Wells Hit With Option-ARM Lawsuit Challenging 2010 Settlement

Legal filings last week said Wells had failed to provide wide-ranging reductions of loan balances to delinquent borrowers, as it had promised two years ago, when it settled a combined national class-action suit. A bank spokeswoman disputed the filing, calling it riddled with errors.

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The settlement was reached in December 2010 before U.S. District Judge Jeremy Fogel in San Jose. At the time, the San Francisco bank said it would provide at least $50 million and as much as $600 million in modification benefits to troubled borrowers with the pay-option loans.

Plaintiffs' attorney Jeffrey K. Berns of Woodland Hills had calculated the number might reach $2 billion.

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Of the 66,000 requests for loan modifications made in the 18 months ending Sept. 30, Wells granted only 1,746, or 2.6 percent, Berns alleged.