Among the many unsavory, unethical, and downright illegal practices employed by mortgage services in recent years is the way they drench borrowers with excessive and punitive fees for just about anything they can think of, often without even notifying the borrower. Fortunately, judges are beginning to take notice. An important decision last month (PDF) from the U.S. Bankruptcy Court for the Eastern District of Louisiana found Wells Fargo negligent in the case of Dorothy Chase Stewart, a New Orleans-area widow whose mortgage the bank serviced. The court found that Wells Fargo levied numerous fees and charges against Mrs. Stewart’s account without ever notifying her, for such things as late payments and “inspections” that never took place. In one particularly egregious instance, Wells Fargo charged Mrs. Stewart $250 for two inspections that supposedly took place on September 12, 2005—a day when her parish was under an evacuation order due to Hurricane Katrina! Judge Elizabeth W. Magner assessed more than $27,000 in damages against Wells Fargo, and ordered additional sanctions to force the bank to clean up its act.

If you have encountered any bogus fees on your statement, take a few minutes to read the attached decision—it’s kind of long, but well worth it.

I was interviewed by KOMO TV’s Connie Thompson for a March story on the recent change in Washington’s homestead exemption law. When a debtor files for bankruptcy, the homestead exemption protects the equity in the debtor’s home from creditors up to a maximum amount.

Washington has some of the most expensive residential real estate in the country, yet for many years the homestead exemption law didn’t really reflect that fact. Before the law changed in 2007, the Washington state homestead exemption law only protected up to$40,000 in equity, which wasn’t enough for many homeowners. For example, if you entered bankruptcy with $75,000 equity in your home, creditors could pursue the $35,000 equity in excess of the exemption, which forced many people to sell their homes or refinance under unfavorable conditions. Under the new law, the exemption has been raised to $125,000, making bankruptcy a much more attractive option for many homeowners.

Watch the KOMO story for more information about the homestead exemption law and how it can work for you.