NEW YORK — Wells Fargo (WFC) 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 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 Department said.
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.
“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 analyzes for customers in bankruptcy are properly prepared and delivered in a timely fashion,” Michael DeVito, executive vice president for Wells Fargo Home Mortgage, said in a statement.
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.
Wells previously put aside reserves for the settlement, it 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 analyzes in cases involving nearly 68,000 accounts of bankrupt homeowners during the period, the Justice Department said.