The U.S. District Court for the Northern District of California recently approved a class action settlement between borrowers and a large national bank for the alleged unlawful and unfair collection of post-payment interest on FHA loans.
In Fowler v. Wells Fargo Bank, N.A., No. 17-cv-02092, plaintiffs alleged that the bank collected post-payment interest on their loans without providing the proper notice in compliance with HUD regulations. According to HUD regulations, banks may collect interest after a borrower repays the full principal on his or her FHA-insured loan if the final payment is made after the first of the month, provided a bank discloses to the borrower this ability using a form approved by the FHA Commissioner. The bank allegedly used its own unauthorized form that (1) did not fairly disclose the terms by which the bank could collect the post-payment interest and (2) suggested that borrowers could not avoid paying the post-payment interest.
The district court granted the motion for final approval of the class action settlement. The approved settlement included a net settlement fund consisting of $30 million, minus the costs of settlement administration, incentive awards, and attorneys’ fees and expenses. Plaintiffs estimated that members of the class will recover between $25 and $33. The Court approved attorneys’ fees of 25% of the total fund, or $7.5 million, costs in the amount of $70,000, and incentive awards to the two named plaintiffs totaling $12,500.