Wells Fargo & Company (WFC) is set to end the legal tussle it has been encountering since 2011 for a settlement of around a minimum of $67 million in connection with the ‘robo-signing’ fiasco. It was alleged that the company officials have conducted improper verification of documents in the home-foreclosure process.
In a judicial foreclosure state, the foreclosure process requires that the lending institution must authorize the fact that the homeowner has defaulted on a mortgage which the lender owns. It needs to be authorized through submission of verified documents and written statement duly signed under affidavit by a bank official. The objective is to restrict the possession of houses by the bank in the event where the bank is unable to prove the ownership of the particular mortgage or where in actuality the homeowner has not defaulted to the extent stated in the foreclosure papers.
In the wake of the mortgage crisis, in 2010, the robo-signing scandal popped up, according to which a number of banking giants including Wells Fargo, JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC) and Citigroup Inc. (C) regularly used false affidavits signed by bank officials without proper review and verification of documents. The term ‘robosigner’ was coined as the fact that bank official of companies speedily approved numerous foreclosure documents without true knowledge. This amounted to breach of law and faulty documents that caused improper foreclosure of homes.
Notably, in 2012, Wells Fargo along with other financial institutions reached a settlement for $25 billion owing to charges of faulty documents and other doubtful foreclosure practices.
Though Wells Fargo has not accepted the allegations, it has agreed for the settlement to lessen litigations, uncertainty and risks.
As per the latest settlement, Wells Fargo will shell out $36.5 million as down payment assistance to affected home buyers in places including California's Central Valley, Detroit, St. Louis and Virginia Beach, VA. Further, the bank will provide $6 million in counseling support for its customers who are in a difficult position to make mortgage payments.
Also, Wells Fargo will integrate operations of residential mortgage servicing in order to ensure consistent management of the business. The company expects to incur $24.5 million as consolidation cost.
Wells Fargo currently carries a Zacks Rank #3 (Hold).
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