Salem Radio Network News Tuesday, September 27, 2022

Business

Wells Fargo in $94 million settlement over mortgage forbearance during pandemic

By Jonathan Stempel

(Reuters) – Wells Fargo & Co has reached a $94 million settlement to resolve class-action claims it sent more than 200,000 struggling mortgage borrowers into forbearance during the COVID-19 pandemic without their consent.

The proposed settlement was filed last week in the federal court in Columbus, Ohio, and requires a judge’s approval.

It resolves claims that Wells Fargo unilaterally decided to provide forbearances to customers who inquired about their mortgages or expressed hardship, but had not explicitly requested and did not want relief.

Forbearance temporarily suspends the obligation to make mortgage payments.

Customers said Wells Fargo’s decision damaged their credit, making it harder or more expensive to borrow, and impeding their ability to refinance at historically low interest rates.

They also said the decision violated the CARES Act, the March 2020 federal economic stimulus addressing COVID-19, which provides for forbearances at borrowers’ request.

The Sept. 9 settlement covers about 212,000 to 213,000 loans serviced by San Francisco-based Wells Fargo and put into forbearance without informed consent from March 1, 2020 to Dec. 31, 2021.

Wells Fargo, the fourth-largest U.S. bank, denied wrongdoing in agreeing to settle. It had no immediate comment on Wednesday.

The first $35 million from the settlement will be distributed pro rata, for an average of about $165 per loan.

Remaining funds will be subjected to a claims process or used to pay legal and administrative costs.

Lawyers for Wells Fargo customers may seek up to $23.5 million, or 25% of the settlement fund, for legal fees.

Wells Fargo is still containing fallout from a now six-year-old scandal over its sales practices, including opening millions of accounts without permission.

It has since 2018 operated under consent orders from three U.S. financial regulators to bolster governance and oversight. The Federal Reserve also capped the bank’s assets.

The case is Echard v Wells Fargo Bank NA, U.S. District Court, Southern District of Ohio, No. 21-05080.

(Reporting by Jonathan Stempel in New York; editing by Jonathan Oatis)

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