After a software error that occurred in Wells Fargo’s system sometime between April 2010 and October 2015, a settlement has finally been reached between the company and some 6,000 mortgage holders who were impacted by the error. The software error caused customers to be incorrectly denied modifications on their loans and repayment plans when they actually should have qualified. In several cases, foreclosure proceedings began after the denials.
The Beginning Issue
Wells Fargo originally stated that less than 1,000 customers were affected by the software error, however a group of the affected borrowers filed suit against the company in June of 2017 for soliciting Chapter 13 debtors for what Wells Fargo called pre-approved “trial” modifications to their existing mortgage loans. The company also used the terms “no-application modifications.”
The class action lawsuit stated that Wells Fargo used these post-petition contractual delinquencies to apply for reduced amount payments of its unsolicited modification payments, and then used this as the basis for filing a motion for relief from the automatic stay issued by the bankruptcy court therefore enabling them to foreclose on the homes of the affected borrowers.
Tim Sloan, CEO of Wells Fargo addressed the House Financial Services Committee stating how the company is working to better serve their customers. He acknowledged that the company had improperly filed to foreclose on some 500 homes after the software error denied mortgage modifications. He reported that full restitution had been made to the customers and each had received $15,000 in compensation. He did not, however, have an answer for how the error had affected credit scores and other residual damages.
Sloan was also questioned why Wells Fargo’s customers should not get the same justice that investors received to which he replied that the company went back 15 years, found the customers who had been harmed, and made restitution. He says everything was resolved, but they enforced their arbitration rights.
The proposed $13.8 million settlement was granted in North Carolina Federal Court and states that Wells Fargo must pay the amount into a settlement fund for some 6,000 class members. Four class representatives were also appointed and attorney fees in the amount of $4.56 million were awarded to the class counsel. The counsel is also entitled to $54,466 in litigation fees and each class representative will receive $10,000 each.
According to these terms, the settlement will provide each borrower a cash payment of either $2,300 or $3,800, as well as a minimum of $100 in cash.
Contact an Experienced Loan Modification Attorney Today
If you are wondering whether loan modification is right for you or feel that your loan modification process has not proceeded the way it should have, contact the attorneys at Newland & Newland LLP today. We have years of experience helping our clients understand their rights when they are facing financial struggles and we can help you, too. We serve the Arlington Heights, Palatine, Rolling Meadows, Libertyville, Mundelein, Buffalo Grove, Schaumburg, Elk Grove, and Itasca areas, so contact us today to schedule a consultation.
(image courtesy of Blake Wheeler)