Wells Fargo fined $ 250 million for mismanagement of mortgage program
Wells Fargo will pay $ 250 million after regulators accused the bank of failing to properly oversee mortgages, which are managed by a Des Moines-based division of the company.
Bank executives and the U.S. Office of the Comptroller of the Currency on Thursday announced a consent order requiring Wells Fargo employees to improve their decision-making when assessing whether borrowers are eligible for loan repayment relief. The nine-figure fine comes after regulators alerted Wells Fargo to similar problems three years ago.
“This is unacceptable,” Acting Currency Comptroller Michael Hsu said in a statement. “… The OCC will continue to use all the tools at its disposal, including trade restrictions, to ensure that domestic banks deal with issues in a timely manner, treat customers fairly, and operate in a safe and sound manner. . “
In addition to paying the fine, Wells Fargo executives have agreed to temporarily stop servicing other lenders’ mortgages, an arrangement in which the bank collects fees for processing payments from customers of other banks. On the other end of these deals, Wells Fargo will also stop handing over fee-generating service responsibilities for certain mortgages to other lenders in exchange for an upfront payment.
Wells Fargo & Co. issues more mortgages than any other bank in the country. Ranked as the number one private employer of the Des Moines metro, it has about 13,000 workers in central Iowa, a spokesperson told the Des Moines Register earlier this year.
According to a cease and desist order from OCC, a bank committee must write policies to help employees more accurately assess whether borrowers qualify for mortgage relief.
The OCC also ordered the company to assess employee decision making every three months, create a new plan on how to handle customer complaints, properly document all decisions, and maintain sufficient workers to process relief requests from borrowers.
“Building an appropriate risk and control infrastructure has been and remains Wells Fargo’s top priority,” Wells Fargo CEO Charlie Scharf said in a statement Thursday. “OCC’s actions today indicate the work we must continue to do to address important and long-standing gaps. “
Guy Cecala, editor of Inside Mortgage Finance, said regulators’ sanction against Wells Fargo is linked to the Great Recession, when subprime mortgages sparked a wave of foreclosures.
In the wake of the economic collapse, lawmakers and regulators have called on banks to offer special debt relief to certain borrowers who may have been victims of predatory lending. For example, a borrower whose mortgage rate has doubled to 12% may not have enough income to meet their monthly payments.
As this borrower fell behind, Cecala said, regulators demanded lenders offer help rather than immediately foreclosure. The banks may have had to lower the borrower’s interest rate or allow more time to catch up.
Cecala said some lenders were struggling to determine which customers were eligible for relief. The OCC issued a consent order against Wells Fargo in 2018, asking the bank to improve its software systems and employee decision-making.
“Despite a lot of effort, Wells Fargo hasn’t fixed everything that needs to be fixed,” Cecala said.
In its statement on Thursday, Wells Fargo also announced that its 2016 Consent Order from the Consumer Financial Protection Bureau expired this week. The action was linked to the bank’s fake accounts scandal, in which thousands of employees unwittingly opened new accounts on behalf of customers to increase commissions.
“Our work to build the right foundation for a company of our size and complexity will not follow a straight line,” Scharf said in a statement. “We are dealing with several issues simultaneously, and progress will come with setbacks. That said, we believe we are making significant progress.”
Wells Fargo most recently reported a profit of $ 6 billion for the quarter ending June 30. That included $ 2.07 billion in revenue from its home loan division, a 40% increase from the same period a year earlier.