Wells Fargo to pay $81.6M to homeowners in bankruptcy

Wells Fargo agrees to pay $81.6 million as a settlement over errors in mortgage payment change notices for customers in bankruptcy. The proposed settlement has been filed in the Maryland district court by the Department of Justice and is awaiting approval.

Wells Fargo, one the largest mortgage banks and among the 30 largest corporations in the US came to a settlement with the US Department of Justice in respect to a dispute regarding Payment Change Notices (PCNs) for the bankruptcy court and escrow analyses for customers in Chapter 13 bankruptcy between December 2011 and March 2015.

The Office of Public Affairs of the Department of Justice (DOJ) issued a statement on Thursday saying DOJ's US Trustee Program has entered into a national settlement with Wells Fargo Bank N.A. (Wells Fargo) requiring Wells Fargo to pay $81.6 million as remedy for its repeated failure to provide homeowners with legally required notices hence denying homeowners the chance to challenge the accuracy of the mortgage payment increases.

Wells Fargo is said to have violated a 2011 US bankruptcy law by failing to send a type of legal notice about homeowners' mortgage payment increases to bankruptcy courts.

The law requires the notice to include disclosures to ensure that fees and charges by banks to homeowners in bankruptcy proceedings are accurate.

The bankruptcy rule requires Wells Fargo as mortgage creditor, to file and serve a notice 21 days before adjusting a Chapter 13 debtor's monthly mortgage payment.

Wells Fargo admittedly failed to timely file more than 100,000 PCNs and failed to perform more than 18,000 escrow analyses in cases involving nearly 68,000 accounts of homeowners in bankruptcy between Dec 2011 and March 2015.

The DOJ also states that the settlement agreement also requires Well Fargo to change internal operations and submit to oversight by an independent compliance reviewer to prevent recurrence of violations.

These changes include improvements to computer platform, employee training and quality control processes to ensure the accuracy and timely issuance of PCNs and escrow statements.

Wells Forgo in a statement acknowledged that the settlement resolved the disagreements regarding the filing of PCNs and preparation of annual escrow analyses and includes a total of $81.6mil in payment to customers.

In a statement released to media, Wells Fargo's executive vice-president Michael DeVito  said that they will work with the US Trustee's office and an independent reviewer to demonstrate the effectiveness of our improvements and to provide payments to customers, as required.

Meanwhile, Director Cliff White of the US Trustee Program expressed satisfaction 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."