Two law firms have filed a class action lawsuit on behalf of borrowers who were wrongfully denied a mortgage modification under the federal Home Affordable Modification Program due to an alleged software error by Wells Fargo. The Gibbs Law Group and Paul LLP allege in the lawsuit that Wells Fargo failed to implement and maintain its internal software and protocols to correctly determine whether a mortgage modification was required under HAMP regulations.

The lawsuit, Case 3:18-cv-07354, was filed in United States District Court for the Northern District of California on Dec. 5, 2018, contends the amount involved exceeds $5 million. It alleges that Wells Fargo knew of the error in 2015 but failed to disclose it for nearly three years. As a result, “approximately 625 customers,” were “incorrectly denied a loan modification.”

In November 2018, Wells Fargo announced that it had understated the number of affected borrowers and that it was actually 40% more; now Wells Fargo claims a total of 874 were incorrectly denied loan modifications by the software error, though they were entitled to one under the federal Home Affordable Modification Program, according to the court filing.

At least 545 mortgage borrowers lost their homes through foreclosures because of Wells Fargo’s software error. The lawsuit seeks remedies for the harm Wells Fargo caused borrowers who were erroneously denied a mortgage modification. Due to deteriorating financial markets in the fall of 2008, the Home Affordable Mortgage Program was created to “minimize foreclosures” and funded with $50 billion.

Wells Fargo chose to participate in the HAMP program and received $6.4 billion in HAMP funds. In exchange for which, it agreed to abide by all “guidelines and procedures issued by the Treasury with respect to [HAMP]” and “any supplemental documentation … issued by the Treasury,” including “Supplemental Directives,” according to the court filing.