Wells Fargo has agreed to pay $81.6 million to settle a federal investigation into its alleged failure to properly notify homeowners of increases in their mortgage payments.
The Justice Department's U.S. Trustee Program alleged that Wells Fargo violated bankruptcy laws that require timely payment-charge notices and analyses of escrow accounts. Wells Fargo reportedly failed to timely file more than 100,000 payment-charge notices and to timely perform more than 18,000 escrow analyses for about 68,000 accounts, between December 2011 and March this year.
About $53 million of the settlement will be used to compensate homeowners whose payments increased after Wells Fargo failed to timely file a notice. Homeowners will receive the funds as a lump sum, averaging about $1,254 per homeowner, in their mortgage accounts.
In addition to the payment, Wells Fargo will make internal changes to its procedures, including improvements to its computer platform and employee training and the implementation of quality control processes. Wells Fargo's compliance will be subject to oversight by an independent compliance reviewer, Lucy Morris of the law firm Hudson Cook in Washington.
The settlement terms are subject to court approval.
"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," Cliff White, director of the U.S. Trustee Program, said in a news release.
Michael DeVito, executive vice president of Wells Fargo Home Mortgage, said the bank has made the necessary improvements.
"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," DeVito said in a news release.
"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," DeVito said.