As reported by Law360, a class-action lawsuit between nearly 6,000 mortgage holders and Wells Fargo has arrived at an agreement. A proposed $13.8 million deal has been granted the final go-ahead in a North Carolina federal court, stemming from allegations that the bank imposed a trial loan modification program on borrowers without their consent. The program allegedly led to many unwitting defaults on payments.
According to Law360, the terms of the agreement stipulate that “Wells Fargo will pay $13,460,000 into a settlement fund for nearly 6,000 class members, and provide another $366,376.39 for account remediation for 393 of those borrowers, for a total settlement of $13,826,376.” U.S. District Judge Robert J. Conrad Jr. also appointed four class representatives and awarded attorneys' fees of $4.56 million to class counsel. Counsel will also receive $54,466 in litigation costs and the class representatives will receive $10,000 each.
The settlement fund will provide relief for the borrowers on 5,975 mortgage loan accounts who were subjected to the no-application modification program. According to the terms of the agreement, some borrowers will receive cash payments of $2,300 or $3,800. Furthermore, all class members will receive a minimum of $100 in cash.
The class filing the suit stated that "Wells Fargo used the post-petition contractual delinquencies it created by applying for payments in the reduced amount of its unsolicited trial modification payments as a basis for filing motions for relief from the automatic stay with the bankruptcy courts to foreclose on affected borrowers' homes.”
So far, neither side has released any official media statements regarding the settlement agreement and plan.
Wells Fargo had previously reported a software error that occurred between April 2010 and October 2015, which allegedly caused a total of 870 customers to be incorrectly denied a loan modification or repayment plan in cases where they would have otherwise been qualified. The bank reported that, in approximately 545 of these instances, after the loan modification was denied or the customer was deemed ineligible to be offered a loan modification or repayment plan, a foreclosure was then completed. A group of the affected borrowers sued Wells Fargo in June 2017 for soliciting Chapter 13 debtors for pre-approved "trial" loan modifications of their existing mortgage loans, which the bank called "no-application modifications."
In a hearing last week, Wells Fargo CEO Tim Sloan appeared before the House Financial Services Committee to address the bank’s progress in providing reparations related to past scandals and how the bank is working to improve its culture and better serve its customers. Sloan acknowledged the bank had had improperly foreclosed on 500 homes after incorrectly denying mortgage modifications. He said that full restitution has been made and that each of the affected customers “received $15K compensation,” but did not have an answer when asked about additional harm such as devastating credit scores and other residual damages caused by the error.
Addressing the plight of a collective 3.5M customers who were defrauded, Sloan was questioned as to why the bank perceivers customers not worthy of the same justice that was meted out to investors. To which Sloan responded, “We went back 15 years, looked back 165M accounts and we feel we captured all customers harmed, addressed and made things right. They have all been taken care of, restitution has been made. We’ve settled customer suits, and resolved them but we’ve enforced our arbitration rights.”