Wells Fargo: Deja Vu All Over Again
Another day, another Wells Fargo PR disaster.
The company is admitting they have foreclosed on about 400 homes owned by borrowers who were not allowed loan modifications to which they were entitled, delayed three years in admitting the problem, and are hoping to cheaply remediate it.
The bank disclosed the problem in a filing last Friday with the Securities and Exchange Commission (SEC). Wells Fargo admitted there had been an error in an automated program that persisted for five years and caused over 600 customers to be denied or not offered loan modifications to which they appeared otherwise eligible. The distressed homeowners had applied for the relief primarily through the Home Affordable Modification Program operated by the Treasury Department and the Federal Housing Finance Agency (FHFA). Four hundred of those customers ultimately lost their homes to foreclosure.
The problem started in 2010 and was not corrected until the fall of 2015 after it was discovered in an internal review. A spokesperson for the bank had no information on where the foreclosures occurred, but the Charlotte Observer said a number of them occurred in that area. Wells Fargo, based in San Francisco, has a large administrative presence in that North Carolina city.
The bank has largely completed its review of the matter and will begin to reach out to affected customers and offer remediation once it is finished, while admitting it could uncover additional problems. The filing said, "This effort to identify other instances in which customers may have experienced harm is ongoing, and it is possible that we may identify other areas of potential concern."
The bank has set aside $8 million this year to help the affected customers. This breaks down to $12,800 per affected customer.
Deon Roberts, writing in the Observer, said a number of consumer groups in North Carolina are speaking out about the issue, criticizing the bank for the three-year delay in reporting its findings, the amount set aside for reparations, and the bank's recent history. The state's Attorney General Josh Stein is said to be looking into the issue.
It was the latest in a series of mistakes, as well as actions, that could reasonably be considered fraudulent that have come to light regarding the bank in the last decade. These include selling bad loans to Fannie Mae, Freddie Mac, and the FHA. The most recent suit over this was settled for a $2.1 billion fine just last week. It has also been hit with suits over its auto-lending and student loan practices, paying $1 billion to the Consumer Financial Protection Bureau and the Comptroller of the Currency in April.
Among the more recent scandals was the 2016 revelation that its sales force had opened as many as two million deposit and credit card accounts without customers' knowledge or permission. That led to $185 million in fines and the resignation of former chair and CEO John Strumpt.