The New York Times | November 1, 2016 In the latest hit to the battered bank, Wells Fargo has agreed to pay $50 million to settle a class-action lawsuit that accused the bank of overcharging hundreds of thousands of homeowners for appraisals ordered after the homeowners defaulted on their mortgage loans.
The proposed settlement calls for Wells Fargo to automatically mail checks to more than 250,000 customers nationwide whose home loans were serviced by the bank between 2005 and 2010.
The checks will typically be for $120, according to Roland Tellis, a lawyer with Baron & Budd, the law firm that represented Wells Fargo’s customers. If a judge signs off on the settlement, as expected, the checks will be distributed next year.
When a borrower falls behind on a loan, mortgage contracts typically let the lender order an appraisal of the home’s current value. The cost of that appraisal, known as a “broker price opinion,” can be passed on to the borrower, but Wells Fargo used one of its own subsidiaries to conduct appraisals and then routinely marked up the cost, according to the lawsuit.
Borrowers would be charged $95 to $120 for a service that cost the bank $50 or less, the complaint said. The charges were then listed cryptically on mortgage statements, with vague descriptions like “other charges” or “other fees.”
“People who are behind on their loans are the people who can least afford to be charged marked-up fees, but unfortunately, that’s exactly what happened,” Mr. Tellis said.
Several homeowners filed suit against Wells Fargo in 2012 in a Northern California federal court. Last year, a judge granted class-action status to a portion of the claims related to racketeering charges. Read more here.