By Jonathan Stempel

(Reuters) - Wells Fargo & Co must face lawsuits by homeowners who claim the largest U.S. mortgage lender refused to offer them permanent mortgage modifications for which they had qualified, a federal appeals court ruled on Thursday.

The 9th U.S. Circuit Court of Appeals said Wells Fargo was required under the federal Home Affordable Modification Program to offer loan modifications to borrowers who demonstrated their eligibility during a trial period.

Reversing the dismissals by a San Francisco federal judge of two lawsuits seeking class-action status, the appeals court rejected the argument that Wells Fargo became bound only upon sending borrowers signed modification agreements.

The court said this would create "unfettered discretion" for the San Francisco-based bank to reject modifications "for any reason whatsoever - interest rates went up, the economy soured, (or) it just didn't like the borrower."

While a federal appeals court in Chicago reached a similar conclusion last year, the 9th Circuit decision applies in several western U.S. states - among them California, Arizona and Nevada - that have been particularly hard-hit by foreclosures.

http://finance.yahoo.com/news/borrowers-sue-wells-fargo-over-211621881.html