Wells Fargo (WFC) has been acquitted by a jury of giving kickbacks to a real estate firm in exchange for mortgage business.
A group of homeowners who sued the nation's fourth-biggest bank and the real estate firm Long & Foster real estate failed to prove that Wells Fargo funneled referral fees to Long & Foster, a Maryland jury found Friday.
The verdict ended a class-action lawsuit filed in 2007 with the U.S. District Court in Baltimore by homeowners who obtained mortgages from Prosperity Mortgage, an entity the homeowners alleged that Wells Fargo and Long & Foster formed to facilitate the collection of fees and payments.
Wells Fargo solicited loan originations from Long & Foster by promising that the real estate firm could collect additional funds for loan applications it referred to the bank, according to the lawsuit.
Both companies denied the allegations.
"We thought it was a very unfair lawsuit to begin with and we clearly feel vindicated that we were doing it the right way," Tim Wilson, a Long & Foster spokesman, told American Banker. "Our customers are getting great service, and we think the jury affirmed that."
A Wells Fargo spokesman did not respond to a request for comment. Lawyers for the homeowners also did not respond to a request for comment.
For their part, the homeowners alleged that Wells Fargo and Long & Foster overcharged them for fees attributable to Prosperity Mortgage that instead were split between the companies in violation of the Real Estate Settlement Procedures Act, which governs information about the cost of mortgage settlement that lenders provide to borrowers.
Denise Minter, a homeowner from Baltimore who settled on her house in 2006, charged that Long & Foster required her to use Prosperity as her lender and that at closing, Wells Fargo, which funded her loan, withheld $945 in fees that the bank and realtor later divided between themselves.
Jason and Rachel Alborough made similar charges in connection with a home purchase in 2007 they said required them to pay $777 in allegedly illegal fees, while Lizbeth Binks alleged she paid $2,382 in fees attributable to Prosperity that were later divided between Wells Fargo and Long & Foster.
The borrowers charged that paperwork they received in connection with their loan originations misled them about the services Prosperity provided.