Wells Fargo (WFC) must face lawsuits by home loan borrowers over claims the bank refused to offer them permanent mortgage modifications for which they assert they qualified, a U.S. appeals court ruled.

The federal government's 2009 Home Affordable Modification Program requires the bank to offer permanent adjustments to homeowners who met the terms of a trial-period modification, a three-judge panel of the U.S. Court of Appeals in San Francisco ruled.

"The program seems to have created more litigation than it has happy homeowners," the judges said in today's decision.

Reversing a lower-court dismissal of two separate lawsuits, the panel rejected the conclusion San Francisco-based Wells Fargo was only bound if it had actually offered the borrowers a fully-executed copy of a modification agreement.

The terms of the trial period plan "cannot convert a purported agreement setting forth clear obligations into a decision left to the unfettered discretion of the loan servicer," the panel said.

A Chicago-based federal appeals court reached a similar conclusion last year, the judges said.

Borrower Phillip Corvello, the plaintiff in one case, claimed he had completed the terms of a written trial period plan, while the plaintiffs in the other case, Karen and Jeffrey Lucia, alleged they'd complied with the terms of an oral plan, according to the court ruling. The Lucias later lost their home to foreclosure.

Wells Fargo claimed the borrowers hadn't met all the temporary plan qualifications and that it was within its rights to not offer them permanent adjustments, according to the unanimous ruling.

The appeals court "did not rule on the merits the underlying case and found only that the district court should consider the arguments put forth by the plaintiffs," Tom Goyda, a spokesman for the bank, said in an e-mail. "Wells Fargo has strong defenses to those arguments and is prepared to present its case."

The cases are Corvello v. Wells Fargo Bank NA, 11-16234 and Lucia v. Wells Fargo Bank NA, 11-16242, U.S. Court of Appeals for the Ninth Circuit (San Francisco).

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