Baron and Budd attorneys, led by Roland Tellis and Mark Pifko in Los Angeles, have filed a class action lawsuit alleging that Wells Fargo and JPMorgan Chase illegally levied excessive and deceptive default service fees against borrowers who were late on mortgage payments. The suit states that Wells Fargo and JPMorgan Chase, who, together, service approximately 25 percent of all U.S. mortgages, allegedly cheated hundreds of thousands of borrowers by charging abusive default fees. Baron and Budd attorneys believe that the two banks may have potentially defrauded borrowers out of a billion dollars or more.
“Wells Fargo and Chase executives conspired to increase profits in any way they can, even if that meant deceiving homeowners who were losing out on the American dream,” said Tellis. "In addition to charging unnecessary and marked-up fees, the banks concealed the fees through cryptic wording."
According to the suit, the amount of the inflated or unnecessary charges can vary, from $20 for some services, to as much as $135 for others. As part of the banks’ efforts to hide the true nature of the charges, these fees are typically listed on a borrower’s monthly statements as “Other Charges,” “Miscellaneous Fees” or “Corporate Advances.”
According to the lawsuit, the fees are charged when a borrower is late on a payment, and the bank’s computer programs begin the default process by levying fees against the borrower. One of these fees is used to hire a real estate broker to assess the value of the home based on similar properties, the broker price opinion (BPO) and the BPO is used to help the lender price the property for foreclosure. Federal law allows lenders to charge these BPO fees, but they are not allowed to mark up the charges or perform unnecessary services and make a profit, which is what Wells Fargo and Chase have done, according to the suit.
“Our investigation has revealed that as a result of these practices, banks often make more money from loans that are in default than loans that are current," said Pifko. “Loan agreements require that default-related services must be reasonable and appropriate. Banks are not allowed to mark-up the charges so they can make a profit, but that is exactly what they have done. In many cases, the banks are overcharging by as much as 300 percent.”
