SAN FRANCISCO (CN) – A federal class action claims Wells Fargo failed to tell customers that its purchase of Wachovia Mortgage in November 2009 would drastically increase the interest rates on their mortgage loans.
Lead plaintiffs Charles and Gina Haggarty say that although Wells Fargo sent them a letter notifying them of the impending deal, it did not disclose that the acquisition would materially affect the way the Cost of Funds Index was calculated, and cause a corresponding increase of the interest on the class’s adjustable-rate mortgages.
The class claims that after the acquisition, Wachovia was disqualified as a COFI reporting member, which raised the COFI by 66 percent in November 2009. This led to an “increased cost to borrowers on the Wachovia Mortgage loans indexed to COFI in the amount of $106,250,000 per year,” according to the complaint.
“That artificially created rate increase will continue to be built into the interest rate computation over the life of the loans and thereby result in the interest rate being artificially inflated throughout the life of the loans, regardless of future events,” the complaint states.
The Haggartys claim that the annual interest payments on their loans will be increased by $4,600 on one loan, and by $2,500 on another, as a result of Wells Fargo’s buying Wachovia.
While Wells Fargo promised the Haggartys and other class members that it would “keep you informed along the way,” and provide with “detailed information in advance of any changes that may affect [their] accounts,” Wells Fargo did not send the class any information on the effect its purchase of Wachovia had on the COFI, according to the complaint.
The Haggartys demand damages for breach of contract, intentional fraud and deceit and deceptive trade practices, and want the bank enjoined from collecting interest payments on any adjustable rate mortgages based on the COFI after the 2009 acquisition.