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Wells Fargo Lawsuit Is Reinstated

September 11, 2004|From Bloomberg News

A federal appeals court Friday reinstated a class-action lawsuit that accuses Wells Fargo & Co., the nation's biggest mortgage lender, of charging excessive fees on home loans.

The U.S. 2nd Circuit Court of Appeals in New York reinstated a suit against the San Francisco-based bank that a trial judge had dismissed. The suit claims Wells Fargo, the nation's fourth-largest bank, violates federal law by requiring mortgage customers to pay excessive fees for some services.

The suit focuses on tax services, document preparation, flood certifications and underwriting during the home loan process. According to the complaint, Wells Fargo subcontracts some of those services and then makes customers pay the fees plus its own markup, even though it doesn't perform additional work.

Michael C. Spencer, a lawyer for homeowners suing the bank, said other lenders imposed similar fees and could be affected by the ruling. "It is standard practice by every lender," said Spencer of Milberg Weiss Bershad & Schulman in New York.

Wells Fargo spokesman Kevin Waetke declined to comment. Shares of the company gained 14 cents to $59.13 on the New York Stock Exchange.

The appeals court said the homeowners' claims, if true, would be a violation of the U.S. Real Estate Settlement Procedures Act. The court did not rule on the merits of the case, saying only that the homeowners had alleged enough facts for the suit to go forward. The case seeks class-action status.

The Department of Housing and Urban Development filed a brief siding with the homeowners, Spencer said. Appeals courts elsewhere have rejected similar claims, raising the prospect that the U.S. Supreme Court may be asked to resolve the issue.

Wells Fargo in July said second-quarter profit, which increased 12%, was reduced by 14 cents a share partially because of costs related to selling low-interest rate mortgages.

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