In the course of defending numerous foreclosure actions around the United States, we have come across some fairly horrendous fact patterns, but to date, that described here (a true story, by the way) is unprecedented.

The victim is a single young woman in Michigan who was looking to purchase a home. After viewing several properties, she decided on a particular home and initiated the loan application process to see if she qualified for the financing needed to purchase the property. Loan application documents naming several potential lenders, including Wells Fargo, were filled out through the mortgage broker. However, in the days that followed and within the legally prescribed period to decline the transaction, she decided for her own reasons not to pursue the purchase. She notified the broker and signed a Release of Purchase Agreement. These events occurred in late September, 2007.

Six months later on March 21, 2008, she received a call from a representative of Wells Fargo advising her that she was being placed in foreclosure, as Wells Fargo claimed that she was in default on a mortgage which Wells Fargo had placed in her name on the property which she had decided not to purchase in the fall of 2007. She advised Wells Fargo that she had properly declined to go through with the purchase and had signed a release of the purchase agreement. However, Wells Fargo stated that they were in possession of a mortgage in her name for the subject property, were proceeding with the foreclosure, and that Wells Fargo had placed the loan and foreclosure on her credit report.

Although she persisted in her attempts to rectify the matter informally, Wells Fargo did nothing but stall, make excuses, and do nothing. Wells Fargo first promised to rectify the matter “within 3-4 days”, then “within 6-8 weeks”, with eventually nothing being done at all other than Wells Fargo admitting to her that they had “no documents on this file”, but that Wells Fargo still would not remove the loan and the negative information on her credit report.

Notwithstanding that there was no valid purchase contract, no executed loan documents, and no closing, Wells Fargo created a fraudulent mortgage (which it may have sold to a third party given its recent admission discussed below); created a fraudulent foreclosure on property which the victim did not even own and which was not in her name; and created and published fraudulent negative information on the victim’s credit report. Until the victim hired an attorney, Wells Fargo insisted that the victim was in default on the (phantom) mortgage.

The victim’s attorney forwarded a formal demand and legal notice of the wrongful actions of Wells Fargo to the brokers and Wells Fargo. The brokers have confirmed that a closing did not take place, and that there were no loan closing documents executed in favor of Wells Fargo by the victim, and that the only documents referencing Wells Fargo signed by the victim were those in a standard-form loan application.

Today (July 25, 2008), Wells Fargo has advised that it has notified the credit reporting agencies that it has directed these agencies to remove any and all credit reporting made by Wells Fargo in connection with the mortgage loan, claiming that the entire incident was the result of a “processing oversight” and that the loan data was “inadvertently updated into our records for servicing of the loan”. How a financial megalith like Wells Fargo could claim that the creation of a nonexistent mortgage loan, the creation of false credit information, the creation of a fraudulent default on the nonexistent mortgage, and the creation of a wrongful threat of foreclosure on the nonexistent mortgage was nothing more than a “processing oversight” is beyond credulity. What may have occurred, given the widespread litigation involving Wells Fargo and its admission that it was going to “service” the loan, is that Wells Fargo presold this mortgage to an aggregator at or about the time of the loan application without any closing taking place and without any loan closing documents being signed by the victim.

This conclusion is bolstered by Wells Fargo’s actions in at least one other pending case in the Florida Keys where, in the first claim on the first page of its foreclosure lawsuit, Wells Fargo claims to “own and hold the note and mortgage”, yet on the second page of the same lawsuit admits that Wells Fargo does not own or hold the note or mortgage, do not know where these documents are, but will agree to indemnify and hold the borrower harmless, if the borrower agrees to a judgment of foreclosure, against anyone else who may come along claiming ownership of the note and mortgage.

Given that Wells Fargo is one of the largest financial institutions in the United States and given that Wells Fargo created a fraudulent mortgage obligation upon an innocent victim as part of what appears to be a national corporate policy of selling or assigning mortgages to third parties, it is more than likely that the victim here was not the only victim of this type of conduct on the part of Wells Fargo. The only question at this point is how widespread was this operation, and how many other victims of Wells Fargo are still out there not knowing what to do when Wells Fargo makes a fraudulent demand upon them.

Stay tuned. There is surely more to come.

Jeff Barnes, Esq.
[email protected]