Wells Fargo to pay homeowners $81.6M
This is a dispatch.com article.
The Department of Justice said on Thursday that the lender’s failure to give borrowers timely notice of payment increases or reductions violated a federal bankruptcy rule aimed at ensuring proper accounting of consumers’ costs in bankruptcy.
Under the rule, which took effect in December 2011, mortgage lenders are required to give borrowers in Chapter 13 bankruptcy cases 21 days’ notice before changing their monthly payment.
Wells Fargo acknowledged it failed to file more than 100,000 payment-change notices on a timely basis. It also failed to meet the deadline required in more than 18,000 escrow analyses.
The violations involved nearly 68,000 accounts of homeowners in bankruptcy court between Dec. 1, 2011, and March 31 of this year.
The biggest portion of the settlement payout, $53.6 million, will be paid to more than 42,000 homeowners whose mortgage payments were increased without their receiving timely notice from Wells Fargo.
Homeowners will receive the payments in the form of a lump-sum credit to their mortgage account, averaging $1,254, the Justice Department said.
More than 70 percent of those payouts will go to borrowers with a home-loan balance of less than $300,000.
About $10 million will be used to credit accounts for homeowners who are not fully compensated by the initial payout.
Wells Fargo estimates that as many as 20 percent of borrowers who receive an initial settlement payout will be due a second credit to their mortgage balance.
The rest of the settlement amount will go to homeowners who made higher mortgage payments than necessary or didn’t receive timely escrow statements — other consequences of Wells Fargo’s lapses.
In addition to the payout, Wells Fargo agreed to improve its computer system and beef up employee training and oversight.
Shares in the San Francisco-based bank rose 28 cents to close at $54.86 on Thursday.