Washington, D.C. –
The Department of Justice (DOJ) entered into a class action settlement with Wells Fargo Bank, N.A. (Wells Fargo) on November 5, 2015 ending a case whereby the defendant, Wells Fargo, was accused of failing to notify homeowners with legally mandated disclosures relating to the increase in their monthly mortgage payments. According to the settlement, Wells Fargo agreed to pay $81.6 million in damages, admitted its failure to adhere to the statutorily required bankruptcy notices and agreed to implement internal changes to ensure compliance with the law.
Bankruptcy Rule 3002.1 requires mortgage creditors to file and serve a notice 21 days before adjusting a debtor’s monthly mortgage payment. The rule is applicable in chapter 13 bankruptcy cases when the claim(s) is secured by a security interest in the debtor’s principal residence and provided for under Section 1322(b)(5) of the Code in the debtor’s plan. The primary purpose of requiring notice is to allow the debtor or trustee to challenge the validity of the increases.
The DOJ claims Wells Fargo acknowledged its failure to file more than 100,000 payment change notices relating to more than 68,000 accounts between 2011 and 2015. The terms of the financial settlement, as provided by the DOJ (http://www.justice.gov/opa/pr/us-trustee-program-reaches-816-million-settlement-wells-fargo-bank-na-protect-homeowners), are laid out below:
– $53.6 million paid to more than 42,000 homeowners who were in bankruptcy when their monthly payments increased through a payment change notice filed without proper notification
– An estimated $10 million paid at the end of homeowners’ bankruptcy proceedings if it is determined that the initial crediting process failed to fully compensate them
– $1.5 million will be refunded to homeowners where notices of decreases in monthly payments were not timely provided and the homeowners paid more than the actual amount due
– $1 million to homeowners who satisfied escrow shortages but whose monthly payments did not decrease to account for the lump sum payment
– $4.5 million will be paid to credit the escrow accounts of homeowners who did not receive timely escrow statements
– $4 million will be paid to about 12,000 homeowners by crediting mortgage accounts in the amount of $333, where Wells Fargo failed to timely perform an escrow analysis that would have resulted in a payment change notice being filed
– $4 million will be refunded to homeowners who did not receive timely escrow statements and whose escrow accounts contained surpluses that Wells Fargo had not refunded or credited toward the next year’s escrow payment
– $3 million in remediation already completed by Wells Fargo