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COVID-19 Update 8: Thoughts on the CARES Act, Planning for life after the pandemic

Wells Fargo

By

Marc Dann - Marc Dann Consumer Fraud & Foreclosure Defense AttorneyI was mildly enthusiastic about the CARES Act immediately after it was passed because it appeared to be substantially different from the stimulus plan crafted by the federal government during the Great Recession of 2008.

That package funneled trillions of dollars to the big banks and Wall Street speculators whose unfettered greed nearly destroyed the world’s financial system but did relatively little to help working and middle-class families devastated by the collapse of the housing market. By the time the economy began to turn around 10,000,000 of them had lost their homes.

By contrast, the CARES Act appears to direct $937 billion in aid to where it’s needed most: into the pockets of the more than 20,000,000 million Americans who are now unemployed and the bank accounts of small business owners who are literally hours away from losing everything they have built.

Sure, Congress doled out hundreds of billions of dollars to corporate America, including the airlines who have been ripping off travelers for decades, but the stimulus checks, enhanced unemployment benefits, and small business loan programs funded by the Act will help millions of people weather the Covid-19 storm—at least for the next couple months.

While it appears that Congress got a few things right, there are holes in the legislation that could negatively impact consumers, homeowners and small business owners. In this update I’ll identify the gaps and provide advice on who to deal with or avoid them.

Problems with the Paycheck Protection Program 

As I mentioned earlier, hundreds of thousands of small businesses across the nation are about to go under. The Paycheck Protection Program (PPP) is designed to help keep them afloat by providing forgivable loans owners can use to pay expenses including employee wages, rent, and utilities.

In concept the program is great. In practice, not so much.

That’s because the nationally chartered banks and SBA approved lenders charged with administering the program are permitted to pick and choose which applications to accept and in what order. As a result, they’ve been playing favorites. Business owners who have an existing relationship with a PPP lender go to the front of the line. Those who don’t, including minorities, are shoved to the back—if they’re able to apply at all. I’m sure you won’t be shocked to learn that Wells Fargo and other large financial institutions are telling smaller customers to hit the road and “try other banks.”  Publically owned Ruth’s Chris Steakhouse just announced that they alone sucked up $20 Million of the funds appropriated.

This type of discrimination is especially troubling in light of the fact that  Congress did not appropriate enough money to meet the needs of all the small businesses that are in trouble. When the money runs out, thousands of hard-working entrepreneurs and their employees will be doomed simply because they couldn’t access the help they were promised and desperately need.

We launched an investigation into this situation after being contacted by frustrated and infuriated small business owners. If you think something is wrong with the way a lender is handling or, more to the point, not handling your PPP application, please give us a call or email me at mdann@dannlaw.com

On the positive side, a number of clients have told us that smaller community banks are eager to process PPP paperwork. We’re not surprised. Over the years we’ve learned that community banks are extremely responsive to the needs of small borrowers. If you’ve been unable to make headway with a large lender, I encourage you to contact one of the community banks listed here.

Stimulus Checks can be hijacked by Judgment Creditors and banks

Stimulus checks funded by the CARES Act are already being deposited in the bank accounts of millions of Americans. That’s the good news.

Here’s the bad news: The Act doesn’t prohibit private debt collectors from garnishing stimulus money. That means if you’re behind on debt payments and have an outstanding court judgment, a private debt collector can grab your stimulus check. Attorney Javier Merino, head of DannLaw’s New Jersey office, along with consumer lawyers Josh Denbeaux and Ira Metrick just published an op-ed in the New Jersey Law Journal dealing with this issue.

If you fall in this category you should keep a close eye on your bank account and withdraw the money as soon as it is deposited. To stay one step ahead of judgment creditors you can track your stimulus payment here.

Here’s more bad news: if you owe money to the bank where your stimulus payment is being direct-deposited the bank can grab it. For example, if you have a bank account that’s been overdrawn, and your stimulus payment is deposited into that account, the CARES Act does not prevent the bank from taking part or all of the stimulus payment to pay back the debt. So far J.P. Morgan Chase and Wells Fargo have said they will not seize stimulus funds. Bank of America, Citibank, and U.S. Bank have yet to clarify their positions.

Waiver of Federal Student Loan interest is in doubt 

Federal Student Loans servicers have not been completely transparent about how they are going to implement the six-month zero interest, zero-fee forbearance included in the Act. In addition, some observers speculate that Navient, Greatlakes, and Nelnet don’t have the technology needed to properly track accounts. If you are taking advantage of the forbearance program please pay close attention to your loan statements and contact DannLaw or other attorneys if you notice a discrepancy in your account.

The CARES Act does not provide relief for federal loans originated before 2005 and private student loans 

The CARES Act does not provide forbearance for federal student loans originated before 2005 that were not consolidated or private student loans. If your loan falls into these categories you must continue to make your payments. If you are unable to do so, contact your servicer in writing and request a modification, forbearance or another type of accommodation.

Monitor your credit if you are taking advantage of the mortgage forbearance provisions of the CARES Act.

As we’ve noted in previous updates, the CARES Act provides for up to 12 months of payment suspension/forbearance for borrowers with federally-backed loans owned by Fannie Mae, Freddie Mac or insured by the FHA, VA and the Department of Agriculture. To determine if you have a qualifying loan send a request for information (RFI) to your mortgage servicer. We’ve drafted a simple RFI you can use. To obtain a copy email us at intake@dannlaw.com.

Please remember forbearance isn’t forgiveness.  That means you may be subject to higher mortgage payments, escrow payments, and other fees when you begin making your payments after the forbearance period. If you do take advantage of the Act’s forbearance program you should look closely at your monthly statement to make sure it is correct. You should also subscribe to a credit monitoring service and check regularly to make sure your servicer is not entering negative information on your credit report. If you notice discrepancies contact us at intake@dannlaw.com so we can help protect you and determine if you have legal claims that may entitle you to financial compensation.

Bankruptcy may be the solution to your financial problems 

My parents always encouraged me to hope for the best but prepare for the worst. Today, their advice is more valuable than ever before because the COVID-19 emergency is causing unprecedented damage to our economy and levels of unemployment not seen since the Great Depression. Study after study has shown that a majority of Americans would have a difficult time meeting their obligations for more than a month or two if they lost their source of income. The ongoing crisis has validated those studies.

The $1200 stimulus checks and small business loans may ease the pain in the short term, but when that money is gone many business owners and individuals will be forced to consider filing bankruptcy in the months ahead. And while many people are loathe to do so, bankruptcy protections may provide the best option for dealing with the devastation caused by the crisis—a crisis none of us created or could have anticipated.

The fact that the courts and collection activity are essentially shut down gives business owners and individuals a unique opportunity to closely examine their financial situation and begin planning for the future—including a future that includes bankruptcy. Doing so will put you in a good position to move forward once the crisis ends if you don’t have to file and will help ensure that bankruptcy provides the maximum protection for your family and your business if filing proves to be the best alternative.

If you would like to schedule a phone or video conference with one of our experienced bankruptcy attorneys to discuss your financial future and the options that are available to you, please email bflick@dannlaw.com  We are here to listen, to advise, and to help.

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Wells FargoWe have the honor of representing three people who lost their homes because they were unjustly denied a loan modification by Wells Fargo.

One of those clients, Jose Aguilar, recently told his story to a reporter from American Banker, a financial industry trade journal:

Jose Aguilar was shocked, but also angry, when he received a letter of apology earlier this fall from Wells Fargo.

Aguilar and his family lost their home in Chittenango, N.Y., in 2015 after trying time and again to get a mortgage modification from Wells. “I was denied, denied, denied, denied, denied, denied,” he recalled.

Now the San Francisco bank was saying that it made a mistake. Aguilar’s application should have been approved.

The 41-year-old father recounted how the foreclosure upended his kids’ lives, who moved to Florida after being uprooted from their home in upstate New York. Aguilar and his ex-wife have two boys, ages 9 and 15. Wells Fargo sent a $25,000 check, an amount that Aguilar saw as inadequate.

“To me, it’s a slap in face,” he said. “It’s not going to repair my life. I mean, my kids have been traumatized.”

The scandal-plagued bank blames a computer glitch. We blame the companies carelessness and unfettered greed. We’re working hard to secure justice–and just compensation–for Mr. Aguilar and his family as well as others whose lives have been devastated by Wells Fargo.

If you or someone you know has been harmed by Wells, contact DannLaw immediately at 216-373-0539 to arrange a free consultation. You may be eligible to receive significant damages from Wells.

The entire American Banker article follows below:

‘I lost my home because of a computer glitch’: Wells’ victims seek answers

By Kevin Wack

Jose Aguilar was shocked, but also angry, when he received a letter of apology earlier this fall from Wells Fargo.

Aguilar and his family lost their home in Chittenango, N.Y., in 2015 after trying time and again to get a mortgage modification from Wells. “I was denied, denied, denied, denied, denied, denied,” he recalled.

Now the San Francisco bank was saying that it made a mistake. Aguilar’s application should have been approved.

The 41-year-old father recounted how the foreclosure upended his kids’ lives, who moved to Florida after being uprooted from their home in upstate New York. Aguilar and his ex-wife have two boys, ages 9 and 15. Wells Fargo sent a $25,000 check, an amount that Aguilar saw as inadequate.

“To me, it’s a slap in face,” he said. “It’s not going to repair my life. I mean, my kids have been traumatized.”

Aguilar is one of hundreds of homeowners that Wells has identified as victims of a calculation error involving foreclosure attorneys’ fees. He took the $1.9 trillion-asset bank to court on Tuesday, filing a petition that aims to compel Wells to disclose additional information that could be used as the basis for an eventual lawsuit.

The mortgage servicing errors add to the list of woes at scandal-plagued Wells. The bank’s critics say the mistakes are emblematic of a company that devotes insufficient resources to back-office operations and then litigates the resulting customer grievances aggressively.

“This is a problem that goes back to the beginning of the Great Recession, and continues to plague customers of Wells Fargo,” said Timothy Blood, a San Diego attorney who filed a class-action lawsuit in 2010 that alleged the bank improperly denied applications for mortgage modifications.

“They seem to constantly be making errors in processing loan modifications. That’s what their job is.”

The class action that Blood brought in 2010 alleged that Wells did not follow through with its obligations under the post-crisis program that used federal taxpayer dollars to pay for mortgage modifications. Seven years later, the case was settled for $750,000 plus attorneys’ fees, which worked out to $65.45 per affected borrower.

In July 2018, Wells disclosed in a securities filing that it had identified a calculation error that affected certain accounts that were in the foreclosure process. The bank said at the time that the problem was corrected in October 2015, and that approximately 625 customers were incorrectly denied loan modifications, of whom roughly 400 lost their homes.

Three months later, Wells Fargo revised its previous disclosure, stating that the errors actually persisted until April 2018. The bank also raised its estimates of the number of customers affected, stating that roughly 870 borrowers were incorrectly denied mortgage modifications, and that foreclosures were completed in approximately 545 of those cases.

In recent weeks, Wells has been sending apology letters to affected borrowers. “We have some difficult news to share,” the letters begin.

The letters state that a payment enclosed will help make up for the borrower’s financial loss, and note that Wells Fargo is reaching out to consumer bureaus to ask that any negative reporting be removed. They also offer mediation at no cost to borrowers who feel the bank’s compensation is inadequate.

Tom Goyda, a Wells Fargo spokesman, declined to provide the range of financial sums that the bank is sending to borrowers, or to provide details about how the bank calculated its offers. The bank said in August that it accrued $8 million for customer remediation, which would amount to an average of less than $13,000 per victim.

“We’re trying to work with each customer to arrive at a solution that addresses their personal situation,” Goyda said.

Goyda noted that affected customers can request mediation even if they cash the checks that Wells sends to them. And if they are unsatisfied with the results of mediation, they have the choice to pursue other legal options, he said.

But the bank’s offers to harmed customers fall short, according to 20 pro-consumer organizations that are writing to the Federal Reserve on Tuesday. In their letter, the organizations argue that Wells should be required to make affected homeowners whole as a condition of lifting the nine-month-old cap on asset growth at the bank.

Organizations that signed the letter include Americans for Financial Reform, Public Citizen, the National Fair Housing Alliance and the Consumer Federation of America.

“Until proper compensation is provided and Wells Fargo demonstrates that it has reformed its systems and practices to prevent problems like this in the future, Wells Fargo’s apologies are hollow and insufficient,” said Linda Jun, senior policy counsel at Americans for Financial Reform.

Some of the borrowers who recently received letters from Wells Fargo are now exploring their legal options. Marc Dann, an Ohio attorney, said that he has three such clients, including Aguilar.

Because the bank’s letters did not include details about what went wrong, Dann recently wrote to Wells Fargo to request additional information about what happened to one of his clients. He cited federal mortgage servicing rules that in certain circumstances require the disclosure of information to borrowers.

A lawyer for Wells Fargo declined the request, stating that the regulation’s requirements are not applicable in situations where the information is being sought more than one year after the mortgage was discharged.

“They’re like a stone wall on this issue,” Dann said.

So Dann has resorted to asking courts to order Wells Fargo to provide additional information prior to the filing of a lawsuit — an unusual step that he says is necessary because he does not know enough to determine which laws may have been violated.

“There’s no question, there’s a wrong that happened here,” Dann said. “The question is, how do we properly litigate it?”

When Goyda, the Wells Fargo spokesman, was asked whether the bank intends to fight efforts by affected borrowers who want to go to court, he said: “I don’t know that there’s one single answer that we could give to that question.”

“It may very well depend on the circumstance, but we would approach each legal action individually,” he added.

Aguilar said in a recent interview that he bought his home outside of Syracuse, N.Y., in 2005. The problems began after the discovery that the house had mold; health concerns prompted the family to move.

Thinking that they might never return, Aguilar fell behind on the mortgage. But the family later decided that the mold could be remediated and moved back in.

Aguilar said he that spent many months trying to get a mortgage modification from Wells, and was repeatedly told that his paperwork had been lost.

Aguilar estimated that houses in Chittenango comparable to the one his family lost are selling today for around $130,000 to $140,000. He said that he owed $92,000 on the mortgage before losing the home.

But it is difficult to put a price tag on a wrongful foreclosure.

“It’s been hard for me. It’s been hard for my kids too,” he said. “I lost my house, I lost my family, all because of a computer glitch.”

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DannLaw attorneys suspect troubled bank has understated number of victims, urges Wells borrowers who received loan modifications between 2010 and 2015 to seek legal advice.

Earlier this year Wells Fargo revealed in an SEC filing that a “software glitch” caused the bank to improperly deny mortgage loan modifications to 625 homeowners between 2010 and 2015. At the time, Wells said it had set aside eight million dollars to compensate borrowers impacted by the mistake, including the 400 families who lost their homes to foreclosure.  Now victims of the incident are receiving checks from Wells. Attorney Marc Dann, founder and managing partner of DannLaw, is urging them to seek legal advice before accepting the money.

“A number of borrowers who received checks from Wells have contacted us to ask if the amount being offered is fair,” Atty. Dann said. “Obviously, families who went through the trauma of losing or almost losing their homes due to Wells’ incompetence deserve more than a few thousand bucks—especially if the company violated federal lending laws and rules. We’ve launched an investigation to determine if that’s true.  No one should cash a check they receive from the company or sign a settlement agreement until our inquiry is complete.”

That investigation is likely to reveal Wells has understated the number of people damaged by the glitch. “Company officials admit 625 borrowers were improperly denied modifications,” Atty. Dann noted. “But that’s only part of the story. The same software error may have caused loan mods that were granted to be miscalculated. As a result, thousands of homeowners may be making payments that are much higher than they should be.”

“Wells has no intention of telling them about the problem, so we’re making a concerted effort to alert anyone whose mortgage was modified by Wells Fargo between 2010 and 2015 that they may have been cheated,” he said noting that borrowers with “conventional” loans owned by Fannie Mae or Freddie Mac comprise the pool of potential victims.

“Talking to those folks will enable us to assess whether and to what extent Wells violated lending laws and regs, including the Real Estate Settlement Procedures Act (RESPA) and the Truth in Lending Act (TILA)” Atty. Dann explained. “If we discover the law has been violated, borrowers could receive thousands of dollars in compensation from Wells whether they are a member of the group of 625 homeowners the bank admits to abusing or someone whose loan mod was miscalculated. In either case, we’re able and eager to take legal steps that will hold Wells accountable for its actions and make victims whole.”

Borrowers who receive a compensation/settlement check from Wells, as well as those who received a loan modification from the bank between 2010 and 2015, may call 877-475-8100 to arrange a free consultation with DannLaw.

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Wells Fargo

Look up the word “scam” in the dictionary these days and you just might find the Wells Fargo logo. The giant lender, already accused of cheating homeowners in bankruptcy and creating fraudulent credit card and bank accounts for millions of unsuspecting customers, has now been caught charging people who took out car loans for insurance they didn’t need.

According to media reports more than 800,000 people were charged for insurance they did not need. Charges for the insurance, which were often deducted directly from customers’ bank accounts, forced 274,000 borrowers into delinquency and resulted in almost 25,000 wrongful vehicle repossessions. Members of the military on active duty were among the victims of WF’s latest scam.

Wells Fargo will soon begin sending out letters to customers who have been caught up in the auto insurance scam. Along with the letter, borrowers will be offered a settlement of approximately $140. Those whose cars were possessed illegally will be offered $800. Both amounts are laughably low and fall far short of compensating victims for the harm done to their credit rating, the premiums they paid for insurance they neither wanted nor needed, the embarrassment caused by vehicle repossession, and the bank’s utter negligence and unethical behavior.

If you or someone you know receives a letter and a check from Wells Fargo do not cash it or sign the settlement agreement that may be attached to it. Instead, you should immediately call 216-373-0539 oremail the experienced attorneys at the Dann Law firm to schedule a no-cost consultation. We’ll review your loan documents and if we learn you’ve been cheated we’ll begin fighting for the money you need and deserve.

If you do not receive a letter and a check but have taken out a Wells Fargo car loan in the past ten years you should contact us. That’s because the company obviously can’t be trusted to do the right thing and may not reach out to every customer who has been scammed. Our free review is the sure way to establish if you’re entitled to monetary compensation.

And here’s an important note: we’ll also conduct a free review of your Wells Fargo mortgage that will enable us to determine if the bank is cheating you. If that’s the case you may be entitled to a substantial cash award.

The New York Times recently published a comprehensive report about the car insurance scam. You may read it here. In the meantime, please contact us at once at 216-373-0539 or via email to arrange a free consultation if you obtained a car loan through Wells Fargo in the past ten years. We’re ready to fight for justice and the compensation you deserve.