A federal judge has granted final approval to a $110 million shareholder derivative settlement resolving claims that Wells Fargo directors and senior executives failed to properly oversee the bank’s mortgage lending practices.
The final approval, announced May 15, paves the way for expanded mortgage assistance programs for low- and moderate-income borrowers in more than 50 metropolitan areas nationwide.
Under the settlement, Wells Fargo will provide $100 million to establish a borrower assistance program to support communities disproportionately affected by barriers to mortgage lending. The program includes grant and closing cost assistance for eligible borrowers purchasing or residing in designated metro areas.
According to the approval, the program “will remain in existence for a minimum of three years after the final approval of the settlement.”
The lead counsel also requested $27.5 million in attorneys’ fees and litigation costs. Court filings said the amount would be paid separately from the settlement’s $100 million borrower assistance program and a separate $10 million directors and officers insurance payment.
The litigation, filed in 2022 on behalf of Wells Fargo shareholders, alleged the bank’s board failed to maintain adequate oversight and lacked a functioning committee to monitor fairness in mortgage lending practices.
Plaintiffs said the governance shortcomings exposed the company to regulatory scrutiny, civil and criminal investigations, and significant compliance costs.
Law firms Motley Rice LLC, Cotchett Pitre & McCarthy LLP and Bleichmar Fonti & Auld LLP served as co-lead counsel for the plaintiffs, helping to negotiate the settlement and develop the borrower assistance framework.
“Often, the largest asset a person or family has is a home,” attorney Marlon Kimpson of Motley Rice said. “This settlement delivers real, tangible benefits for low- to moderate-income borrowers in census tracts that mirror the people allegedly discriminated against.”
Motley Rice attorney Josh Littlejohn called the agreement “a positive step toward needed change,” adding that it would provide assistance for borrowers who have historically faced barriers to homeownership.
Attorney Bill Norton said the settlement reinforces the importance of board-level accountability and compliance with fair lending laws.
“In a shareholder derivative action, the shareholders stand in the shoes of the company and seek to address its directors’ and officers’ alleged breaches of fiduciary duty,” Norton said. “This settlement strengthens Wells Fargo for all of its shareholders by reaffirming the bank’s commitment to lend to low- and moderate-income borrowers in communities throughout the country.”
The borrower assistance programs will be available in dozens of metropolitan areas, including markets in California, Texas, Florida, Georgia, New York, New Jersey, Pennsylvania and Washington, D.C.
Additional markets, including Houston, Las Vegas and Salt Lake City, will be eligible for closing cost credit assistance only.
