Wells Fargo Wreaks Havoc in Borrowers’ Bankruptcy Cases by Filing False Mortgage Forbearance Notices
July 6, 2020: Roanoke, Virginia
Kellett & Bartholow PLLC (Dallas, Texas) and co-counsel Giles & Lambert, PC (Roanoke, VA), Abelardo Limon (Brownsville, Texas), and The Crow Law Firm (Charlotte, NC) have filed a nationwide class action against Wells Fargo Bank, N.A. alleging that Wells Fargo has, without its customers' authorization or knowledge, filed notices with bankruptcy courts around the United States that falsely assert that borrowers in Chapter 13 bankruptcy requested and received a temporary CARES Act forbearance of their mortgage payment obligations after the allegedly forborne mortgage payments had been made.
Plaintiffs assert that Wells Fargo has engaged and is engaging in this practice across the nation, wreaking havoc on the nation’s bankruptcy courts and the Chapter 13 bankruptcy cases of homeowners who are working hard and complying with the Bankruptcy Code and Rules.
In order to be eligible for a forbearance under the CARES Act, borrowers must (a) request forbearance relief, and (b) attest that the borrower is experiencing a financial hardship as a result of the COVID-19 emergency. Plaintiffs deny requesting forbearance of their mortgage payments, which they already were addressing in their Chapter 13 bankruptcy cases.
A forbearance is a temporary suspension of the borrower’s monthly mortgage payment obligation, offered for a finite time period, after which borrowers must either make arrangements to cure any missed payments or face potential foreclosure if they are unable or unwilling to do so. Plaintiffs fear that Wells Fargo, having wrongly put Plaintiffs in forbearances they never asked for, will ask bankruptcy courts to let Wells foreclose on their homes at the end of the forbearance period, even though Plaintiffs and the class members have made their mortgage payments.
In addition, Wells Fargo’s false forbearance notices give bankruptcy courts and Chapter 13 trustees the false impression that Plaintiffs are unable to satisfy or are in violation of their obligations under their Chapter 13 plans. Plaintiffs allege that in such instances, Plaintiffs and the class members are at risk of having their bankruptcy cases dismissed, which also could lead to their homes being foreclosed on by Wells Fargo.
Even when these obstacles are overcome by proving that the notices are false, the Plaintiffs’ cases are still rendered more costly and burdensome – not just for the Plaintiffs and class members, but also for all participants in the bankruptcy process – by the work involved in identifying and debunking the false claims in Wells Fargo’s forbearance notices.
Theodore O. Bartholow III of Kellett & Bartholow PLLC in Dallas, Texas, who serves, along with his partner, Karen L. Kellett, as lead counsel for the class plaintiffs, stated, “these false and unauthorized forbearance notices filed in bankruptcy cases throughout the United States are a fraud on the bankruptcy courts. They create needless chaos in the class members’ Chapter 13 cases.” Bartholow added that “the false notices, many of which have not been signed by licensed attorneys, needlessly burden the debtors, the attorneys for the debtors, the bankruptcy judges and their staff, the Chapter 13 trustees and their staff, and other parties including other creditors involved with the debtors’ Chapter 13 cases.”
Ms. Kellett explains that the false forbearance notices, “force all the other participants in the bankruptcy process to determine whether the claimed forbearance notice is legitimate, and if not, to take affirmative action to prevent foreseeable risks and harms, including the potential dismissal of the Plaintiffs’ and class members’ bankruptcy cases and foreclosure of their homes.” Kellett continued, saying, “one of our primary goals is to enjoin Wells Fargo from filing such false notices in future cases.”
The Plaintiffs’ attorneys have also alleged that the motivation behind these practices, at least in part, are the bonus fees that Wells Fargo can receive from GSEs (Government Sponsored Entities) for filing the false forbearance notices and any “workout” of the alleged forbearance when the forbearance period is over.
O. Max Gardner III of Shelby, North Carolina, who also represents the class, has been referred to as “The Dean of the consumer bankruptcy bar.” Gardner, who has practiced consumer bankruptcy law for more than 45 years said, “Wells Fargo has a long and extensive resume of serious abuses of our federal bankruptcy and consumer protection laws, but in this case, using a national pandemic to file false forbearance notices to capture potentially millions of dollars in extra fees is simply beyond the pale, even for Wells Fargo.”