Wigod v. Wells Fargo Bank, N.A.

Summarized by Mark Melickian , Raines Feldman Littrell LLP
13 years 12 months ago

Citation:

Case no. 11-1423, 7th Circuit Court of Appeals (decided March 7, 2012)

Tag(s):

Ruling:

Overturning the district court, the 7th Circuit panel held that a plaintiff successfully pled various state law contract and tort claims against a mortgage servicer that she alleged improperly denied her a permanent mortgage loan modification under the Home Affodability Loan Program (HAMP). The panel found that Lori Wigod successfully stated claims under Illinois law for breach of contract, promissory estoppel, and violations of the Illinois Consumer Fraud Act. The servicer, Wells Fargo, argued that as HAMP did not provide a private right of action to consumers for enforcement of its provisions, Wigod's claims were were barred and/or preempted by federal law. The court disagreed. With respect to her core claim - breach of contract - the court noted that Wigod had not brought claims under HAMP (which she could not do) but rather claimed that Wells Fargo has breached its promise (contract) when it "failed to do what it had agreed to do and what HAMP required it to do." This, the court held, was a garden variety breach of contract claim that, along with her state law estoppel and consumer fraud claims, was not preempted by HAMP or any federal law principle. Although this decision does not address a bankrutpcy issue directly, it could foreseeably support actions by debtors and panel trustees in consumer cases against mortgage lenders and servicers who declined mortgage modifications under HAMP as well as objections to claims by such servicers or lenders.

Procedural context:

Appeal from the United States District Court, Northern District of Illinois. Case no. 1:10-cv-02348. The action was brought as a class action. The district court dismissed Wigod's claims pursuant to Federal Rule 12(b)(6). See Wigod v. Wells Fargo Bank N.A., 2011 WL 250501 (Jan 25, 2011).

Facts:

In September 2007, Lori Wigod obtained a mortgage from Wachovia Mortgage, which later merged into Wells Fargo. In April 2009, facing financial distress, Wigod requested a modification under HAMP. She submitted the documentation Wells Fargo requested, and returned an executed TPP Agreement in May 2009. In June 2009, Wells Fargo countersigned and returned the TPP Agreement, effectively approving her modification subject to her completion of the trial period. Wigod successfully completed her four month trial period, making timely reduced payments. Wells Fargo then informed her in writing that her loan would not be permanently modified because to do so would violate "the investor guidelines for her mortgage." Wigod continued to make modified payments and tried to negotiate with the bank. Wells Fargo declared her in default and threatened to foreclose, leading Wigod to bring suit.

Judge(s):

Kenneth Ripple (Circuit Judge); David Hamilton (Circuit Judge); Sue E. Myerscough (District Court Judge - CD Illinois - sitting by designation). Opinion by Hamilton; concurrence by Ripple.

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