Wells Fargo has agreed to settle a lawsuit that accused it of overcharging homeowners for appraisals ordered after they defaulted on their mortgage loans. The company will be paying $50 million to settle the lawsuit.
According to Reuters, the settlement, once approved, will resolve the claims of hundreds of thousands of homeowners. These homeowners said that Wells Fargo overcharged them for appraisals ordered than what third-party appraisal offers, exploiting the borrowers who could least afford it and driving them further into debt.
USA Today reports that the latest settlement piles on top of other legal issues that Wells Fargo is facing following a scandal this year. The company was mired in a scandal where thousands of bank employees allegedly opened accounts unknown to its customers to reach sales goals.
Wells Fargo spokesman Tom Goyda said that the bank is settling to avoid prolonged litigation. He adds that the bank stands by its procedures.
Goyda said that the settlement is part of a private class action lawsuit where part of the payments goes to the members of the class. The other part of the payment goes to legal costs and attorney fees.
Goyda adds that they disagree with the claims, but opted to settle to avoid further problems. He said they "believe their practices related to Broker Price Opinions were proper."
Ronald Tellis, the plaintiff's lawyer, said they are pleased with the results of negotiating a settlement to avoid litigation. He said that about 250,000 homeowners are covered by the proposed deal.
Mortgage banks are allowed to charge homeowners for appraisals if they default on their mortgage loans. But Wells Fargo overcharged the homeowners for the appraisals ordered.
The complaint said that the company typically charged $95 to $125 for the type of expedited appraisal at issue while the actual cost was $50 less. The overcharge added hundreds of thousands of dollars to borrower's mortgage loans over time.