Sloppy Lender/Servicer Leaves Judge Fuming, Homeowners Frustrated

A recent story in The New York Times describes how Wells Fargo left one federal bankruptcy judge fuming regarding a dispute the lender had with a homeowner couple over whether they had missed some of their required payments on their home loan. Wells Fargo claimed that the couple missed some payments but that, if they could present “valid, accurate and true copies” of the front and back of the checks they sent in, they would receive the proper credit.

What ultimately had the judge fuming was that, several months later, evidence came out that strongly suggested that the borrowers' purportedly missing payments to Wells Fargo were, in fact, received and processed electronically. That meant that the lender never returned the checks to the borrowers' bank, thereby making it impossible for the couple to provide the proof of payment that Wells Fargo had demanded in the first place. An excerpt from the story:

• [S]idney B. Brooks, the judge overseeing the case, was clearly dismayed by the bank’s performance. In his opinion, he fumed that Wells Fargo had asked the borrowers for canceled checks as proof of payment, even though such checks were often not available.

• Wells Fargo’s request for canceled checks was especially troubling, the judge said, given that the bank was a proponent of the 2003 law that allowed banks to stop returning canceled checks to customers.

• The only institution that could have the original checks is Wells Fargo, he concluded. “The payments have, evidently, been lost in a black hole of the creditor’s organization or through accounting mismanagement,” the judge wrote. “This is a major lender/mortgage loan servicer where the left hand does not know what the right hand is doing — the collection department does not know what the check processing and accounting departments are doing.”

• Because this is not the first time the judge has encountered problems in Wells Fargo’s operations, he is considering sanctions on the bank. “This dispute might portend a widespread abuse of collection practices or creditor overreaching,” he wrote, “demanding of debtors what it, the creditor itself, is unable to provide: accurate and reliable record keeping and billing practices.”(1)

Not surprisingly, Wells Fargo reportedly disgreed with the judge's conclusions.

For the story, see A Mortgage Paper Trail Often Leads to Nowhere.

For the judge's written decision, see Wells Fargo v. Burrier.

(1) According to the story, the attorney for the homeowners says that this kind of dispute is becoming more common in her practice and that borrowers wind up losing too often. “A lot of times clients don’t keep canceled checks or maybe their bank account was closed and they can’t go and get the proof,” she said. “The bank gets that extra money for as long as the debtor can keep it up and when they can’t they are pushed out of their homes.” SloppyForeclosuresAlpha