Wells Fargo To Pay $81.6M To Settle Allegations Of Botched Payment Change Notices

Posted by Patrick Barnard on November 09, 2015 No Comments
Categories : Residential Mortgage

Wells Fargo will pay $81.6 million to settle allegations brought by the U.S. Department of Justice (DOJ) that the bank failed to properly notify thousands of bankrupt homeowners that it was increasing their mortgage payments.

Authorities with the Executive Office of the United States Trustee Program, the arm of the DOJ that oversees the nation's bankruptcy courts, allege that Wells Fargo failed to properly notify borrowers who had filed for Chapter 13 bankruptcy that it had raised their mortgage payments, thus violating a 2011 bankruptcy law that requires borrowers be notified of such changes within 21 days of filing for bankruptcy.

The alleged violations occurred between Dec. 1, 2011, and March 31 of this year. The bank also failed to conduct 18,000 escrow analyses in cases involving nearly 68,000 accounts of homeowners in bankruptcy during the same time period, authorities allege.

As per the settlement, Wells Fargo will pay the more than 42,000 homeowners who were affected about $53.6 million. Another $10 million will be credited to debtors' accounts at the end of their bankruptcy cases.

Most of the remainder of the settlement funds will go to homeowners whose escrow accounts weren't properly accounted for or who paid the bank more than required because their mortgage payments were reduced without their knowledge, according to a Wall Street Journal report.

In a statement, Michael DeVito, executive vice president for Wells Fargo Home Mortgage, says the company has ‘made the necessary investments and improvements in our systems and processes to ensure that payment change notices for the bankruptcy court and escrow analyses for customers in bankruptcy are properly prepared and delivered in a timely fashion.’

‘We will work with the U.S. Trustee's office and an independent reviewer to demonstrate the effectiveness of our improvements and to provide payments to customers, as required,’ DeVito says in the statement.

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