J Thomas Black
Board Certified, Consumer Bankruptcy Law- Texas Board of Legal Specialization

If you are in chapter 13 bankruptcy and Wells Fargo is your mortgage company, you may be entitled to receive a check or a credit to your mortgage loan because of a settlement with the U.S. Trustee's office, an arm of the U.S. Department of Justice. Wells Fargo will pay out $81.6 million in settlement payments and credits.

For a settlement involving this many people, the payments are not too bad! The payments average $1254 each, but yours could be more or less, depending on what happened on your mortgage loan. Your payment may be sent to your chapter 13 trustee if you are still in a chapter 13 case.

We are not sure yet if the trustees will refund the payments to the debtors, or apply them to the chapter 13 cases, either as a credit against what debtors owe on their plans (so the cases are completed earlier) or as an "additional" payment that would only benefit the unsecured creditors (assuming that a case is not paying the unsecured creditors in full through the plan). 

If you receive a check or a credit and you receive an IRS Form 1099 from Wells Fargo, be sure to provide the 1099 to your tax preparer, or if you prepare your own taxes you may need to report the payment or credit as income for the year. Consult a tax professional. 

Why did this settlement happen? Because mortgage companies or "mortgage servicers" such as Wells Fargo are required by Bankruptcy Rule 3002.1 to file Notices of Payment Change in chapter 13 bankruptcy cases each time the amount of the monthly mortgage payment changes. Mortgage payments commonly change either because of changes to escrow amounts due to taxes or insurance changing, or because the loan is a variable interest rate or ARM loan. 

According to the Bankruptcy Rule, mortgage servicers must send out the Payment Change Notices at least 21 days before the date of the payment change. In some cases Wells Fargo was sending the notices late, or not performing escrow analyses on some mortgage loans for years.

The U.S. Trustee's office brought suit against Wells Fargo in a court case called In re Green, Case No. 11-33377, in the U.S. Bankruptcy Court for the District of Maryland. As part of the settlement, and in addition to the payments and credits, Wells Fargo agreed to change its practices and comply with the law. If you are a homeowner with questions and Wells Fargo is your mortgage servicer, you can call Wells Fargo at 1-800-274-7025.

What do you think of this settlement? Is it fair to the homeowners? Fair to Wells Fargo? Do you have an experience with Notice of Payment Changes or escrow accounts in chapter 13? Or with Wells Fargo in general? Please leave your comments and questions below!

1 Comments
I owed one thousand dollars on my chapter 13 case and it would have been finished. I had a overage in my escrow account of $648.00. Instead of sending it to me as as usual Wells Fargo sent it to the trustee. The check was not received at the trustees office. I called Wells Fargo and they said they would cancel that one and send another one. This was a month later. The claimed they sent it, but afeter weeks the trustee said they got it, but did not know what to do with it. I kept asking them to send it to me or apply it to my account. The trustee never did this. I sent a payment for $280.00 which wasa the regular payment. The trustee dismissed my case and sent me two checks back. One for the $648.00 payment from Wells Fargo,and the other was the retured of my payment for $280.00. Wells Fargo's check was never credited to my account. I still owed other creditors one for $8000,00 which had been reduced to $800.00 and another for around $850.00 which was reduced top $80.00 because my debts were reduced to 10 percent for the bankruptsy They are now trying to collect the full amounmts from me. My balance for the bankrutpsy would have paid if my refund and next payment had been applied as it should have been. My only out is to file another bankrutpsy case for a 13 or a seven. Later I received a letter from Wells Fargo stating all escrow refunds would go the peoperty owner or applied to the mortgage. That was what they should have done in the first place, instead my life is still messed yp with date and I am 67 years old with a $650.00 social security check. It took three months to get the check to the trustee, and it still was not credited to my account or returned to me until it was to late to save me. By the way I made continuous calls to well fargo and the trustee to get the money credited. On one cal l and a letter Wells stated," This a decision we made in August of that year that all escrow funds would be sent to the trustee. and again the trustee never heard of such a thing. Thank you.
by Earnestine P. Greene January 10, 2017 at 02:37 PM
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