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The federal Ninth Circuit Court of Appeals last week ruled in favor of San Diego attorney Timothy Blood, who represents two classes claiming that California lender Wells Fargo refused to follow guidelines in administrating the federal government’s Home Affordable Modification Program, which was intended to provide relief to homeowners unable to cope with mortgage payments either due to an adjustment in the payment terms or curtailment of income during the Great Recession.

The ruling reversed the previous decision of a San Francisco judge, who had previously dismissed the two suits, ruling in favor of the bank.

The Home Affordable program, which also included guidelines to allow borrowers to refinance into cheaper, market-rate loans or to conduct short sales, where a lender would accept a payoff of less than the full balance owed, was launched in 2009. The Treasury Department offered cash incentives to lenders (in addition to the $25 billion loan Wells received in 2008 through the Troubled Asset Relief Program, or TARP), to lenders that followed procedures to help borrowers avoid foreclosure through payment reductions, refinances, or selling their property.

Wells, according to primary complainant Phillip Corvello, offered temporary assistance to thousands of borrowers through the program. The company then failed to follow through on commitments to make the modification plans permanent, even if borrowers had been in full compliance during their “trial modification” periods.

“Wells Fargo willingly took bailout money from US taxpayers, and then failed to live up to its end of the bargain by denying deserving families reasonable loan modifications it was contractually obligated to provide,” said Blood in a Friday (August 9) release.

The appeals court’s unanimous ruling notes that Wells offered the commitments to borrowers in writing – “Wells Fargo drafted this document, and Wells Fargo must be held responsible for it.”

The company said it had about $352 million dollars' worth of loans participating in trial modifications at the end of 2013's second quarter.

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