New Jersey Chancery Judge Peter Doyne ruled in December that Wells Fargo Bank committed “actionable fraud” and “predatory lending” when it persuaded Oscar Montesdeoca to borrow more than $600,000 at interest rates ranging from 7.75 percent to 14.35 percent to buy a three-bedroom house. In an opinion piece, R. William Potter calls the judgment a major victory in the fight against predatory lending practices in New Jersey, where a foreclosure takes place approximately every eight minutes.
Montesdeoca's mortgage required him to pay the bank about $4,800 per month, although he was earning only $500 to $600 a week and his wife worked for $7.00 an hour. The family income was never more than $37,500 a year, but they signed documents agreeing to pay Wells Fargo $5,700 monthly for mortgages. The court determined that a loan officer had “promised unequivocally if Oscar timely paid the loan and maintained good credit [for two years], he would receive refinancing” to reduce the high interest rates.
The couple were unable to read the paperwork presented to them in English and only later learned that the bank had listed their take-home income as $10,150 a month. One of their sons initiated requests to obtain “the promised refinancing” from Wells Fargo, but the bank officer who had written the mortgages and made these promises “never responded.” A key issue was who provided the false income statement that indicated Montesdeoca and his wife earned $10,150 a month, but Wells Fargo could not produce the loan file.
The court ultimately ordered the banks to refinance the loans as promised, pay Montesdeoca's legal fees, and pay three times his damages, as required by New Jersey’s Consumer Fraud Act.