Wells Fargo Bank and the Department of Justice’s U.S. Trustee program have entered into a settlement agreement over the bank’s acknowledged violation of federal bankruptcy rules that took effect in December 2011, according to an announcement from the DOJ.
Under the terms of the settlement, Wells Fargo is required to pay $81.6 million in remediation to homeowners who were in bankruptcy between December 11, 2011, and March 31, 2015. The bank has acknowledged that repeatedly failed to timely file more than 100,000 payment change notices (PCNs), which are required to be filed by mortgage creditors and served 21 days before the Chapter 13 debtor’s monthly mortgage payment is adjusted (Bankruptcy Rule 3002.1).
The bank also acknowledges that it failed to perform more than 18,000 escrow analyses on nearly 68,000 mortgage accounts of homeowners in bankruptcy during the three-plus year period from December 2011 to March 2015.
“Homeowners in bankruptcy have the right to proper and timely notices, particularly when they are being asked to pay more.”
Department of Justice
“I am pleased that Wells Fargo has acted responsibly by accepting accountability for its deficient bankruptcy practices, agreed to compensate affected homeowners for those deficiencies and committed to making necessary improvements in its bankruptcy operations,” said Director Cliff White of the U.S. Trustee Program. “When creditors fail to comply with the bankruptcy laws and rules, they compromise the integrity of the bankruptcy system and must be held accountable. Transparency in the process is of paramount importance. Homeowners in bankruptcy have the right to proper and timely notices, particularly when they are being asked to pay more. The U.S. Trustee Program remains diligent in its effort to hold financial institutions that disregard the law accountable for their actions.”
Wells Fargo has also agreed to change its internal operations and submit to oversight by an independent monitor who will periodically perform compliance checks and file reports with the bankruptcy court, according to the DOJ. The two parties have selected Lucy Morris of Hudson Cook LLP as the independent reviewer, and the bank will pay all costs associated with the compliance reviews.
“We believe we have 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,” said Michael DeVito, executive vice president for Wells Fargo Home Mortgage. “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.”
Click here for a breakdown of the settlement terms.