Wells Fargo is named too — and the escrow claim is just the beginning
A federal lawsuit accuses Freedom Mortgage of passing off PACE lien payments as borrower escrow charges — raising questions for servicers nationwide.
A Miami family has taken Freedom Mortgage Corporation and Wells Fargo Bank to federal court, accusing the mortgage giants of inflating what borrowers owe by folding property-level assessments into escrow accounts where they do not belong.
The case, filed on February 9, 2026, in the Southern District of Florida, centers on an FHA-insured loan originated in December 2009. But the most striking allegation is not about missed payments or overdue balances. It is about how Freedom Mortgage allegedly categorized payments toward a PACE — Property Assessed Clean Energy — lien on the property as "escrow advances" owed by the borrowers.
PACE liens, as the lawsuit points out, are non-ad valorem assessments tied to the property itself. They run with the land, are collected through tax bills, and are not the borrower's personal obligation under the note or mortgage. If a servicer treats those payments as escrow items and demands repayment from the borrower, the case argues, it misrepresents both the nature and the amount of the debt.
For mortgage servicers managing portfolios with PACE-encumbered properties, the distinction is not academic. How a servicer classifies those charges can determine whether it stays within federal guidelines or crosses into territory that regulators and courts may treat as deceptive.
The lawsuit does not stop at PACE liens. It also alleges that Freedom Mortgage advanced premiums for force-placed hazard insurance at rates far above market, without giving the borrowers a chance to obtain their own coverage. If those charges were bundled into the escrow totals, the case contends, they further inflated the claimed debt.
Then there is the question of standing. According to the lawsuit, Wells Fargo assigned the mortgage to Freedom Mortgage in August 2025 — more than five months after the borrowers allegedly defaulted in March 2025. The promissory note, originally executed for $177,045.00, carries an endorsement to Freedom Mortgage that is undated and made "without recourse," language the filing characterizes as a signal that the instrument was transferred in impaired condition. Under Florida case law, that combination could undermine Freedom Mortgage's standing to foreclose.
The lawsuit further alleges that neither Wells Fargo nor Freedom Mortgage sat down with the borrowers to discuss alternatives before moving to foreclose — a step required by HUD for FHA-insured loans.
No court has made any determination on these claims. The defendants — Freedom Mortgage Corporation, Wells Fargo Bank, N.A., Wells Fargo & Company, and law firm Brock & Scott, PLLC — have not yet responded.
The case is Cruz et al. v. Freedom Mortgage Corporation et al., No. 1:26-cv-20851, United States District Court, Southern District of Florida.
