A $81.6 million settlement has been reached between the Department of Justice’s U.S. Trustee Program and Wells Fargo Bank N.A. over the bank’s failure to provide homeowners in bankruptcy with legally required mortgage payment change notices.
Wells Fargo acknowledged that it had failed to provide homeowners in Chapter 13 bankruptcy with payment change notices (PCNs) in a timely manner. The bank also said it had failed to perform escrow analyses for nearly 68,000 accounts of homeowners in bankruptcy between December 2, 2011, and March 31, 2015.
These failures violate Bankruptcy Rule 3002.1, which requires mortgage lenders and servicers to file and serve a notice 21 days before making any adjustments to a Chapter 13 debtor’s monthly mortgage payments. As part of the settlement agreement, Wells Fargo agreed to revise its internal processes and submit to compliance oversight by an independent reviewer. The settlement was filed in the U.S. Bankruptcy Court for the District of Maryland, but affects homeowners in bankruptcy nationwide.
The $81.6 million settlement will be paid out as follows:
- $53.6 million to over 42,000 homeowners whose payments increased without receipt of the required notice by Wells Fargo. Payment will be in the form of a credit to the homeowners’ mortgage accounts.
- $10 million to compensate additional homeowners who were not fully compensated through the initial crediting process.
- $1.5 million to approximately 3,000 homeowners whose payments decreased, but absent the proper notice, they paid more than the amount due.
- $1 million to about 2,400 homeowners who made a lump sum payment to satisfy escrow shortages but whose statements did not decrease to account for the payment.
- $4.5 million in escrow credits to approximately 6,000 homeowners who did not receive escrow statements in a timely manner as required.
- $4 million to almost 6,000 homeowners who did not receive timely notice and whose escrow accounts had surpluses not refunded or credited by Wells Fargo.
- $4 million to almost 12,000 homeowners for failure to perform an escrow analysis where a homeowner is not already receiving compensation for an untimely or missed PCN.
- $3 million to about 8,000 homeowners already completed by Wells Fargo.
The settlement resolves the bank’s issues with the U.S. Trustee, but does not provide protection from any lawsuits filed by affected consumers or third parties.
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