Lawsuits Claim Wells Fargo Modified Mortgages Without Customer Permission
Friday, 16 Jun 2017 10:32 AM
The Washington Post reported that the bank forced borrowers in bankruptcy into loan modifications “by reducing their monthly mortgage payments, even though homeowners had not requested the adjustments,” according to lawsuits filed against Wells Fargo last week and last year.
The loan modifications also “typically extended consumers’ mortgages by decades, substantially increasing the amount of interest they would owe on their loans and putting them at greater risk of default,” the Post reported.
The $270 billion California-based lender is still recovering from a consumer accounts scandal last year.
The lawsuits, which were first reported by the New York Times, allege that Wells Fargo sent letters to the trustees handling the borrowers’ debt payments to notify them that the mortgage payments had been adjusted because of a trial loan modification, the Post reported.
The bank strongly denied the allegations and disputed the way the modifications were described in the complaint. Tom Goyda, a spokesman for Wells Fargo, said in an emailed statement to the Post that the “modification offers were clearly outlined in letters” sent to borrowers or their attorneys.
“In no event would we finalize a modification without receiving signed documents from the customer and, where required, approval from the bankruptcy court,” he said, adding in a subsequent interview that the borrowers’ loans were not modified, the Post reported.
However, Reuters’ Breakingviews Columnist Antony Currie explains that the bank now run by Tim Sloan is still struggling to get the basics right.
“The actions at issue might seem to help struggling borrowers: Wells Fargo lowered some customers’ monthly mortgage payments, potentially making them manageable. But there are two huge potential problems. First, the bank did this while also extending the duration of the loans – in one case by some 30 years. That greatly increased the total interest borrowers were on the hook to pay over the life of their loans,” Currie wrote.
“Second, Wells Fargo made these changes, according to the lawsuits, without getting the consent of either the customers or the relevant bankruptcy courts. Wells Fargo denies this, saying it notified customers and does “not finalize a loan modification without receiving signed documents” from the required parties,” he wrote.
“The trouble is, Wells Fargo has mucked up mortgage lending and modification in the past. It was one of the five lenders that in 2012 agreed to a $25 billion settlement with the U.S. federal government and 49 states to rectify poor loan servicing and foreclosure practices. Last year it forked over $1.2 billion to settle claims of reckless lending under a Federal Housing Administration program. Home loans should have been squeaky-clean after all that,” Currie wrote.
“Add to that its recent $185 million fine after retail bankers chasing aggressive account-opening targets created 2 million fake bank and credit-card accounts – events that cost former Chief Executive John Stumpf his job – and there’s a sense of a bank still not ensuring it has fundamental checks and balances in place.”