Judge Rules Wells Fargo Must Face Claims

Wells Fargo & Co. has recently received some devastating news that many lenders hoped to avoid by participating in mortgage negotiation talks. Specifically, the company will be forced to deal with the repercussions of their unethical actions.

A Brief Background

During the real estate market crash and afterwards throughout the beginning of the mass increase in foreclosures, many lenders participated in unethical foreclosure practices that inevitably hurt homeowners. Furthermore, many lenders failed to work with government investigators and neglected to provide essential information to aide in the investigation process. As part of the mortgage settlement agreement talks, lenders pushed to obtain protection from further legal actions. In essence, these lenders were unsuccessful in securing this protection in the final mortgage settlement agreement.

Future Litigation

The U.S. District Judge of San Francisco, Judge Susan Illston, has recently ruled that Wells Fargo must face the claims from their shareholders in regards to their refusal to fully cooperate with the government investigations.

Wells Fargo is only one of several lenders that are about to face litigation revolving around everything from robo-signing to failure to disclose information to government investigators. Despite the lenders’ despise of this part of the agreement, many states previously pulled out of the negotiation talks due to the protection that lenders were requesting from future litigation.

Who, exactly, can pursue claims against Wells Fargo and other major lenders? Everyone from government officials and state attorneys general to investors are now able to move forward with any claims against these banks that were stalled due to bank settlement negotiations. Future litigations are expected to take years and could definitely include billions of dollars.

Other Lender News

Wells Fargo has other things to worry about besides current and future litigations as they are now facing the possibility (and likelihood) of downgrades by Moody’s Investor Services. JPMorgan Chase and Bank of America are also expecting these debt-reducing downgrades.

In short, this is only the beginning of what will more than likely be several years of litigations against major lenders who played a key role in the real estate market crash and continued their unethical actions with faulty foreclosure practices and failure to cooperate with government investigations.

Will Wells Fargo face severe consequences as a result of their foreclosure process? It is too early to tell, but all signs indicate the lender is not out of the woods just yet when it comes to repercussions and punishment – as with the other five major lenders.