By Emilie Ruscoe

Law360 (August 27, 2020, 4:50 PM EDT) -- Wells Fargo has been sued over claims that, as the nation scrambled to react to the COVID-19 pandemic, the bank automatically put struggling borrowers' mortgages in forbearance without their explicit permission, hurting those whose credit reports reflected the forbearance as they sought other financial services amid the economic downturn.

In the proposed class action filed Wednesday, Wells Fargo Bank NA mortgage borrower Pamela Delpapa claimed that in response to the passage of the federal Coronavirus Aid, Relief, and Economic Security Act — which included a provision that mortgage borrowers experiencing economic hardship in connection with the pandemic could ask for a temporary forbearance — Wells Fargo put its mortgage borrowers in forbearance if they contacted the bank and said they were experiencing distress, whether or not they actually said they wanted to put their mortgage in forbearance.

According to Delpapa, this policy ended up "hurting the very people Congress intended to help." She held herself up as an example, noting that she lost her job because of the pandemic and wasn't able to refinance her home to get a better rate because of the forbearance.

Delpapa noted that the CARES Act specifies that borrowers whose mortgages are backed by government-sponsored entities Freddie Mac or Fannie Mae can opt for CARES Act forbearance by simply requesting it from their mortgage servicers and affirming that they're experiencing financial hardship.

"Banks may not institute it automatically," she said. "But that's exactly what Wells Fargo did. As documented by 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."

The default CARES Act forbearance period is 180 days, and borrowers can request an additional 180 days, though April guidance from the U.S. Department of Housing and Urban Development clarified that borrowers are able to shorten their CARES Act forbearance period at any time, Delpapa added.

Another suit filed in the same district on July 31 by borrowers Brett Jacob and Samara Green makes similar claims.

"Wells Fargo unilaterally and without consent opted in unwitting clients into its COVID-19 mortgage forbearance program," their suit said.

Both suits claim that Wells Fargo stood to benefit from the forbearances, citing incentive fees the bank receives for each forbearance.

On Thursday, Abbas Kazerounian, an attorney for Jacob and Green, told Law360, "We rely on the allegations in the complaint at this time and look forward to hearing from Wells Fargo."

In an emailed statement, Tom Goyda, a spokesman for Wells Fargo, told Law360 that the bank took a "customer-focused approach" as it contended with the crisis in the spring "to ensure that every customer who needed payment relief would receive it without unnecessary delay."

"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," he said.

Goyda added that the bank followed up with affected customers to notify them about the forbearance and explain how they could change it if they wanted to. The bank has processes in place to take those customers out of forbearance if they ask, he said.

"We sincerely apologize to any customer who received a forbearance and did not expressly request one, and are actively working to assist each customer who may have been negatively affected," Goyda concluded.

Counsel for Delpapa declined to comment Thursday.

Delpapa is represented by Matthew J. Preusch, Derek W. Loeser and Gretchen Freeman Cappio of Keller Rohrback LLP.

Jacob and Green are represented by Abbas Kazerounian, Yana A. Hart and Jason A. Ibey of Kazerouni Law Group APC.

Counsel information for Wells Fargo in either case was not immediately available Thursday.

The cases are Delpapa v. Wells Fargo Bank NA, case number 3:20-cv-06009, and Green et al. v. Wells Fargo & Co. et al., case number 3:20-cv-05296, both in the U.S. District Court for the Northern District of California.

--Editing by Adam LoBelia.

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