Wells Fargo & Co will pay $81.6 million to homeowners
for denying them a chance to challenge mortgage payment increases imposed
during their bankruptcy proceedings, the U.S. Justice Department said on
Thursday. Wells violated a 2011 U.S. 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
Justice Department said.
The settlement between Wells Fargo and the Justice
Department's U.S. Trustee Program, which oversees the U.S. bankruptcy system, also
requires Wells to hire an independent compliance monitor and change its
internal procedures to prevent a recurrence of the problem, the Justice
The settlement is subject to approval by the U.S. Bankruptcy
Court for the District of Maryland. If approved, the Justice Department said it
will distribute the funds to groups of homeowners who were in bankruptcy
proceedings from late 2011 through March, 2015. The bank will work with the
U.S. Trustee's office and independent compliance reviewer to demonstrate the
effectiveness of its changes and make payments to customers, DeVito said.
The bank was late in providing more than 100,000 notices to
homeowners about mortgage payment changes and also did not timely perform more
than 18,000 escrow analyses in cases involving nearly 68,000 accounts of
bankrupt homeowners during the period, the Justice Department said.
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