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Judge Rules Wells Fargo Engages in Reprehensible, Systemic

Accounting Abuses on Mortgages, Hits with $3.1 Million Punitive
Damages for One Loan
Posted on April 9, 2012 by Yves Smith
One of our ongoing frustrations about media coverage of the mortgage mess is its failure to pay
much attention to ample evidence of substantial servicer overcharges to borrowers. Its bad
enough that that happens, but far worse is that when servicers are told that theyve been caught
out, they refuse to make corrections and stonewall court-ordered remedies.
The facts that have surfaced before one bankruptcy judge, Elizabeth Magner of the Eastern
District of Louisiana, and one servicer, Wells Fargo, should give industry defenders pause. Wells,
as we have pointed out repeatedly, has an annoying habit of piously claiming it is better than
other servicers when it engages in the same indefensible conduct as its peers. So if you were to
take Wells at its word, the conduct of other servicers is at least as bad as what has taken place in
this jurisdiction, if not worse. Remember, servicers are highly routinized operations, so if
something, it is almost certain to be standard practice. And Wells has admitted that in this case.
Here is a snippet of background from another case in Magners courtas recounted by the Center
for Public Integrity:
In an April 2008 ruling, Elizabeth Magner, a U.S. bankruptcy judge in New Orleans, rejected the
two charges [for broker price opinions charged when the parish in which the home was located
was evacuated thanks to Hurricane Katrina] as invalid. She also disallowed 43 home inspections,
39 late charges, and thousands of dollars in legal fees charged to the Stewarts account.
Almost every disallowed fee was imposed while the Stewarts were making regular monthly
payments on their home

Magner determined that Wells Fargo had been duplicitous and misleading and ordered the
bank to pay $27,000 in damages and attorneys fees. She also took the unusual step of requiring
the servicer to audit about 400 home loan files in cases in the Eastern District of Louisiana.
Wells fought successfully to keep the results of the audit under seal, and last summer a federal
appeals court overturned the part of Magners ruling that required the audit. But two people
familiar with the results told iWatch News that Wells Fargos audit had turned up accounting
errors in nearly every loan file it reviewed.
The latest example of Wells bad behavior in Magners courtroom that has come to a resolution of
sorts is another case of Wells overcharging a borrower. In this suit, Jones v. Wells Fargo, filed in
2007, involved a borrower having to sue Wells to recoup overcharges by Wells plus actual
damages, plus a request for punitive damages. The ruling sets forth the sorry history in some
detail and I strongly suggest you