage-related for Interest.com. Her work has spanned topics that include lending product reviews, interest rate trends, racial biases in mortgage lending and the role of fintech in lending practices, and has appeared in publications such as Interest, The Simple Dollar, Bankrate, The Spruce, Houston Press and VeryWell, among others.