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A class action lawsuit filed in the Ninth Circuit Court of Appeals alleges that Wells Fargo improperly denied customers the opportunity to obtain permanent mortgage modifications through the Home Affordable Modification Program (HAMP).

The lawsuit, filed by Blood Hurst & O'Reardon LLP on behalf of Phillip Corvello and other Wells Fargo customers, alleges that although many thousands of homeowners nationwide complied with all requirements of their agreements with Wells Fargo, the bank nevertheless refused to modify home loans as it was required to do under the HAMP program.

In a decision rendered last week, the court found that permitting the lawsuit "avoids the injustice that would result were Wells Fargo's position accepted."

A statement issued by the law firm explains that the U.S. Department of the Treasury launched HAMP in 2009 to help millions of distressed homeowners avoid foreclosure.

In addition to the $25 billion in TARP money that the Treasury Department provided to Wells Fargo in 2008, it also gave the bank economic incentives to provide reasonable mortgage modification options to homeowners.

"In so doing, Wells Fargo accepted months of modified mortgage payments and led its customers to believe that they would be offered permanent mortgage modifications under HAMP," the law firm said.

Timothy Blood, counsel for plaintiff Phillip Corvello in the class action lawsuit and managing partner of Blood Hurst & O'Reardon LLP said the court's decision to allow the suit to proceed is "an important victory for tens of thousands of families and a reminder to big banks like Wells Fargo that even they must uphold their promises." 

"Wells Fargo willingly took bailout money from U.S. taxpayers and then failed to live up to its end of the bargain by denying deserving families reasonable loan modifications it was contractually obligated to provide," Blood said. "Today, the appellate court took a large step forward to right this wrong."

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