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After Nevada Win, Is Wells Fargo on Comeback Trail?

By William Vogeler, Esq. on June 28, 2017 | Last updated on March 21, 2019

Wells Fargo stock ticked up another percent after the U.S. Supreme Court handed a significant win to the bank at the close of the summer session.

The decision, along with other recent developments at the company, pushed the bank slowly upward since its fall from grace several years ago. Shares climbed a modest three percent in the past twelve months, holding its spot as the nation's third largest bank.

Wells Fargo has survived the Wild West since 1852, but can the company really bounce back from an expose that has cost the bank billions? For some shareholders -- especially executives and corporate counsel -- their fate may rise or fall with the bank's legal challenges.

Mortgage Lenders Win

In the Nevada case, the Supreme Court left intact an appeals court decision that held unconstitutional a state law that allowed homeowners' associations to foreclose without notice to lenders.

The U.S. Ninth Circuit Court of Appeals said in Bourne Valley Court Trust v. Wells Fargo Bank last year that the associations should give notice to lenders before foreclosing on a property for delinquent dues. The Nevada law allowed the HOA to strip the bank's title without notice, unless the lender "opted-in" beforehand.

"How the mortgage lender, which likely had no relationship with the homeowners' association, should have known to ask is anybody's guess...." the appeals court said. "But this system was not just strange; in our view, it was also unconstitutional."

Wells Fargo Wins

The decision was a most welcome win for Wells Fargo, which has been reeling from unrelated legal actions claiming the bank pressured employees to create fake accounts to generate fees. The Los Angeles Times broke the story in December 2013, and the repercussions continue to hit the bank.

In February, Wells Fargo saw a 55 percent plunge in credit card applications. CNN reported that it was the sharpest decline since the fake account scandal erupted and a sign that customers did not trust the bank.

The news pushed stocks down one percent, but then Wells Fargo executives parried by buying 100,000 shares. Reuters reported the chairman and chief executive officer bought the shares as the bank aims to bounce back.

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