Yet again, Wells Fargo has been exposed for negligent or shady lending practices. The bank’s unforgiveable errors have directly led to more than 500 homeowners losing their houses to foreclosure.
The homeowners, who had applied for mortgage loan modifications under a federal program, were incorrectly denied because of a software glitch. Sadly, such clerical errors are all too common in the lending industry. Homeowners can fight foreclosure actions, but in this case the damage was already done. Hundreds of families were evicted from their homes before the error was discovered.
Review revealed the Wells Fargo problem was more widespread
In August, Wells Fargo disclosed to government regulators a “calculation error” in its underwriting software. That error caused 625 homeowners to be wrongly denied for loan modifications, which in turn resulted in 400 of those homeowners being foreclosed upon.
Upon further review of cases dating to 2010, Wells Fargo admitted that a total of 870 customers were wrongly denied mortgage modifications. Of those, 545 lost their homes to foreclosure.
The bank says it has reached out to the affected customers to offer assistance and remediation. It remains to be seen if they will do the right thing or add insult to injury by failing to fully restore those who were foreclosed upon. Wells Fargo previously said it has set aside $8 million in compensation; that works out to just $20,000 for each of the 400 initial foreclosure cases.
There’s a pattern here
Wells Fargo claims the loan modification denials were due to faulty software. But you can’t blame those customers for being skeptical given the number and extent of Wells Fargo scandals revealed in the past few years.
Wells Fargo was fined $185 million in 2016 for creating millions of phony accounts without customers’ knowledge. Fraud investigations are ongoing and the civil lawsuits may be into the billions. The bank also faces massive regulatory fines for unscrupulous practices revealed in 2018 its auto lending division. It has discontinued the practice and committed more than $400 million to compensate those customers.
Property owners have legal options for loan denials or foreclosure
Whether or not you are a Wells Fargo customer, you may have legal recourse if you are facing home foreclosure or if you believe you were wrongly turned down for a loan modification program or loan workout. There may be remedies to stave off foreclosure action or to walk away from an “underwater” mortgage.