Wells Fargo is in negotiations to resolve a class-action lawsuit alleging that the bank was making mortgage modifications without the knowledge or consent of borrowers – modifications that could dramatically increase homeowners’ borrowing costs.
The scandal – one of many plaguing the banking giant – first came to light in June after a North Carolina couple filed the class-action suit, according to a report by the Charlotte Observer.
The plaintiffs in the case, Christopher and Allison Cotton, filed a voluntary Chapter 13 bankruptcy in 2014, the Observer reported. They were current on their mortgage payments at the time and remained current on payments outlined in their bankruptcy plan, their lawsuit said. But they allege that Wells Fargo made “illegal stealth modifications” that caused their Chapter 13 trustee to pay less than originally required. That, the lawsuit alleged, resulted in “defaults that were not the Cottons’ fault.”
The lawsuit also claimed that Wells Fargo’s “stealth modifications” would have added thousands of dollars to the Cottons’ mortgage debt over the term of the loan – without their knowledge or consent. One alleged change would have extended their mortgage by 26 years and added at least $84,939 in extra interest, the Observer reported.
Wells Fargo has strongly denied the claims in the lawsuit, according to the Observer. However, the banking giant has agreed to “good faith class settlement negotiations” to resolve the suit. The case is only one of a cavalcade of scandals for the bank; CEO Tim Sloane is set to face a Senate committee Oct. 3 over the bank’s numerous alleged improprieties.