Wells Fargo was caught not complying with the Bankruptcy Code for about 68,000 accounts of homeowners in bankruptcy between December 1, 2011 and March 31, 2015. What did they do? During a bankruptcy case the lender is required to file and serve a Notice of Payment Change at least 21 days before adjusting a Chapter 13 debtor's monthly mortgage payment. This gives Debtors a chance to review the payment changes and object if they think that the payment should not go up. (As a side note: we file objections often because the mortgage company is changing for things that they did not do or are just dead wrong about like the insurance or taxes.)
According to the DOJ's press release dated November 5, 2015, Wells Fargo admitted that they did not timely send out the required notices for more than 100,000 payment changes. Additionally, Wells Fargo did not preform more than 18,000 escrow analysis on about 68,000 accounts of homeowners in bankruptcy. (These are the annual reports that spell out how much money has been paid into the escrow account and how much has been paid out for things like taxes and insurance.)
Who is Getting the $81.6 Million from Wells Fargo?
According to the DOJ, the bulk of the money $53.6 million will be paid to the more than 42,000 homeowners, whose mortgage payment increased, when Wells Fargo did not timely file the notice of payment increase. Most of that money (more than 70%) will go to homeowners with a mortgage balance of less than $300,000. The payment is not going to be cash but rather a credit to the homeowner's account. Wells Fargo estimates that about 15 to 20% of the homeowners will be due more money at the end of their bankruptcy case.
About $10 million will be paid to homeowners as a credit at the end of the bankruptcy cases if they were not fully compensated through the first crediting process.
Homeowners Getting Some Cash
Good news for the estimated 3,000 homeowners that will receive cash when the noticing requirement was not meet and the homeowners over paid the amount due. This is about $1.5 million of the settlement. Additionally, another estimated $1 million will be paid to homeowners that made a lump sum payment to satisfy the escrow shortages but the monthly payments were not adjusted to reflect those payments. It is estimated that about 2,400 homeowners will get that money. About 12,000 homeowners will receive $333 for Wells Fargo failing to perform the escrow analysis that would have required a payment change notice being filed and the homeowner is not already receiving credit or money fro a missed or untimely payment change notice.
DOJ estimates that 12,000 will be refunded cash because they did not receive timely escrow statements and their accounts contained surpluses that Wells Fargo did not refund or credit towards the next year's escrow payment. This will be about $4 million of the settlement.
About 8,000 homeowners have already received remediation totaling $3 million for certain violations.
How Will Wells Fargo Be Kept in Compliance?
Lucy Morris of Hudson Cook, LLP has been selected to be an independent reviewer to verify that Wells Fargo Compiles with the settlement order.
This is good news for Debtors!
Thank You to The US Trustee Program Team!