WBK Industry News - Litigation Developments

Large National Bank Will Pay $40.3MM to Settle Class Action Suit for Denying Mortgage Payment Modifications

A $40.3 million class-action settlement was recently approved between a large national bank and a class of plaintiffs who claimed that the bank wrongly denied them loan modifications, which resulted in foreclosure of their homes.

The borrowers claim that from 2010 through 2018, the bank made an error in its calculations for some borrowers that caused them to be denied a loan modification when they were in fact entitled to one under the Home Affordable Modification Plan.  Under HAMP, participating mortgage servicers were incentivized to modify eligible mortgages in order to avoid foreclosure.

The bank had twice previously detected this error in its calculation software, and in 2018 it implemented a comprehensive fix, publicized the error, and contacted certain homeowners to provide an apology and between $5,000 and $15,000 in compensation. 

Under the approved settlement, each borrower is entitled to between $14,000 and $116,502 in payments for economic damages, depending on their unpaid principal balance, the amount of time they were delinquent in payments, and any payment they had already received from the bank in remediation.

The case is Hernandez et al. v. Wells Fargo Bank NA et al., case number 3:18-cv-07354, in the U.S. District Court for the Northern District of California.