In Re Stewart

MEMORANDUM OPINION

On August 23, 2007, Debtor, Dorothy Chase Stewart (“Debtor”), filed an Objection to Wells Fargo Home Mortgage, Inc., as agent to Lehman Brothers’ (“Wells Fargo”) second amended claim. The proof of claim was signed by Hilary Bonial (“Bonial”) of Brice, Vander Linden & Wernick, P.C. (“Brice”), national counsel to Wells Fargo. Debtor objected to the amounts claimed, demanded a payment history and support for items included in the claim described as “Other Amounts for Inspection Fees, Appraisal Fees, NSF Check Charges, and Other Charges” as well as “Pre-Petition Attorney [sic] Fees and Costs” and “Escrow Advance.”

Wells Fargo filed a timely Response to the Objection (“Response”) further itemizing the amounts included in the line item categories to its proof of claim. Wells Fargo listed the individual taxes and insurance payments made from Debtor’s escrow account by amount and date of payment. It also attached copies of the invoices which it alleged substantiated its claim for prepetition attorneys’ fees and costs. It identified property inspections, appraisal fees, title research fees, and property preservation fees as the other charges owed. These charges were itemized by type, but Wells Fargo did not supply any additional *331 information as to the amount, date, or payee for each charge, nor did it supply copies of invoices or proof of payment for the other charges claimed.

Wells Fargo’s Response also admitted that the negative escrow balance contained in its proof of claim was still under review. Specifically, Wells Fargo was not able to ascertain if the amounts claimed for escrow included a credit for the portions of the past due monthly installments attributable to escrow. Without this information, or a full history of the escrow account, Wells Fargo admitted that Debtor would not be able to verify the amounts it claimed on its proof of claim, and conversely, Wells Fargo would not be able to prove the amounts owed.

The Response was signed by Hershel C. Adcock, Jr., as local counsel to Wells Fargo. Approximately one week later, the Response was supplemented to provide a credit against the escrow account for a property tax deduction that was not owed. 1 The Response also detailed the individual past due monthly installments by date, principal, interest, and escrow portions. A schedule reflecting amounts paid into and deducted from escrow over the life of the loan was also supplied.

The initial hearing on this matter was held on September 25, 2007. Paul Rummage of the Law Offices of Paul Rummage and Herman Wessels of Dean Morris, LLP, appeared on behalf of Wells Fargo. Counsel were the third and fourth law firms to represent Wells Fargo since the inception of the case. Neither Ms. Bonial nor Mr. Adcock appeared. As of the initial hearing date, Wells Fargo still had not supplied a full loan history nor had it produced any documentation to substantiate the amounts it claimed for fees and costs, save the invoices of foreclosure counsel. At the start of the hearing, it was evident that counsel were uninformed as to the nature or amounts due on the claims filed, with one limited exception.

Herman Wessels of Dean Morris represented that after reviewing the invoices his firm had submitted to Wells Fargo in connection with the foreclosure and eviction proceedings against Debtor, errors in billing became evident. Specifically, the invoices contained a charge for a deposit forwarded to the sheriff in connection with an eviction action. When the eviction suit was dismissed, the deposit was returned to Dean Morris, and $1,800.00 should have been refunded to Wells Fargo and credited toward Debtor’s account. Upon further questioning, it was also admitted by Dean Morris that a deposit might also exist in connection with the foreclosure action, but further research was necessary.

The Court continued the hearing to November 1, 2007, ordered the appearance of Ms. Bonial and Mr. Adcock at the continued hearing date, and ordered production no later than October 25, 2007, of a loan history and copies of all invoices, cancelled checks, and other evidence to support the costs, fees, and charges claimed.

On October 24, 2007, Wells Fargo filed a request for an extension of the deadline to produce the documentation and accounting. The request for extension was considered at the hearing on November 1, 2007, during which the Debtor painstakingly identified the additional information needed, or explanations required, to review the accounting Wells Fargo supplied. Wells Fargo was instructed to bring to the next hearing a representative with personal knowledge of this loan as well as Wells Fargo’s administrative policies. It was also ordered to provide documentation from the sheriff regarding the amounts *332 charged in connection with the foreclosure. Wells Fargo committed to verify the amounts claimed in connection with the escrow account and to reconcile the amounts claimed on proofs of claim filed in previous cases against its loan history. The Court also ordered the production of any notices delivered to Debtor regarding 1) changes in her adjustable interest rate or escrow account; or 2) the imposition of fees, costs, or charges against her account.

At the second continued hearing on December 4, 2007, Hilary Bonial and Paul Rumage appeared on behalf of Wells Fargo with Kimberly Miller, Vice President in charge of Bankruptcy, Foreclosure, and the Litigation Management Department (“Bankruptcy Dept.”).

Jurisdiction

This Court has jurisdiction pursuant to 11 U.S.C. §§ 501 and 502 and Fed. R. Bankr.P 3001, 3002, and 3007; this is a core proceeding under 28 U.S.C. § 157(b)(2)(B).

Facts

Debtor, along with her now deceased husband William Chase, Jr., obtained a loan from Norwest Mortgage, Inc., in 1999. The loan is secured by a mortgage on her home and the debt is currently being serviced by Wells Fargo, as agent for Lehman Brothers, the assignee of Norwest Mortgage, Inc.

The current bankruptcy was filed on June 12, 2007; it is the third bankruptcy filed by the Debtor or her deceased husband. The first bankruptcy was filed by William Chase, Jr., 2 on January 11, 2002, and dismissed on January 29, 2004, for failure to make payments to the trustee. The second bankruptcy was filed pro se on April 20, 2004, and dismissed on July 26, 2005, for failure to make payments to the trustee. In this case, Debtor is represented by counsel.

Wells Fargo has filed three proofs of claim in this case. The first, filed on July 12, 2007, listed $33,641.80 in past due sums accruing prepetition. On August 20, 2007, Wells Fargo amended its original claim to add two additional past due monthly installments for July and August 2007. Technically, these installments accrued postpetition and should not have been added to the prepetition amounts itemized by Wells Fargo.

Wells Fargo itemized its past due balance:

Total Arrearage as of August SI, 2007

•Regular Monthly Installments July 1, 2004, through August 31, 2007 $26,582.67

•Late Charges 776.44

•Pre-petition Attorney Fees and Costs 6,663.96

•Other pre-petition fees, expenses and charges as reflected in 1A above 1,013.75

•Interest accruing at the contract rate of 10.38% on pre-petition arrearage if allowed by 11 U.S.C. § 1322(e) (0.00)

$35,036.82

The proofs of claim were all signed by Bonial as Wells Fargo’s authorized agent. They all bear the following assertion:

Please be advised that reasonable fees and costs for the review of the bankruptcy pleadings, review of client information, preparation and filing of the Proof of Claim will be charged to the lender/servicer for post-petition services rendered subsequent to the filing of this bankruptcy matter. Further, note that future fees and costs for bankruptcy related services are expected to accrue throughout the life of this bankruptcy case, and will be charged to the lender/servicer. If such fees and costs or charges are not paid through the bank *333 ruptcy, the lender reserves the right, at the lender’s discretion, to seek future reimbursement for the fees, costs and charges related to services rendered and expenses incurred pursuant to the terms provided for in the underlying security instrument, the bankruptcy code and other applicable law. 3

Loan Documents

Debtor’s note requires monthly payments of principal and interest sufficient to amortize her original principal balance of $61,200.00 over 30 years (“Note”). 4 During the first three (3) years of the Note, the interest rate was 10.375% per annum. On the third anniversary of the Note’s execution, and every year thereafter, the interest rate is subject to adjustment by adding 7% to the average weekly yield on United States Treasury Securities adjusted to a constant security of one year. Monthly payments are due on the first day of the month and considered late after the fifteenth day.

If full payment of principal and interest is not received on time, the Note provides that the holder may assess a late charge equal to 5% of the past due principal or interest outstanding. The Note states that only one late charge may be assessed on each late payment. 5

The Note is secured by the mortgage encumbering Debtor’s home (“Mortgage”). Both the Note and Mortgage allow, as a reimbursable expense, up to 25% of the sums due as attorney’s fees. 6

The lender did not initially establish an escrow account for the payment of insurance premiums and property taxes incurred in connection with the property securing this loan. Debtor is elderly and the assessed value of her home is exempt from property taxes due to the homestead exemption and her age. Insurance was initially acquired and paid for by Debtor outside of the loan. The Mortgage provides that if the lender advances money for the payment of insurance premiums or property taxes on behalf of the borrower, then those amounts are immediately reimbursable, or at the lender’s sole discretion, may be repaid in twelve monthly installments. 7

The Mortgage also authorizes lender’s collection, on a monthly basis, of the amounts it reasonably estimates will be necessary to satisfy future property tax or insurance premium demands. It allows the lender to assess and hold the maximum sum provided by 12 U.S.C. § 2603, et seq. (“RESPA”). 8

The Mortgage allows Wells Fargo to make reasonable entries upon and inspections of the property. However, the Mortgage also provides that Wells Fargo “shall give Borrower notice at the time of or prior to an inspection specifying reasonable cause for the inspection.” 9 Finally, the Mortgage requires that “[a]ny notice to Borrower provided for in this Security Instrument shall be given by delivering it or by mailing it by first class mail unless applicable law requires use of another *334 method.” 10

The Mortgage also provides that if Debtor fails to perform under the terms of the loan documents, Wells Fargo may:

... do and pay for whatever is necessary to protect the value of the Property and Lender’s rights in the Property. Lender’s actions may include ... paying reasonable attorney’s fees ... Any amounts disbursed by Lender under this paragraph 7 shall become additional debt of Borrower secured by this Security Instrument. Unless Borrower and Lender agree to other terms of payment, these amounts shall bear interest from the date of disbursement at the Note rate and shall be payable, with interest, upon notice from Lender to Borrower requesting payment. 11

The order of application of payments collected under the Note is set forth in the Mortgage. The Mortgage provides that payments will be applied to: 1) prepayment charges; 2) funds necessary to satisfy property taxes or insurance premiums; 3) accrued interest; 4) accrued principal; and finally, 5) late charges. 12 The Note does not address how attorneys fees, costs, or fees other than late fees, property taxes, or insurance charges are to be satisfied.

Specific provisions control over the general terms of an agreement. 13 Because the Mortgage specifically requires that any payment received must first be applied to satisfy outstanding escrow charges, accrued interest, accrued principal and late charges, in that order, the Court finds that these obligations must be satisfied prior to the satisfaction of any additional sums incurred in connection with protecting the property or enforcing the terms of the Note.

The Note and Mortgage are governed by Louisiana law, which provides that attorney’s fees and charges may be contractually authorized, but even if contractually allowed their assessment must be reasonable. 14

Based on the law and analysis set forth below, the Court has applied the payments received on this debt and in accordance with the terms of the Note and Mortgage. It has also allowed or disallowed various charges, costs, or fees based on the terms of the Note and Mortgage; the accounting, testimony, and documentation supplied by Wells Fargo; Louisiana Law; and RES-PA. The new loan history is reflected as Table I, attached to this Memorandum Opinion. The payments, costs, fees, and charges reflected on Table I are incorporated into this Memorandum Opinion as findings of fact.

Law and Analysis

In this case, Debtor claims Wells Fargo abused its discretion when it imposed the fees, costs, and charges against her account. It, therefore, becomes necessary to examine what, when, how and why any particular charge, fee, or cost is assessed. In order to evaluate Debtor’s claims, some background regarding the ad *335 ministrative practices of Wells Fargo is necessary. 15

Loan Administration

Ms. Miller explained that Wells Fargo administers 7.7 million home mortgage loans. 16 The management or administration of these loans is accomplished through several computer software packages, some owned by Wells Fargo, some licensed from third party vendors. Entries on the loan account are tracked with a licensed computer software platform commonly known as Fidelity Mortgage Servicing Package or Fidelity MSP. Fidelity MSP provides extremely sophisticated computer software for the management of home mortgage loans and is one of the largest providers of this service nationally. When a payment is received on a mortgage loan, it is entered into the Fidelity MSP system and then deposited. Fidelity MSP applies the payment to a borrower’s account; in this case, satisfying outstanding fees and costs first.

In this Court’s experience, virtually every home mortgage executed in the United States contains provisions that determine when payments are due, when they are considered late, what fees or charges may accrue if late, when a default can be declared, the remedies available on default, and which collection fees or charges are recoverable after default. In addition, most notes and mortgages provide fairly clear directives regarding the application of payments between principal, accrued interest, fees, costs, and amounts due to satisfy insurance and property taxes. Mercifully, most home mortgage loans have relatively standard, predictable language. However, the right to assess certain charges or fees on late payment or default is often at the discretion of the holder of the note. How this discretion is exercised is subject to guidelines not contained in the note or mortgage.

In this Court’s opinion, the exercise of that discretion may be impacted by the relationship between the holder of the note and the party that administers its collection. In the present financial market, almost every home mortgage loan is packaged with thousands of other loans and sold to investors assembled on Wall Street. The securitization of mortgage loans allows the original lender to immediately recover the amounts lent, providing it with liquidity and reducing its risk of default. The investors that acquire these bundled loans or portfolios are most often not banks or credit unions, the traditional members of the lending community. Instead, they are investment or brokerage houses; insurance companies; hedge, pension, or mutual funds; and other investment groups. They then hire a loan service provider to administer the loan portfolio.

The securitization of home mortgage loans has divorced the lending community from borrowers. Not only are the new holders of the mortgage notes nontraditional lenders, but a mortgage service pro *336 vider is a buffer in the relationship between lender and borrower. The holders of notes do not see themselves as lenders, but investors in an asset. They have little interest in the relationship between lender and borrower except as it might affect their return on investment.

Mortgage service providers administer notes for a fee. The terms of their agreements with investors, as well as the guidelines the investors set for administration of the loan, have ramifications for the borrower. Most servicing agreements allow the service provider to charge a flat fee, usually stated as a percentage of the portfolio under administration. All principal and interest payments collected are paid to the note holder. Usually, fees are additional income to the service provider while costs are simply a pass through, or reimbursable items. In addition, servicers invest the “float,” or funds held on deposit, and retain earnings on that investment. Therefore, amounts held in escrow or in debtor suspense are an addition source of revenue for the servicer. While a mortgage service provider and note holder’s interests are closely aligned, they are not perfectly aligned. It is in a mortgage service provider’s interest to collect fees and hold funds, both of which generate additional income for its account. Conversely, a note holder or investor is interested in the collection and application of payments to principal and interest.

Since many fees and charges are imposed at the discretion of the lender and must be “reasonable” under the law, servicing agreements may establish guidelines for the exercise of that discretion. 17 In this case, Wells Fargo did not produce its servicing agreement. Therefore, the exact terms of its relationship with Lehman Brothers and the financial incentives available to Wells Fargo are not in evidence.

In any event, Ms. Miller testified that once the guidelines for management of a loan are determined by the loan’s investor, Fidelity MSP imports the guidelines into its internal logic. 18 For example, if investor guidelines suggest the assessment of a late charge every time a payment is fifteen (15) days past due, the Fidelity MSP system will automatically assess a late charge if payment is not posted to the account within fifteen (15) days of its due date.

Other charges or fees are assessed against the account by virtue of “wrap around” software packages maintained by Wells Fargo. These software packages interface with Fidelity MSP and implement decisions based on their own internal logic. For example, if a borrower is delinquent in making a payment, Wells Fargo’s computer system may automatically send a demand letter to the borrower. Guidelines might also recommend a property inspection if a loan is past due. If such an event occurs, the computer system will automatically generate a work order for an inspection, allow the vendor to upload the completed report, generate a check to the vendor for the inspection, and charge the customer’s account — all without human intervention.

When a loan is involved in foreclosure, bankruptcy, or other litigation, Wells Fargo manages that loan through its Bankruptcy Department located in Fort Mill, South Carolina. Ms. Miller is the Vice President who oversees this department of 375 people.

The transfer of loans involved in a bankruptcy to Ms. Miller’s department begins with America InfoSource (“AIS”), a third *337 party vendor hired by Wells Fargo to provide daily information regarding new bankruptcy filings that may potentially involve Wells Fargo loans. At the inception of this relationship, Wells Fargo supplied AIS with a listing of every credit relationship it held or serviced, as well as certain fields of information (debtor’s name, address, social security number, etc.) on each borrower. The information is updated daily as Wells Fargo acquires new relationships and old ones are closed.

AIS scans the electronic databases of all the bankruptcy courts in the country and attempts to match debtors to any of the information supplied by Wells Fargo. If a match is made for one field of information, Wells Fargo is immediately notified. The notification provides Wells Fargo with the debtor’s name, address, social security number, the bankruptcy court, case number, chapter type, and judge assigned. Once notified, Wells Fargo verifies that the debtor is a borrower. To verify the “match,” Wells Fargo scans the information supplied by AIS against its own records. Ideally, three fields or pieces of information will be verified and matched. 19 If a three field match is not secured by Wells Fargo’s internal computer system, the system will reject the borrower and a manual match will be attempted. This is one of the few times any human being touches or reviews a loan’s electronic record.

Once Wells Fargo’s computers have verified the AIS borrower match, the program automatically activates a system within the Fidelity MSP software platform called a Bankruptcy Work Station (“BWS”). This sub-part of Fidelity MSP is allegedly infused with computer logic designed to manage a loan during a pending bankruptcy. The supervision of that loan then falls to Ms. Miller.

Once a borrower’s status as a bankruptcy debtor has been confirmed, the Fidelity MSP/BWS automatically advises counsel for Wells Fargo when a loan is referred for legal action. Who is selected to represent Well Fargo is dependent on who owns the loan. If a loan is owned by Wells Fargo, it is automatically referred to one of its national counsel; either Brice or McCalla Raymer. If held by one of the federal agencies, Wells Fargo will refer the loan to a firm on an approved list supplied by the agency. If held by a private investment group, that group can specify counsel or can delegate the responsibility to Wells Fargo as the service provider. If the loan is managed by national counsel, local counsel are retained to physically file pleadings and make court appearances when necessary. Local counsel are not given access to either the electronic files or accounting history but receive all of their information from national counsel. They typically do not have direct client access and may even be prohibited from contacting the service provider or note holder by their retainer agreements. 20

*338 Once the BWS notifies Brice that it has been retained, Brice is given immediate access to Wells Fargo’s mainframe computer platform. In addition, the computer automatically searches different parts of Wells Fargo’s multiple software packages and compiles a storage file where counsel can obtain all the information necessary to perform his or her duties. For example, when a loan is owned or serviced by Wells Fargo, the documents evidencing the initial loan transaction are kept in pdf format under a software platform called FileNet. FileNet is scanned for copies of the note, mortgage, recordation certificate, and other relevant closing documents. Those electronic files are then assembled in a storage file for counsel’s use. The Fidelity MSP system, containing the loan’s account history, is open to review by counsel. iClear, another computer program, contains copies of the invoices that represent costs billed to the loan. 21

The first task of counsel, once a bankruptcy is filed, is to prepare a proof of claim. Because counsel has direct access to Wells Fargo’s complete loan accounting, as well as the documents that support its debt and security interest, national counsel prepares the proof of claim without ever speaking to a Wells Fargo representative. In fact, Wells Fargo testified that it does not review any proof of claim prior to its filing. Wells Fargo’s testimony was that only after filing was the proof of claim reviewed for accuracy. 22 Other legal assignments are executed in a similar fashion.

For example, when a loan goes into postpetition default, the BWS automatically notifies legal counsel of this fact. Legal counsel then prepares a motion for relief utilizing information obtained from the Fidelity MSP system and BWS, including attaching any necessary documents to sup *339 port the motion and the financial allegations of the default. The motion is typically filed without Wells Fargo’s input or review. Wells Fargo testified that it does not maintain records of the legal documents filed on its behalf but relies exclusively on counsel for this service.

The logic utilized by the BWS in its decision making process is both detailed, court, and even judge specific. For example, if under local rules, or even local custom of a particular district or judge, a motion for relief may not be filed until the loan is at least ninety (90) days past due, the computer can be adjusted to notify counsel of the need to file a motion for relief when the debtor’s account is past due ninety (90) days rather than the typical sixty (60). Other adjustments to the system can be made to eliminate fees or charges prohibited by a particular jurisdiction or judge within a jurisdiction. In summary, Fidelity MSP and BWS allow Wells Fargo to input the individual demands of a particular investor or note holder as well as a court district or even judge.

Debtor has raised several objections to the administration of her loan by Wells Fargo. The objections involve the imposition of inspection fees; appraisal and broker’s price opinion fees; sheriffs costs and commissions; legal fees both incurred both prior to and after bankruptcy; the calculation of Debtor’s escrow balance; and language included in Wells Fargo’s proof of claim which Debtor maintains is illegal and inappropriate. Debtor complains that the fees, costs, and charges claimed were erroneously imposed, unreasonable, inaccurate and/or not legally due.

In addition, Debtor complains that Wells Fargo failed to properly notify her of changes in the amounts estimated to cover demands against her escrow account and interest rate. Debtor also complains of Wells Fargo’s failure to notify her both prior to filing and subsequently thereafter of any costs, charges, or fees imposed on her account. Finally, Debtor complains that Wells Fargo’s application of her payments is contrary to the terms of the Note, Mortgage, and applicable law.

Failure to Notice

In the current case, after the Objection was filed, Wells Fargo amended its proof of claim yet again. The Second Amended Proof of Claim, filed on September 9, 2007, alters the First Amended Proof of Claim by changing the language in “Section 3. Other Information.” The new language provides, in part:

A. Claimant is entitled, and reserves the right to receive all amounts which are payable after the petition date under the loan documents described above ... including the following payments upon and additions to the total debt:

1. Regular monthly installments as are provided by the loan documents, subject to future adjustments for escrow deposit or interest rate changes.

2. As of August 20, 2007, regular monthly payments are due for the months of September 1, 2007 in the amount of $697.51, late charges have been accrued in the amount of ($0.00), and reasonable and necessary attorney’s fees have been incurred for creditor’s representation in this proceeding.

3. Late charges, reasonable attorneys’ fees, and other amounts of the type described in Section 1A above, as provided for in the loan documents.

This Court’s procedures, set forth in Administrative Order 2008-1, dictate the proper method for requesting payment of post-petition fees or costs. The Court finds that this disclaimer is impermissible and notes that Wells Fargo will be subject to sanctions if it attempts to collect any *340 costs or fees in contravention of the Administrative Order or places this language in any proofs of claim on file in the District.

With regard to the noticing of prepetition charges and costs, this Court previously addressed Wells Fargo’s questionable loan administration practices in In re Jones, 366 B.R. 584 (Bankr.E.D.La. 2007)(“Jones I”) and In re Jones, 2007 WL 2480494 (Bankr.E.D.La.2007)(“/owes II”); both opinions were entered in the same adversary. The Debtor in Jones owned a home that was encumbered by a mortgage held by Wells Fargo. The debtor sold his home in an attempt to use the equity to payoff the amounts due under his plan. The payoff provided by Wells Fargo was considerably larger than the debtor expected, however. As a result, the debtor filed an adversary after Wells Fargo refused to provide a detailed explanation of the charges and fees contained within the payoff. In Jones I, this Court thoroughly reviewed Wells Fargo’s accounting and determined that $24,450.65 more than was actually due was collected by Wells Fargo at closing. The discrepancy between Wells Fargo’s payoff and the amount actually due was the result of a number of errors. First, with regard to the prepetition debt calculation, Wells Fargo improperly reported prepetition foreclosure costs. Second, Wells Fargo assessed additional prepetition charges without amending its claim, notifying the debtor, Court, or Chapter 13 Trustee. Third, Wells Fargo improperly calculated the postpetition debt by failing to show the debtor’s account as current on the petition date, an error which caused Debtor to pay thousands of dollars in additional interest. Fourth, Wells Fargo did not report or request Court approval for postpetition fees assessed against the debtor’s account and unknowingly paid by debtor from either Trustee or regular installment payments. 23

The testimony in Jones indicated that this conduct was not unique to Jones’ account but systematic. One of the primary problems discovered in Jones was Wells Fargo’s failure to notify borrowers of the assessment of fees, costs, or charges at the time they are incurred. This practice exists during all stages of the loan’s administration and is not peculiar to loans involved in a bankruptcy. As a result of its previous experience, the Court specifically directed Wells Fargo to submit into evidence copies of any and all notices to Debtor of fees, costs, or charges incurred.

Wells Fargo supplied a listing of computer generated tasks allegedly applicable to this account. 24 The list provides a date, letter or task number, and description of the event. Copies of the letters allegedly sent were not produced nor were any form letters made available to the Court. 25

*341 According to the list, no correspondence was forwarded to Debtor during the first year of her loan’s administration. On December 15, 2000, Debtor was fifteen days late on her monthly installment payment. According to Wells Fargo’s accounting records, it assessed a late fee of $27.71 on December 18, 2000, without notice to Debt- or. On January 8, 2001, an acceleration letter was allegedly forwarded. What demands or information it included are unknown. On the same day a “30 day solicitation” was performed. Again, what this involved is unclear. Debtor made a payment on January 12, 2001, in the amount of $654.11. Wells Fargo applied the payment to the December installment, then assessed and paid itself a late fee on that installment. The remainder, $72.29, was placed in a suspense account.

On January 17, 2001, the list reflects a “15 day delinquency.” It was followed by a “22 day delinquency” on January 23, 2001. Also provided on that date was a “Short Pmt in Suspense” task. Again, no evidence was presented as to the nature or content of these tasks. A review of the entire list indicates that many of the entries that appear are not correspondence, but tasks undertaken by Wells Fargo employees or counsel. Therefore, the Court cannot conclude that the above described delinquencies are notices of past due account delivered to Debtor. 26 The opposite conclusion is more likely, given that several other entries designate “letter” when correspondence is sent. 27

On January 18, 2001, Debtor’s account was charged an additional $27.71 late fee because her payment on January 12th had been applied to the December 1, 2000, installment leaving her January 2001 installment past due. On February 1, 2001, a “30 day solicitation” was allegedly performed. The nature of that solicitation is unknown. On February 9, 2001, another “Short Pmt in Suspense” task is specified on the listing, presumably, a reference to the $72.29 still held in suspense from the January payment. This is the last time Wells Fargo’s task records reflect any entry with regard to the Debtor’s suspense account despite almost continual use throughout the remaining period of the loan’s administration.

On February 12, 2001, Debtor forwarded another payment of $654.11. Wells Fargo applied the payment to the January installment and the late fee assessed on that payment. The remainder of the funds were placed in suspense. On February 17, 2001, a “15 day delinquency” is noted of unknown content, followed by a “22 day delinquency” on February 23, 2001.

For the remaining year, Wells Fargo appears to have entered 15, 22, and 30 day delinquencies as well as acceleration letters. Nothing produced indicates that Debtor was advised that late fees or other charges were being imposed on her account or that funds were being held in suspense rather than being applied to reduce her past due installment. Ms. Miller testified that Debtor was not notified of *342 past due payments, the imposition of late charges, or inspection fees. 28

Between December 2000 and the filing of the first bankruptcy, approximately one year, thirteen (13) late fees were charged, without notice, for a total of $360.23. Each of these fees were deducted from Debtor’s monthly payments, again without notice, deepening her default and ultimately triggering seven (7) property inspections for which Debtor was charged an additional $15.00 each. Again, these charges were assessed against Debtor’s account and paid from the monthly installments she was forwarding without notice. The total cost to Debtor for one missed $554.11 installment in December of 2000 was $465.36 in late fees and property inspection charges. Debtor paid an additional $400.00 towards her past due balance in the four months following her default, all of which was promptly applied to satisfy late fees and property inspections charges rather than the past due interest and principal installment as required by the Mortgage. Although Debt- or paid her monthly principal and interest payments throughout 2001, plus $400.00, Wells Fargo showed her $619.47 in arrears by October, 2001.

Debtor’s October installment payment appears to have been returned by Wells Fargo. 29 Instead of applying her payment, Wells Fargo placed the loan in foreclosure and actively returned at least one other tender in November, 2001. 30 Putting aside late fees and inspection charges, Debtor was only $154.11 in arrears on her monthly installment at the time her loan was referred for foreclosure.

By the time Debtor’s husband filed his case on January 11, 2002 (“2002 Bankruptcy”), Wells Fargo claimed attorney’s fees and costs of foreclosure amounting to $2,218.33 in addition to missed installment payments, inspection fees, and late charges. The proof of claim filed in that case itemizes a past due balance of $6,098.10.

Following the dismissal of the 2002 Bankruptcy 31 and during the entire administration of the loan thereafter, Wells Fargo appears to have had little or no contact with Debtor. Save for the delivery of incoherent escrow adjustments and letters regarding a change in interest rate, none of the thousands of dollars in fees, charges, or costs were noticed to Debtor. 32 The Court concludes, just as in Jones, that Wells Fargo has a corporate practice that fails to notify borrowers that fees, costs, or charges are being assessed against their accounts. This failure is fatal to Wells Fargo’s decision to pay itself from payments sent by Debtor for other purposes and is contrary to the requirements of the Note and Mortgage.

The Triumph of Computer Logic Over Human Logic

Property or “Drive By” Inspections

As previously indicated, the Fidelity MSP and BWS will apply computer logic to certain events, triggering automatic action on a loan file. Wells Fargo testified that in this case the decision paradigm allowed for property inspections if the loan *343 was twenty (20) days past due. According to Wells Fargo, this principle controlled the loan’s management both prior to and after bankruptcy filing. Wells Fargo has produced 43 of the 44 inspection reports prepared on Debtor’s property. 33 Since Debtor’s first missed payment in December of 2000, Wells Fargo has inspected this property on average every 5k days.

Wells Fargo argues that the decision to conduct drive-by inspections every time a loan is twenty (20) days past due is reasonable. It maintains that once a debtor is past due, industry experience supports the belief that the collateral is often at risk. As such, inspections are ordered to guard against a potential loss. Wells Fargo further argues that the charges are minor and constitute a reasonable exercise of discretion to manage the risk. 34

Wells Fargo requests blanket authority to charge every debtor or borrower a fee for a drive-by inspection no matter what the circumstances, provided, in Wells Fargo’s view, the loan is twenty (20) days past due. While this might seem both logical and practical at first blush, in practice it is much less so.

In this case, Debtor fell one month behind in December of 2000. Despite Wells Fargo’s assertion that property inspections are always ordered when a loan is twenty (20) days past due, this does not appear to be the case. Although Debtor was one month past due in December 2000, and according to Wells Fargo remained so for the rest of 2001, property inspections were not ordered until July 2001. 35 What risk suddenly existed in July 2001 was not explained, but it is clear that Wells Fargo does not have a policy of automatically inspecting properties once a loan is twenty (20) days past due. The six month delay in ordering an inspection calls into question Wells Fargo’s assertion that loans twenty (20) days past due constitute a risk to the note-holder justifying immediate inspection. 36

Once the Fidelity MSP system went into action, a drive by inspection was ordered, performed, and its cost charged to Debt- or’s account. The first report revealed that the property was occupied, well maintained, and in good condition. 37 The next month, Debtor paid her monthly installment. However, upon its receipt, the computer posted the payment to the previous month’s installment. The computer then read a delinquency for August, now twenty (20) days past due. The Fidelity MSP system dutifully recognized the triggering event and ordered yet another drive-by inspection which was performed and charged to Debtor. This chain of delayed payment continued for eight (8) months until the 2002 Bankruptcy was filed. Each month, a drive-by inspection was ordered, performed, and charged to Debtor’s account.

*344 All eight (8) inspections indicated that the property was occupied and well maintained. 38 Because the vendor uploads the finished report directly into Wells Fargo’s computer mainframe, the system, rather than a person, checks for the condition of the property and alerts Wells Fargo if a property appears to be at risk. 39 The actual electronic file of the report is stored in the Property Management Department of Wells Fargo but never appears to be read by anyone.

All forty-three (43) reports describe the property as being in good condition. Further, since most were obtained while the Debtor was making regular monthly payments, the paradigm that signaled a risk to the property was imperfect if not inapplicable. In addition, the inspections were of little use to Wells Fargo because a review of the inspections reveals that many were performed on property other than Debt- or’s.

For example, the inspection completed on July 5, 2001, indicates that Debtor’s house is of brick construction, while the inspections completed from August to February of 2002 describe a house of frame construction. Obviously, two different properties were inspected. However, since Wells Fargo blindly relied on a computer to both order inspections and evaluate their conclusions, it did not know that the erroneous inspections it received were of no benefit. 40 The failure of Wells Fargo to notice such significant inconsistencies evident on the face of the reports further confirms that they were not reviewed by any human being. If Wells Fargo did not believe the reports were important enough to read, this calls into question the importance of obtaining the reports in the first place.

Assuming the inspections were properly performed, the other troubling point raised is the frequency of their performance. Forty-four (44) inspections were ordered on one property over a period of seventy-nine (79) months. Every report indicates that the property inspected was in good condition. Why was there a need to continuously reinspect? No answers were supplied. In short, the Court concludes that Wells Fargo’s computer system automatically generates these inspections for no discernable purpose or benefit to the lender.

The Court can only conclude that the necessity of performing drive-by inspections is not critical to the administration of a loan. If the first report reveals a property in fair to good condition, nothing justifies, without further evidence of a problem, monthly inspections thereafter. The fact that Wells Fargo does not appear to read the inspections it orders further substantiates this finding.

Paragraph 9 of the Mortgage provides that “[l]ender or its agent may make reasonable entries upon and inspections of the Property. Lender shall give Borrower notice at the time of or prior to an inspection specifying reasonable cause for the inspection.” 41 Ms. Miller testified that Wells Fargo does not send borrowers notice when it performs a property inspection. 42 The Court has already found that Wells Fargo does not notify the borrower that she has incurred a charge for this service.

*345 Wells Fargo is entitled to recover necessary costs incurred in connection with the protection of its rights in the property. The Mortgage specifies that the disbursements shall be payable upon notice from Lender to Borrower. 43 Eve