Distressed Homeowners Appeal to Third Circuit in Foreclosure Fraud Class Action Against Countrywide, Wells Fargo and Phelan Hallinan & Schmieg

Less than two weeks ago, an appeal was filed in the US Court of Appeals for the Third Circuit, alleging a Philadelphia based law firm, Phelan Hallinan & Schmeig (PHS) along with Countrywide Home Loans, Inc (CW) and Wells Fargo Bank, N.A. (WF), were involved in a systematic scheme to:

  1. Inflate or fabricate foreclosure costs
  2. File Foreclosure lawsuits for banks that had no longer owned the Mortgages

They wanted to file this class action suit under the RICO act, and the Fair Debt Collection Practices Act and Pennsylvania’s Unfair Trade Practices and Consumer Protection Law.  They also alleged common law remedies for fraud, breach of contract, breach of good faith and fair dealing, money had and received, and negligent misrepresentation.

To get some idea of the scope of this, the lawfirm, PHS, has a staff of 17 lawyers and 250 support personnel, and in 20088 handled 24,000 to 26,000 foreclosure cases in Pennsylvania and new Jersey along.

Here is what it is alleged this lawfirm did:

  1. When they get a new foreclosure case, they fail to make a factual investigation to determine the ownership of borrower’ mortgages.  Now why would they fail to do this?  Because it takes time to do it right, and they get their business based upon their promise to do a foreclosures as fast as humanly possible.  Second, because it’s hard to do, because these mortgages are frequently bought and sold to investors as collateralized debt obligations.  Take a look at our site to find out more about what a collateralized debt obligation is, and why it’s important to you.

If you want to view the actual brief, click here.

Foreclosure Defenses, Foreclosure Fraud, The Players