Monday, August 10, 2009

Maryland Homeowner Accuses Wells Of "Unclean Hands" In Federal Suit Seeking To Undo Toxic Mortgage Loan

In Greenbelt, Maryland, The Business Gazette reports:
  • A Bowie couple is suing Wells Fargo bank, alleging the bank should have known they could not afford the second mortgage they agreed to for their home. [...] According to court documents, the Bahs have asked for "legal and equitable relief as may be appropriate," though lawyers hope that will include a chance to renegotiate with the lender. The lawsuit is the latest of hundreds in the region that homeowners have filed in the past year to put off losing their homes, legal aid lawyers said.


  • In court papers, the couple's lawyer, Mary Goulet, argues that Wells Fargo knowingly approved the second loan knowing it would push them over their ability to pay and lead them to foreclosure. "It's clear to me and it would be clear to any bank that's underwriting a loan that the Bahs did not win the lottery in 2000. They didn't suddenly have this extra money to take out a second mortgage."

  • The argument is known in legal circles as the "unclean hands" doctrine. Under Maryland law, contracts can be changed or nullified if one group negotiated a deal in bad faith, which Goulet is alleging. "If you, as a bank, create a situation where you have pushed their finances into foreclosure, then you have unclean hands," said Goulet, who is representing the couple for free. Goulet said her office took on the pro bono case at the request of state officials, who have been urging lawyers to take on clients facing foreclosure for the last two years.

  • The argument has been used frequently by pro-bono attorneys in the region since foreclosures began to increase in 2006. The lawsuits generally are filed in local district courts, but in the case of the Bahs, the lawsuit was filed in federal court because Wells Fargo's headquarters is not located in Maryland. In most cases, it has led banks to renegotiate with homeowners, said Vicki Taitano, a lawyer for the Riverdale office of the Maryland Legal Aid Bureau in Prince George's County. "We've filed several in Prince George's County, but they've never gotten before a judge," said Taitano, who said banks usually choose to renegotiate with owners before a case goes to court and avoid foreclosure.

  • Legal experts said the lawsuits are being used to get people to the table because often homeowners and banks cannot seem to get together. [...] In papers filed July 16, Wells Fargo attorney Elizabeth Finberg said the complaint by Goulet "lack[s] factual and legal support and was filed in bad faith for the purpose of harassment." Finberg asked the court to fine Goulet $5,000.

For the story, see Struggling homeowners take banks to court (Residents facing foreclosure allege lenders have ‘unclean hands').

For the lawsuit, see Bah v. Wells Fargo Bank, N.A., et al. UndoMortgageLoans TILAdelta