Wells Fargo Revises Estimate: More Loan Modification Errors than Previously Thought
November 7, 2018
Back in August of this year, Wells Fargo wrote in a filing with the Securities and Exchange Commission (SEC) that there was an error in its software for calculating whether someone qualified for a mortgage modification under federal law, affecting about 600 individuals—400 of whom were foreclosed upon.
In early November, Wells Fargo revised the estimate upwards in a new SEC filing, stating that 870 individuals who were legally entitled to a loan modification under the federal Home Affordable Modification Program (HAMP) were wrongfully denied a modification by Wells Fargo and its faulty software. Of those individuals, 545 lost their homes in foreclosure, according to Wells Fargo’s newest SEC disclosure.
Wells Fargo says it has sent or will be sending notification letters and checks to individuals who were affected by the miscalculation error. But many former homeowners who suffered serious financial hardship from the foreclosure feel that the amount that is offered by Wells Fargo is insufficient to compensate them for lost home equity value, years of poor credit, the stigma of foreclosure, and pain and suffering. On behalf of affected homeowners, we have filed a Wells Fargo loan modification lawsuit over the software error and wrongful foreclosures.
Not the First Time Wells Fargo Has Expanded Its Estimate of Wrong Doing
During its fraudulent account opening scandal, Wells Fargo initially announced that 2.1 million accounts had been secretly opened in customers’ names, without their consent, by Wells Fargo employees who faced extreme pressure from managers to meet account-opening quotas, reports Chicago Tribune. Wells Fargo later revised the estimate, saying that a total of 3.5 million fraudulent accounts were opened, according to the Tribune.
Initially, Wells Fargo had said that only 130,000 of those accounts had incurred charges or fees on the accounts opened in their names, the Tribune reports. Wells Fargo later revised the estimate to 190,000 who incurred fees and another 528,000 who were signed up for online bill payments without their authorization, says the Tribune.
Wells Fargo ended up settling with regulators, who were investigating the fake accounts, for a total of $185 million, and settled a class action on behalf of customers who paid fees on accounts they didn’t open for a total of $142 million, the Tribune reports.
Force-Placed Car Insurance
In July 2017, the New York Times broke the story that Wells Fargo had improperly force-placed car insurance on the vehicles of more than 800,000 people who took out auto loans with Wells Fargo. Of those, 25,000 people had their cars wrongfully repossessed, according to NYT. Wells Fargo initially announced that it would be setting aside $80 million to compensate affected car loan borrowers. Wells Fargo later revised this estimate, saying it would pay affected borrowers $145 million and adjust their account balances by another $37 million (for a total value of $182 million).
Our attorneys serve in a court-appointed leadership position in the class action lawsuit against Wells Fargo over force-placed auto insurance.
To compensate for the mortgage modification error, Wells Fargo has said it will set aside only $8 million. But if past trends continue, this number may rise, as Wells Fargo faces increasing pressure from regulators. This compensation is part of the purported Wells Fargo computer glitch compensation program.
Wells Fargo’s Newest SEC Filing: 870, rather than 625, affected by loan modification error
Wells Fargo’s newest SEC filing contains a revised upward estimate of the number of faulty loan-modification denials the bank issued.
The SEC filing says:
Mortgage Loan Modifications | An internal review of the Company’s use of a mortgage loan modification underwriting tool identified a calculation error regarding foreclosure attorneys’ fees affecting certain accounts that were in the foreclosure process between April 13, 2010, and October 2, 2015, when the error was corrected. A subsequent expanded review identified related errors regarding the maximum allowable foreclosure attorneys’ fees permitted for certain accounts that were in the foreclosure process between March 15, 2010, and April 30, 2018, when new controls were implemented. Similar to the initial calculation error, these errors caused an overstatement of the attorneys’ fees that were included for purposes of determining whether a customer qualified for a mortgage loan modification or repayment plan pursuant to the requirements of government-sponsored enterprises (such as Fannie Mae and Freddie Mac), the Federal Housing Administration (FHA), and the U.S. Department of Treasury’s Home Affordable Modification Program (HAMP). Customers were not actually charged the incorrect attorneys’ fees. As a result of these errors, taken together and subject to final validation, approximately 870 customers were incorrectly denied a loan modification or were not offered a loan modification or repayment plan in cases where they otherwise would have qualified. In approximately 545 of these instances, after the loan modification was denied or the customer was deemed ineligible to be offered a loan modification or repayment plan, a foreclosure was completed. The Company has contacted a substantial majority of the approximately 870 affected customers to provide remediation and the option also to pursue no-cost mediation with an independent mediator. Attempts to contact the remaining affected customers are ongoing. Also, the Company’s review of these matters is ongoing, including a review of its mortgage loan modification tools.
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