A foreclosed homeowner filed a class action complaint on behalf of distressed homeowners residing in New Jersey and Pennsylvania. The complaint was filed in the United States District Court for the District of New Jersey against Wells Fargo Bank, N.A. and one of its principal foreclosure law firms. The caption of the Complaint, filed on October 24, 2011, is Giles v. Phelan Hallinan & Schmieg, LLP, 1:11-cv-06239 (D.N.J.).
The Complaint alleges that Wells Fargo and Phelan, Hallinan & Schmieg, a high-volume foreclosure law firm in Pennsylvania and New Jersey, engaged in a fraudulent scheme to “pile on” unlawful foreclosure fees from financially troubled families on the brink of losing their homes. The lawsuit contends that, to carry out the scheme, defendants systematically filed falsified complaints, affidavits and mortgage assignments to bring foreclosure actions in the name of parties without legal standing to sue.
The Complaint explains that, beginning in 2005, Phelan adopted a business model in which companies under its ownership and control provide “default management services” incidental to foreclosures, such as title searches, notary public certifications, investigations and service of process. The hallmark of the business model is barebones cost, automated rapid speed, indifference to quality, grossly inflated charges, and millions of dollars in unearned profits obtained by Phelan and its mortgage servicer clients at the expense of defrauded homeowners.
Documents filed with the SEC reveal that, in 2009 and 2010 alone, Phelan and its affiliated companies obtained $48 million in “default services” fees from just one of their many clients — Fannie Mae — a government sponsored enterprise in which the brother of Phelan’s senior partner held a top management position as Executive Vice President and Chief Risk Officer.
One of the homeowners leading this lawsuit lost his ability to earn a living when, as an EMT responding to rescue calls at Ground Zero on 9/11, he inhaled a mix of dust and debris that caused life-threatening health problems that remain with him today. When this hero’s medical crisis evolved into a financial nightmare, Wells Fargo ordered Phelan to remove his family from their home through foreclosure. The Complaint alleges that, during this process, Phelan and Wells Fargo (1) identified the wrong financial institution as plaintiff, (2) recorded bogus mortgage assignments, (3) filed court documents containing untrue statements of material fact, (4) included multiple versions of the same lawyer’s “signature” in different documents filed in the same case; (5) charged vastly overstated foreclosure fees and (6) despite a formal warning by the misidentified bank, heedlessly continued to file later foreclosure actions against other homeowners “on behalf” of the same improperly named bank.
The Complaint seeks monetary and injunctive relief against defendants under the Racketeer Influenced and Corruption Act, the New Jersey Consumer Fraud Act and Pennsylvania’s Unfair Trade Practices and Consumer Protection Law.