Wells Fargo & Co. reached a $50-million settlement this week with homeowners who alleged that the bank marked up home appraisal fees for borrowers who defaulted on their residential loans.
Under the terms of the settlement, which is still subject to a judge's approval, San Francisco-based Wells Fargo will be required to automatically mail checks to more than 250,000 mortgage holders.
Based on a class of 275,000 people, each person will receive at least $120, which is the highest amount Wells Fargo charged for one of these appraisals, said Roland Tellis of the law firm Baron & Budd, which represented the homeowners.
The plaintiffs won't need to fill out a claim form or provide any documentation to get compensated, according to Baron & Budd.
The case focused on broker price opinions, which are informal home appraisals done by real estate brokers when borrowers default on residential loans.
Plaintiffs alleged that although their mortgage agreements allowed Wells Fargo to pass along the costs of obtaining these appraisals from third-party real estate brokers, the bank charged homeowners more than it paid for the appraisals. The plaintiffs' racketeering claim was certified as a class action.
Wells Fargo believes its practices related to broker price opinion were "proper" and disagrees with the claims in the suit but agreed to settle to avoid further litigation, bank spokesman Tom Goyda said in a statement.
The settlement comes as Wells Fargo faces increased scrutiny from lawmakers over a separate issue: revelations that bank employees created as many as 2 million accounts in customers' names without those customers' knowledge or consent. The accounts scandal has led to a $185-million settlement with regulators and last month's sudden retirement of Wells Fargo Chief Executive John Stumpf.
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2:40 p.m.: This article was updated with details of how much each homeowner in the lawsuit will receive from Wells Fargo.