In re Wells Fargo Mortgage Modification Litigation

Background

The fourteen plaintiffs alleged that each had or had previously had a mortgage held or serviced by Wells Fargo and had sought a loan modification. Six plaintiffs were denied modifications; eight obtained modifications. In December 2023 or June 2024, each plaintiff received a form letter stating that Wells Fargo had identified a possible error during an account review and enclosing a check.

The plaintiffs alleged that the errors involved calculations concerning escrow accounts, attorneys’ fees, default-servicing fees, and accrued interest. They asserted twelve state-law counts in their Second Amended Consolidated Class Action Complaint. Wells Fargo moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not allege enough facts for a legally recognized claim.

Court’s Analysis

The court dismissed each count for pleading or other threshold deficiencies:

1. Count One—Breach of contract: The plaintiffs did not allege that Wells Fargo charged fees in violation of the quoted contract provisions, identify contract terms requiring loan modifications, identify specific HAMP terms that Wells Fargo allegedly breached, or identify an express contractual right governing how Wells Fargo had to review modification requests. The court therefore dismissed the contract and implied-covenant theories.

2. Count Two—Intentional infliction of emotional distress: The plaintiffs did not allege facts showing that Wells Fargo knew of the specific errors at the time it reviewed their requests or facts describing severe emotional distress. The court dismissed the count.

3. Count Three—Negligent reporting: The court held that the Fair Credit Reporting Act preempted the state-law claim concerning allegedly inaccurate information provided to consumer-reporting agencies and dismissed the count.

4. Count Four—Negligent undertaking of loan modification: The court relied on authority holding that mortgage lenders and servicers do not owe a general negligence duty to carefully and completely process, review, and respond to loan-modification applications. The court dismissed the count.

5. Count Five—California Homeowner Bill of Rights: The plaintiffs did not allege that a trustee’s deed had been recorded after a foreclosure sale, as required for damages under the provision at issue. They also could not show entitlement to an injunction because the relevant plaintiffs had sold their properties. The court dismissed the count.

6. Count Six—California Unfair Competition Law: The court ruled that this claim could be brought only for California plaintiffs Curry and the Liggetts because the complaint did not connect the non-California plaintiffs’ alleged injuries to conduct in California. The court then dismissed the deceptive, unfair, and unlawful theories because the plaintiffs did not plead the required statements or omissions, reliance, supporting legal or regulatory policies, or facts supporting their underlying theories.

7. Count Seven—Illinois Consumer Fraud and Deceptive Business Practices Act: The plaintiffs did not identify deceptive information on which they relied, allege that Wells Fargo knew of the relevant errors when it reviewed the requests, or adequately describe any unfair or deceptive HAMP violation. The court dismissed the count.

8. Count Eight—Pennsylvania Unfair Trade Practices and Consumer Protection Law: The plaintiffs did not identify a qualifying statutory or regulatory practice and did not allege facts showing that Wells Fargo knew of the relevant error when it considered the request. The court dismissed the count.

9. Count Nine—North Carolina Unfair and Deceptive Trade Practices Act: The claim was based on an alleged failure to disclose known software errors, but the plaintiffs did not allege facts showing Wells Fargo knew of the relevant error when it considered the request. The court dismissed the count.

10. Count Ten—District of Columbia Consumer Protection Procedures Act: The plaintiffs did not allege facts showing that Wells Fargo knew of the relevant error when it considered the modification request. The court dismissed the count and did not decide Wells Fargo’s separate argument concerning whether it qualified as a covered merchant.

11. Count Eleven—New York General Business Law § 349: The plaintiffs did not allege facts showing Wells Fargo knew of the relevant error when it considered the modification request. The court dismissed the count.

12. Count Twelve—Unjust enrichment: Although the court noted that a contract might not exist between Wells Fargo and some plaintiffs, the plaintiffs did not allege that any plaintiff paid increased fees or interest to Wells Fargo that was not otherwise required by the relevant security instrument. The court dismissed the count.

Disposition

The court’s conclusion states that Wells Fargo’s motion to dismiss was granted. The plaintiffs were given leave to amend to cure the identified deficiencies, and the court ordered that a Third Amended Consolidated Class Action Complaint be filed by December 19, 2025. The court also maintained the previously ordered stay of discovery because no viable claims were pending.

The court did not determine whether the alleged calculation errors actually occurred or decide the ultimate merits of the plaintiffs’ claims.