Jay Neil v. Wells Fargo Bank, N.A., 686 F. App'x 213

Background

In 2005 the Neils took a $604,000 mortgage secured by their Virginia home; Wells Fargo later serviced the loan.
In October 2009 Wells Fargo sent the Neils a Trial Period Plan (TPP) tied to the federal Home Affordable Modification Program (HAMP); the Neils made the reduced trial payments November 2009–January 2010 and continued reduced payments thereafter.
After the TPP ended Wells Fargo denied a permanent modification in September 2010, stating the loan’s net present value (NPV) was negative for the investor; the Neils stopped paying in September 2011 and the home was foreclosed in March 2013.
The Neils sued in state court asserting breach of the TPP and related tort claims; Wells Fargo removed and counterclaimed for a deficiency; after prior appeal (Neil I) holding the TPP enforceable, the district court granted summary judgment to Wells Fargo and awarded a $122,462.65 deficiency.
On appeal the Fourth Circuit reviewed de novo whether the TPP required Wells Fargo to grant a permanent modification and whether Wells Fargo had standing to enforce the Note as servicer.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the TPP required Wells Fargo to grant a permanent modification after successful trial payments	The Neils: the TPP’s four corners require modification so long as their representations “remain true” and they complied with TPP payments	Wells Fargo: the TPP was tied to HAMP and qualification required a positive NPV; negative NPV permits denial	Held for Wells Fargo — TPP incorporated HAMP; a positive NPV was a condition precedent, and a negative NPV allowed denial
Whether Wells Fargo’s NPV calculation timing or alleged typographical error invalidated its denial	The Neils: NPV date (Oct. 6, 2009) appears before signing and shows procedural flaw; calculation was inaccurate	Wells Fargo: the date was a typographical error; Neils never corrected input values or showed different inputs would yield positive NPV	Held for Wells Fargo — date typographical and Neils did not demonstrate a different NPV outcome
Whether Wells Fargo’s delay in notifying Neils of denial barred foreclosure or constituted breach despite negative NPV	The Neils: late notice (months after TPP) undermines enforcement and could constitute breach	Wells Fargo: timing regrettable but immaterial because NPV was negative and no obligation to modify ever arose	Held for Wells Fargo — delay immaterial where NPV negative; no breach
Whether Wells Fargo (as servicer, not noteholder) had Article III standing to pursue the deficiency	The Neils: Wells Fargo does not hold the Note and thus lacks injury-in-fact and standing	Wells Fargo: as servicer it was authorized by U.S. Bank to collect and sue; agency/servicing agreement confers enforceable interest	Held for Wells Fargo — Virginia law and the servicing agreement gave Wells Fargo authority to enforce and Article III standing

Key Cases Cited

Ray Commc’ns, Inc. v. Clear Channel Commc’ns, Inc., 673 F.3d 294 (4th Cir. 2012) (standard of review for summary judgment)
Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547 (7th Cir. 2012) (TPP conditions: borrower compliance generally requires lender to offer permanent HAMP-consistent modification)
Corvello v. Wells Fargo Bank, N.A., 728 F.3d 878 (9th Cir. 2013) (adopting Wigod reasoning that servicer cannot unilaterally refuse modification after TPP compliance)
Young v. Wells Fargo Bank, N.A., 717 F.3d 224 (1st Cir. 2013) (lender breaches if it refuses permanent modification after borrower meets TPP conditions)
CWCapital Asset Mgmt., LLC v. Chicago Props., LLC, 610 F.3d 497 (7th Cir. 2010) (mortgage servicers with authority to collect may have standing to enforce loans)
Sprint Commc’ns Co. v. APCC Servs., Inc., 554 U.S. 269 (2008) (distinguishing assigness for collection in Article III standing analysis)
Neil v. Wells Fargo Bank, N.A., 596 Fed.Appx. 194 (4th Cir. 2014) (panel decision holding the parties’ TPP was an enforceable contract)