Lender Explains Forbearance Without Consent

September 1, 2020

Wells Fargo is being sued in a proposed class-action lawsuit that accuses the lending giant of automatically placing some borrowers’ mortgages in forbearance without their permission. The borrowers claim that the forbearance has reflected poorly on their credit reports and prevented them from being able to obtain other financial services, such as refinances.

However, Wells Fargo told media outlets that the bank placed accounts in forbearance after those customers reached out to them and expressed financial hardship during the pandemic. The bank wanted “to ensure that every customer who needed payment relief would receive it without unnecessary delay,” Wells Fargo said in a statement.

"We sincerely apologize to any customer who received a forbearance and did not expressly request one, and [we] are actively working to assist each customer who may have been negatively affected," Tom Goyda, spokesperson for Wells Fargo, said in the statement to Law360.

The federal government’s Coronavirus Aid, Relief, and Economic Security Act includes a provision that mortgage borrowers facing economic hardship due to the COVID-19 pandemic can ask for a temporary forbearance on their mortgage.

Pamela Delpapa, who has brought forward one of the lawsuits against the bank, says she was unable to refinance her home to get a better mortgage rate because her loan had been placed in forbearance, which she says she never asked for. “Banks may not institute it automatically,” the lawsuit against Wells Fargo states. “But that’s exactly what Wells Fargo did. As documented by the plaintiff and in consumer complaints from across the nation, Wells Fargo automatically placed borrowers in forbearance when they contacted the bank by phone or online to merely inquire about their options.”

An additional lawsuit filed on July 31 made similar claims against Wells Fargo. Last month, NBC News reported on borrowers in Chapter 13 bankruptcy who also claimed their loans were placed in forbearance without their consent.

Wells Fargo’s Goyda explained in a statement to Law360: “For a short period during the early stages of the crisis, in an attempt to ensure that all customers received the payment relief they needed in the midst of unprecedented levels of customer calls, we made a decision to provide mortgage forbearances to certain customers who had made an inquiry or expressed hardship but had not explicitly requested a payment suspension.”

Goyda says that the bank notified any customers whose loans were placed in forbearance and explained to them how they could change that status if they wanted.

Wells Fargo is one of the largest underwriters and home loan servicers in the U.S.