Wells Fargo is on the brink of settling a lawsuit alleging a computer error led the bank to deny loan modifications to some homeowners who later lost their homes to foreclosure. An $18.5 million settlement is awaiting final approval from a district judge, who said Thursday he intends to approve the settlement on a preliminary basis after reviewing the notice to the class action case members, according to Law360.
The plaintiffs in the case allege a miscalculation that persisted between 2010 and 2018 led to some homeowners being denied home loan modifications they would otherwise have been approved for.
Wells Fargo became aware of the error in 2013 and partially fixed the problem in 2015 before enacting a “comprehensive fix” in 2018, Law360 reported. The bank sent apology letters and compensation ranging between $5,000 and $15,000 to some affected homeowners.
The settlement now under review addresses a class action case filed in 2018 involving 511 homeowners whose homes were allegedly foreclosed due to the error.
Each of the 511 homeowners will receive between $14,000 and $120,000 if the settlement is approved. The amount will vary based on each individual’s unpaid principal balance, the duration of their loan delinquency, and how much they have already received from Wells Fargo in compensation.
Included in the $18.5 million is $1 million earmarked for homeowners who suffered “severe emotional distress” directly related to the erroneous foreclosure. These funds will be available to “only members of the class who can tie their distress to Wells Fargo’s conduct,” according to Law360, which added that any unused funds from this $1 million will be dispersed to all the homeowners involved in the case.
District Judge William Alsup will review the proposed notice to the plaintiffs before deciding on a final approval and also sought assurance that this settlement will not impede any other borrowers from bringing similar claims of their own against Wells Fargo.
Tom Goyda, a spokesperson for Wells Fargo, told Law360 Thursday, “It is important to note that we have prevailed on all of these lawsuits that have reached a final decision and have not paid any money directly to a suing city/county or to any private lawyers.”