Consumers Allege Wells Fargo Switched Mortgage to Balloon-Payment Loan Without Proper Notice

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A proposed class action lawsuit against Wells Fargo Bank, N.A details allegations from a married couple that the reeling financial institution unlawfully transformed their amortizing loan—one for which the principal is paid down on a schedule over the life of the loan—into a balloon-payment loan without first providing proper notice as required under California law.

Initially filed in January and recently removed to California federal court, the lawsuit alleges Wells Fargo modified the plaintiffs’ 30-year loan—the last payment for which is scheduled for September 2036—by creating a “New Principle Balance” that the bank then broke down in a “Secondary Principal Balance” and an “Interest Bearing Principal Balance.” The problem, the lawsuit claims, is that the plaintiffs’ original loan agreement mandates that they be placed on notice in the event they would be responsible for a balloon payment at the end of the loan’s maturity.