In Corvello v. Wells Fargo Bank, NA, 11-16234, 11-16242, 2013 U.S. App. LEXIS 16415 (9th Cir. Aug. 8, 2013) (a copy of the opinion can be found here) [an enhanced version of this opinion is available to lexis.com subscribers], the Ninth Circuit reversed the lower Court’s dismissal of two consolidated class action complaints, holding that if a borrower complies with a standardized Home Affordable Modification Program (“HAMP”) trial period plan (“TPP”), the mortgage servicer is contractually required to either offer a permanent modification or promptly notify the borrower, in writing, that he or she does not qualify.
In aligning with the Seventh Circuit’s decision in Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547 (7th Cir. 2012) [enhanced version], the Ninth Circuit rejected Wells Fargo’s argument that the promise to provide a permanent modification is not enforceable where a fully-executed modification may not have been delivered Corvello, 2013 U.S. App. LEXIS 16415 at *16-17. Citing Wigod, the Ninth Circuit recognized that banks are “required to offer permanent modifications to borrowers who completed their obligations under the TPPs, unless the banks timely notified those borrowers that they did not qualify for a HAMP modification.” Corvello, 2013 U.S. App. LEXIS 16415 at *12-13. In reversing the district Court, the Ninth Circuit held in relevant part:
Wells Fargo’s interpretation of the TPP was suspect because it allowed banks to avoid their obligations to borrowers merely by choosing not to send a signed Modification Agreement, even though the borrowers made both accurate representations and the required payments. As the Seventh Circuit put it, Wells Fargo’s interpretation would allow it to “simply refuse to send the Modification Agreement for any reason whatsoever—interest rates went up, the economy soured, it just didn’t like [the Borrower]—and there would still be no breach … turn[ing] an otherwise straightforward offer into an illusion.” Wigod, 673 F.3d at 563
We believe the reasoning in Wigod is sound. Paragraph 2G cannot convert a purported agreement setting forth clear obligations into a decision left to the unfettered discretion of the loan servicer. The more natural and fair interpretation of the TPP is that the servicer must send a signed Modification Agreement offering to modify the loan once borrowers meet their end of the bargain.
Wells Fargo’s own failure to fulfill the notification obligation does not deprive plaintiffs of the benefits of their agreement.
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