Wells Fargo must face lawsuits by homeowners who claim the largest US mortgage lender refused to offer them permanent mortgage modifications for which they had qualified, a federal appeals court ruled yesterday.

The court 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.

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