A proposed class action alleges Wells Fargo, with the aid of a “nationwide web of outside vendors,” has extracted improper property inspection fees from homeowners who’ve fallen behind on their mortgages.
The 51-page lawsuit alleges the supposedly “inflated, bogus” Wells Fargo inspection fees have been imposed as additional loan charges on borrowers in “difficult financial straits,” and have jeopardized some homes and in some cases resulted in bankruptcy. The suit pins blame for the Wells Fargo inspection fees on the bank’s use of a computer system to automatically assess property inspection fees without human intervention and on a continuous loop until an initial default has been cured. According to the case, the fees are assessed “without regard to the terms of the borrowers’ mortgage loans or the relevant circumstances.”
“Instead of being based upon reasonable parameters, the computer system was programmed to assess as many charges as possible and to pay first all outstanding fees and costs before satisfying interest and principal,” the filing claims.
Moreover, Wells Fargo is alleged to have concealed the nature of borrowers’ inspection fees, calling the fees simply “other” charges in monthly statements mailed to proposed class members, the case says.
“In this manner, Wells Fargo victimized and further increased the indebtedness of persons who were already in danger of losing their homes to foreclosure,” the complaint asserts.
The plaintiff, a Brigantine, New Jersey resident, alleges Wells Fargo has “profited enormously from this fraudulent scheme,” generating hundreds of millions in revenue on the alleged “improper, unwarranted and unreasonable” inspection fees.
Wells Fargo, as part of its mortgage servicing operations, collects from borrowers monthly payments that include principal and interest, taxes and insurance, and other fees and charges and disburses the money to the appropriate parties, the lawsuit begins. The case explains that one way the bank earns revenue is through “float” income from accrued interest between when a consumer makes a mortgage payment and when those funds are remitted to lenders, investors, taxing authorities or other relevant parties. Moreover, Wells Fargo retains all or part of certain fees, such as the inspection fee charged to consumers, the complaint states, arguing that the bank thus “has an incentive to impose additional fees” on borrowers.
If a borrower is late in making a payment, Wells Fargo’s computer system will automatically order a property inspection and charge the account for this inspection after the loan has been in default for a certain number of days and regardless of whether there is a reasonable need for an inspection, the lawsuit says. In most cases, Wells Fargo’s computer system automatically recommends a property inspection in the event a borrower has been in default for between 20 to 45 days, according to the suit. Further, the bank orders duplicative inspection fees on properties for which it services both a first mortgage loan and a second mortgage loan, such as a home equity line of credit, per the complaint.
As the case tells it, no human at Wells Fargo is involved in ordering property inspections for borrowers who have fallen into default.
“Wells Fargo’s computer system automatically generates work orders for property inspections without human intervention,” the suit reads. “No person or employee of Wells Fargo is involved in the determination of whether a property inspection is reasonably necessary to protect the lender’s interest in the property.”
More specifically, the lawsuit says a first property inspection is triggered upon a borrower’s default on a mortgage, and the Wells Fargo computer system will continue to order property inspections every 20 to 45 days until the default is cured. Therefore, although a borrower might continue to make regular payments after missing only one month, the defendant’s computer system will continue to generate property inspection work orders until the initial default is remedied, the case claims. Per the suit, this is where the lack of human intervention is particularly problematic:
“Further, because the proper inspections are ordered based on a computer program, rather than human decision-making, property inspections may be performed on a borrower’s property regardless of the fact that the property has already been inspected numerous times and was previously deemed occupied, well-maintained and in good condition.”
The lawsuit looks to represent all borrowers who, within the applicable statutes of limitations, were charged for inspection fees by Wells Fargo Bank, N.A. The case also looks to cover a New Jersey-specific subclass.
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