A proposed class action claims Wells Fargo's voluntary remediation for consumers who were wrongly denied mortgage loan modifications for which they should have been qualified is insufficient to compensate the borrowers for their losses.
United States District Judge William Alsup granted preliminary approval to the $18.5 settlement between Wells Fargo and more than 500 eligible mortgage borrowers.
The order granting preliminary settlement approval can be foundhere.
Update – March 27, 2020 – Settlement Reached
Last month, Wells Fargo and the plaintiffs in the case detailed on this page announced a settlement that looks to resolve allegations that the bank wrongly denied loan modifications to over 500 mortgage borrowers due to a software error.
According to court documents, the 512 borrowers whose homes were wrongly foreclosed upon as a result of Wells Fargo’s miscalculation will each receive between $14,000 and $120,000 without having to submit a claim form. Each borrower’s cut of the $18.5 million settlement fund will be determined by factors such as their unpaid principal balance, period of delinquency, and the amount already received from Wells Fargo as reparation, the document states. The proposed deal will also set aside $1 million for class members who claim to have suffered severe emotional distress as a result of the foreclosure of their homes.
The plaintiffs’ attorneys have praised the settlement as providing “among the highest monetary awards in a negotiated compromise concerning similar allegations.” They look to secure the judge’s preliminary approval of the settlement on April 16, 2020.
A proposed class action filed against Wells Fargo Bank, N.A. claims the bank’s voluntary remediation for consumers who were wrongly denied mortgage loan modifications for which they should have been qualified is insufficient to compensate the borrowers for their losses.
The lawsuit centers around federal funds that were provided to Wells Fargo as part of the Home Affordable Modification Program (HAMP), through which the bank was incentivized to modify the mortgage loans of qualified borrowers suffering financial hardship. Under the program, the case explains, homeowners could avoid foreclosure with lower monthly payments and interest rates on their mortgages.
According to the lawsuit, Wells Fargo, rather than use a Fannie Mae-developed HAMP tool, developed its own software for calculating a borrower’s loan modification eligibility. Unfortunately, the suit says, the software “caused systematic miscalculations” that resulted in at least 870 borrowers being wrongly denied loan modifications despite being qualified. Wells Fargo admitted in early November 2018 that it had, in fact, improperly foreclosed on 545 borrowers who should have instead received modifications on their mortgages.
In an attempt to “make things right,” the case says, the bank contacted “a substantial majority” of the affected consumers to offer them remediation, which constituted a check for between $1,400 and $25,000. Wells Fargo allegedly provided no explanation of how the amounts were calculated. In the letters sent with the checks, the complaint continues, the bank merely admitted that some borrowers were wrongly denied loan modifications due to a “faulty calculation” but offered no further explanation of what the issue was or how it occurred.
The plaintiff, who the lawsuit says received a check for $15,000 from the defendant after losing her New Jersey home to foreclosure, claims the amount is insufficient to compensate her for the loss of her condo and the other effects of Wells Fargo’s actions.
“The check does not make up for the severe financial and other consequences that Wells Fargo’s calculation error inflicted on [the plaintiff],” the complaint reads, “including the money and equity she lost from the foreclosure, the damage to her credit rating, and other serious consequences for her and her family.”