RATE AND SWITCH

Wells loan modification funny business: suit

Wells Fargo is being accused of misleading homeowners who were seeking to lower their home payments in the aftermath of the mortgage crisis.

Aclass-action lawsuit filed in White Plains federal bankruptcy court says the scandal-ridden bank mishandled loan modification trials it was required by law to entertain following the 2008 mortgage meltdown.

According to the suit, the bank told certain underwater mortgage holders that they could qualify for reduced monthly payments — and keep their homes — if they followed certain procedures, including making regular payments at the reduced rate for at least three months.

But when it came time to make the reduced payments permanent, the borrowers were rejected for “title issues” that had not been disclosed to them in advance, the lawsuit said.

The two homeowners behind the suit, both New York residents, say they only learned of the alleged obfuscation in recent weeks — after Wells sent them checks for $300 along with an alarming apology letter.

“We should have let you know at the time of trial approval that the modification might be denied due to title issues,” the letter said, according to the lawsuit filed by lawyer Linda Tirelli. “We apologize for our oversight. Wewant to make it right.”

In an interview with The Post, Tirelli said Wells’ apology letters raise a whole host of unsettling questions, including the nature of the “title issues” the bank now says it should have disclosed — and why it withheld this information.

“The question is, was this a mistake? I think this is more calculated” she said.

One thing is clear, she said: Her clients aren’t cashing the $300 checks because they now fear they were not fully told the risks of the government-sponsored loan modification program, which cost each of them roughly $10,000 between 2011 and 2012.

“They believed they had completed all prerequisites necessary to save their homes from being foreclosed upon, but then had the rug pulled out from under them by Wells Fargo when they were then informed that those efforts were insufficient,” the lawsuit said.

One of the lead plaintiffs, Justo Reyes, was so sure he was going to succeed with his modification based on the information he had at the time that he borrowed the roughly $10,000 he needed to qualify, Tirelli said.

“I was doing exactly what they wanted me to do,” said the homeowner, who ended up filing for bankruptcy to stay in his Hartsdale, NY, home.

“For them to offer $300 was offensive,” Reyes told The Post.

“We strongly disagree with the claims in this newlawsuit and are confident that the loan modifications in these cases werehandledappropriately,” Wells said in a statement.

“The need to clear title issues in order to qualify for a permanent modification was disclosed to customers,” the spokesman said — just not “at the time of trial approval.”

When pressed about when the title issues were disclosed, he declined to specify.

The bank has come under the microscope in recent months for creating millions of fake bank and credit card accounts for customers; wrongly hitting customers withfees to lock in their mortgage rates, and charging customers for car insurance they didn’t need, resulting in some vehicles being repossessed.

Wells Fargo was also one of three banks called out by the Treasury Department in 2011 for doing a poor job at using the government’s Home Affordable Modification Program, known as HAMP, to keep people in their homes, resulting in the agency withholding taxpayer-funded payments for mortgage modifications by those banks.

“I think the suit presents valid claims,” Geoffry Walsh, a lawyer with the National Consumer Law Center who focuses on foreclosure prevention, told The Post. “The basic rule” of HAMP“was as long as the borrower makes the payments and the initial application was accurate, you would be made permanent,” he said.