Bank Agrees to $81.6 Million Bankruptcy Settlement

If you are thinking about filing for Chapter 13 bankruptcy or are currently making payments as part of a consumer bankruptcy repayment plan, it is extremely important that you know the timing and amount of your monthly mortgage payment. Many consumers were negatively impacted when Wells Fargo Bank did not notify them of payment changes. According to a recent article in The Washington Post, Wells Fargo Bank agreed to a payment of $81.6 million “to settle claims that it failed to notify homeowners in bankruptcy of changes in their mortgage payments.”
Notice Violations Impacted Nearly 70,000 Account Holders
Allegations that Wells Fargo failed to let homeowners in bankruptcy know about payment changes were not referring only to a handful of customers. To be sure, “Wells Fargo acknowledged that it failed to file more than 100,000 payment-change notices on a timely basis,” and that it “failed to meet the deadline required in more than 18,000 escrow analyses.” All in all, the violations affected about 68,000 accounts of homeowners who were in bankruptcy. The violations impacted accounts from December 1, 2011 until March 31, 2015.
What does it mean that Wells Fargo failed to send out timely notices? In connection with the settlement, the Department of Justice explained that a federal bankruptcy rule is in place to make sure that there is a “proper accounting of consumers’ costs in bankruptcy.” In order to do that, the rule requires that a mortgage lender give borrowers in bankruptcy a “timely notice of payment hikes or reductions.” For consumers who are in Chapter 13 bankruptcy, lenders such as Wells Fargo have 21 days to provide notice before they adjust a homeowner’s required monthly payment.
How Will the Settlement Funds Be Disbursed?
A report on the settlement from NBC News noted that more than $53 million of the settlement funds will go directly to homeowners who saw a hike in their monthly mortgage payments without receiving a proper notice from the bank. These funds will go to more than 42,000 borrowers who were impacted, and the money will come to them as a lump-sum credit. On average, the Department of Justice reported, these homeowners will see a credit of $1,254 to their mortgage accounts. A majority of those borrowers have a mortgage balance of less than $300,000.
Where will the rest of the settlement money go? Some homeowners will not be fully compensated through the first payout, and about $10 million will go toward crediting their accounts. The remaining funds will reimburse homeowners who made mortgage payments that were higher than they needed to be, as well as homeowners who did not receive escrow statements in a timely manner.
For many Chicagoans, filing for Chapter 13 bankruptcy was an important decision that allowed them to keep their homes despite the fact that they were going into foreclosure. Indeed, when you file for Chapter 13 bankruptcy, there is a stay on foreclosure proceedings that prevent the bank from going through with the sale of your home. Yet as the recent settlement makes clear, banks do not always take care of consumers. If you have questions about personal bankruptcy, you should speak with a dedicated Oak Park bankruptcy attorney as soon as possible. Contact the Emerson Law Firm today to learn more about how we can help with your situation.
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