Wigod v. Wells Fargo: the Federal Court Case That Allows State Law Claims Against Foreclosing Banks For Failed HAMP Modification

Posted By on September 25, 2012

Last week, we posted about how there are lots of foreclosure alternatives out there for Florida home owners fighting against losing their homes – and how alternatives to foreclosure aren’t all the same for everyone and how there are many ways to deal with a foreclosure.  Florida law is dealing with lots of new issues these days, because strange and bizarre factual circumstances never before seen by Florida courts, Florida judges, or the Florida legislature have sprung out of the Foreclosure Fraud housing crisis.

It’s not happening just in Florida, of course.  This is a national event.  And just as other states may look to how the Florida Supreme Court will rule in the Pino case, some Florida judges may be interested in a recent Illinois case that addresses an interesting alternative to foreclosure.  The case is Wigod v. Wells Fargo Bank, NA, 673 F. 3d 547 (7th Cir. 2012) (you can read the complete opinion online and how it is being cited in other states as well as legal writings at Google Scholar).

Lisa Wigod Sues Wells Fargo Over Wachovia Mortgage – Failed HAMP Modification

Back in September 2007, up in Illinois, Lisa Wigod bought her home and got a $728,500 mortgage from Wachovia Mortgage.  Some time after that, Wachovia merged with Wells Fargo.   It wasn’t too long after Ms. Wigod moved into her new home that she started have money troubles and in April 2009, she did what so many can identify with: she bit the bullet, sat down, and wrote her mortgage lender: she wanted to talk with them about a HAMP modification to her home loan.

In 2009, upon receipt of her request, Wells Fargo could do two things per Treasury guidelines:  (A) offer her a trial modification based on unverified oral representations, or (B) ask her to provide documentary proof of her financial information before any trial modification plan could start.   Guess what?  You’re right.  The bank chose B.

Which meant that Ms. Wigod had to gather together all that paperwork and send it over to the bank for review.  Which she did, in May 2009.

Things looked okay right then:  Wells Fargo checked the stuff over and sent Wigod a TPP Agreement (Trial Period Plan), with a trial modification term in the documents:  July 2009 – November 2009, and which had the following language in it:

  • “I understand that after I sign and return two copies of this Plan to the Lender, the Lender will send me a signed copy of this Plan if I qualify for the [permanent modification] Offer or will send me written notice that I do not qualify for the Offer.”
  • “If I am in compliance with this Loan Trial Period and my representations in Section 1 continue to be true in all material respects, then the Lender will provide me with a [permanent] Loan Modification Agreement.”

Wigod agreed.  On May 28, 2009, she signed two copies of the TPP Agreement and sent both signed copies to Wells Fargo along with more documents and the first modified mortgage payment.  A few weeks later, she got a copy of the TPP Agreement, executed by Wells Fargo, in the mail.

Time passed.  Wigod made her mortgage payments under this deal on time.  Wells Fargo took her money every month, no problem.  Everything looked sweet.  Until that trial period ended, and Wells Fargo essentially said something like “see ya, wouldn’t want to be ya,” and dissed that permanent modification.  It notified Wigod that it was  “unable to get you to a modified payment amount that you could afford per the investor guidelines on your mortgage.”

Once the trial period was over, you can imagine what happened.  Wigod got nasty warnings from the bank that she owed the outstanding balance; that there were late fees; that she was in default.  Wigod kept up those reduced monthly mortgage payments  and Wells Fargo kept up threats to foreclose.

Eventually, lawsuits were filed.  And here’s the thing.  The BIG THING:

The case went up to the United States Court of Appeals for the Seventh Circuit (the only court higher than it is the U.S. Supreme Court),  and that federal appellate court ruled that Lisa Wigod has state law claims that the federal laws can’t preempt.  Wigod has claims for breach of contract under state law that she can still sue for damages under — as well as other state law claims for money damages. The federal court has ruled that the federal statutes don’t block (or “preempt”) her state law claims.

Larry Tolchinsky’s Tip:

This Illinois case is important to all Floridians fighting for their homes.  It’s a demonstration to a Florida state judge that there is solid legal analysis out there – by some pretty well-respected judicial minds, the Justices on the Seventh Circuit Court of Appeals aren’t to be disregarded here – to support a Florida breach of contract action against their bank.

In Wigod, the bank lost on all its arguments and this home owner can proceed with her claims that the bank did her wrong and that she is due monetary damages under legal protections provided to her under her state’s law.  Congratulations to Lisa Wigod.

Is this case binding in Florida?  No.  This is not recognized as the law here.  Our Eleventh Circuit Court of Appeals, with a similar case before it, might rule differently than the Seventh Circuit has in Wigod.  It is, however, what is considered to be a “secondary source.”  It can be used in legal argument before a court.  It can also be used in negotiations with a bank seeking to foreclose in situations similar to the Wigod situation.

This court case is just one more example of the many defenses that may be available to Florida home owners who are fighting to keep their homes.  Don’t procrastinate on investigating what all your legal options are when you are fighting to keep your family home.

Do you have questions or comments? Then please feel free to Chat with Larry in the comments below, at info@hallandalelaw.com, or (954) 458-8655.  If you have a specific situation, please call or email Larry because he can’t answer specific fact questions in general comments.  He’s happy to take your call.

Comments

Leave a Reply

Please note: Comment moderation is currently enabled so there will be a delay between when you post your comment and when it shows up. Patience is a virtue; there is no need to re-submit your comment.

css.php