MIAMI – A South Florida couple claims Wells Fargo engaged in fraud when it accepted thousands of dollars in exchange for a promise of a permanent loan modification never delivered.
The federal lawsuit centers on the issue of a Trial Period Plan (TPP).
When Jade and George Giourgas bought their home in 2002, they never imagined years later they'd been fending off a foreclosure.
"This was our dream to have a house," Giourgas said. "This is home to us. I don't know what else to say. This is hard."
In February 2009, George Giourgas was laid off from his employment.
"When my husband lost his job, I couldn't make the payments," she said.
In the years that followed, while the couple looked for relief under various banking problems, George Giourgas suffered a heart attack and their son developed a chronic medical condition.
"We started getting bills for all the different doctor's services," she said.
Juggling it all on a teacher's salary was tough.
"It's been very stressful," Jade Giourgas said. "It's just been very overwhelming. Very overwhelming."
THE TPP - TRIAL PERIOD PLAN
Then they received an offer from Wells Fargo called a "Trial Period Plan." The letter begins by stating, "Wells Fargo Home Mortgage wants to continue to work with you to modify your mortgage." According to the letter, the family "must make new monthly 'trial period payments' in place of (their) normal monthly mortgage payments" at a little more than $2,000 and "after all trial period payments are made, (their) mortgage will be permanently modified."
"It felt like it was Christmas, you know, I cried. And we even sent the payments way ahead of time," Giourgas said. "We were just very excited."
But she said after making those three payments, and then several more, Wells Fargo worked to reschedule the foreclosure sale and no permanent loan modification was granted.
"It felt like the rug got pulled from under us. Because of the fact that I've given them everything and they still said, 'No, you're denied,'" she said. "It was very frustrating. Because you're going through this modification process, you're doing what the bank asks you to do because we're told to trust the bank."
"These are not the same banks we had growing up," said Bruce Jacobs, an attorney who specializes in real estate and debt litigation. "The days of trusting banks are over."
THE LOAN SERVICER
In Giourgas' case, Freddie Mac was the owner of the note of Giorgas' home loan.
"Wells Fargo is acting as a servicer, which means they make more money when they foreclose and they can make more money from making trial payments, they can charge late fees, they can charge property inspection fees, they can pay taxes, they do all these things and they get paid off the top of whatever comes in and whatever's left goes to the people who actually own your loan," he said.
The Giourgas family thought the offer they received provided them with a solution to getting a modification, but Jacobs argues it is misleading.
"It makes people feel safe when they're not really safe," he said. "Ultimately, they're lining their pockets with it [TPP Payments] and then they make more money when they foreclose at the end."
In a statement to Local 10 News, Janey Kiryluik, Consumer Lending Communications spokeswoman for Wells Fargo said, "We have worked with the Giourgas' for six years in an effort to find an option that would allow them to avoid foreclosure but, due to active litigation, we are unable to comment further at this time. I can confirm that no foreclosure sale is currently scheduled for this property."
THE FINE PRINT
While looking at the letter sent to the family, Jacobs said, "So here it says after all the trial payments are timely made, you get a permanent modification. Congratulations. But that's not so simple. Because over here it says wait your trial payment could extend beyond these three payments and over here it says you may not even get a modification. You may not be eligible, even if you do make your payments."
Jacobs warns to thoroughly read an offer.
"All I can say is you got to be really careful about the fine print because it's there for a reason. It's there to take advantage of you," he said.
"I don't understand," Giourgas said. "If you're showing the bank you're able to make those payments why would a bank want to foreclose on a family that is showing they can make the payments?"
Jacobs says the answer is a conflict of interest.
"You have the people who are supposed to be saving your house for you getting more money when they take you out of your house," he said. "What we're dealing with now are banks that are kind of out of control. And people expected that they're going to treat them fairly and then all of a sudden they look around and (say) 'Don't worry, we're not going to hurt you, we're not going to hurt you.' Boom. Foreclosure. That happens over and over again."
The Giourgas' case is now in federal court. The family's attorney is accusing Wells Fargo of misleading the couple with broken promises, acting maliciously, and breach of contract. They are seeking injunctive relief to protect the ownership and title of their home and $75,000 in damages.
"I just don't think it's fair, what they're doing," Giougas said. "I know there are other people out there that have stories similar to mine."
According to Giourgas' suit, "Wells Fargo, advertised to Plaintiffs a loan modification as an opportunity for homeowners struggling with their mortgage payments to become current, avoid foreclosure and save their homes. The agreement was designed to induce Plaintiffs into making thousands of dollars of additional payments that Defendants, Wells Fargo, could not otherwise collect prior to a final deficiency judgment."
The suit goes on to state that Wells Fargo requested the state trial court to reschedule a foreclosure sale on Aug. 7, 2014.
"Plaintiffs made thousands of dollars in payments to Defendants under the Agreement ... Plaintiffs have been harmed by Defendants' breached agreement, broken promises, and wrongful acts ... Defendants' illusory and false written representations for a permanent loan modification are in violation of Florida's Unfair and Deceptive Trade Practices Act and constitute fraud, misrepresentation and breach of covenant of good faith and fair dealings, amongst other claims."
The attorney filing the suit on behalf of the Giourgas also argues in the suit that Wells Fargo had "no intention of offering such permanent loan modification ... by inducing Plaintiffs into making thousands of dollars of additional payment (that could not otherwise be collected) with the false promise of a loan modification Defendants, Wells Fargo, can collect more from the distressed homeowner, than the $4,000 maximum incentive payment collected under Defendant, Freddie Mac, loan modification program."
Accusing Wells Fargo of acting in "bad faith" the suit claims, "Defendants have falsely, deceptively, misleadingly, unfairly, and/or unconscionably advertised otherwise induced consumers to make payments pursuant to a 'Trial Plan' by falsely, deceptively, or misleadingly representing that a permanent modification on similar terms would be forthcoming."
"'Heads I win, tails you lose' is a fraudulent coin toss."
The TPP is the subject of extensive litigation in multiple jurisdictions. In 2013 the 9th Circuit Court of Appeals ruled that a TPP is an enforceable contract. "The panel held that under the Home Affordable Modification Program the bank was contractually required to offer the plaintiffs a permanent mortgage modification after they complied with the requirements of a trial period plan ("TPP")."
Circuit Judge John T. Noonan added, "Wells Fargo drafted this document, and Wells Fargo must be held responsible for it ... No purpose was served by the document Wells Fargo prepared except the fraudulent purpose of inducing Corvello to make the payments while the bank retained the option of modifying the loan or stiffing him. 'Heads I win, tails you lose' is a fraudulent coin toss. Wells Fargo did no better." That decision applies to several western states to include Arizona, California and Nevada.
"It's a federal decision out of California," said Jacobs, "So if you're in federal court, you'd be persuasive, if you're in California for sure. But if you're in Florida, Florida doesn't have to follow that. And certainly a state court judge has no obligation to follow it. And what we're seeing here is, you look at the way that they write their agreements, that they write their letter, it's very cagey. It's misleading. It makes people feel safe when they're not really safe. And it's all done because very smart people are looking for ways to get themselves paid without actually having to give people a modification that is meaningful and helps them save their home."
In the offer sent to Jade and George Giourgas, Wells Fargo stated, "This modification is designed for borrowers, like you, who for some reason did not meet all the eligibility criteria for a permanent modification under the government's Home Affordable Modification Program (HAMP), or were unable to successfully make payments under a HAMP modification or another modification."
Of that, Jacobs said, "What that means to me is they don't want you to be in HAMP. They want you to be in a higher cost private modification plan."
"I know that we're not the only one with this problem, and I just want other people to learn from my story so that this doesn't happen to them," said Giourgas.
In a statement to Local 10 News, Kiryluik said, "We have worked with the Giourgas' for six years in an effort to find an option that would allow them to avoid foreclosure but, due to active litigation, we are unable to comment further at this time. I can confirm that no foreclosure sale is currently scheduled for this property."
Links to cases on this legal issue:
--Wigod v. Wells Fargo Bank
--Young v. Wells Fargo Bank
--Corvello v. Wells Fargo Bank
--Topchian v JP Morgan Chase Bank
--Neil v. Wells Fargo
--Bloch v. Wells Fargo
--Senator v. JP Morgan Chase