Wells Fargo fined $250 million over mortgage loan modifications

Wells Fargo has agreed to pay a $250 million fine after an investigation by federal banking regulators questioned the bank’s practices in helping homeowners struggling to pay their mortgages.

In announcing the fine, the Office of the Comptroller of the Currency said Wells Fargo failed to implement an effective home loan loss mitigation program and discovered the bank’s mistakes. by offering loan modifications to homeowners.

Michael J. Hsu

“In addition to the $250 million civil penalty we are imposing on Wells Fargo, today’s action limits the bank’s future activities until the existing issues in servicing mortgages are resolved. properly resolved,” Acting Comptroller of the Currency Michael J. Hsu said in a statement. declaration. “The OCC will continue to use all the tools at our disposal, including trade restrictions, to ensure that domestic banks resolve issues in a timely manner, treat customers fairly, and operate in a safe and sound manner.”

The OCC said Wells Fargo also violated the terms of a 2018 consent order that required the bank to develop and implement “an effective enterprise-wide compliance risk management program.” “, after discovering problematic practices in its auto lending business.

Charlie Scharf

In a statement, Wells Fargo CEO Charlie Scharf said, “Establishing an appropriate risk and control infrastructure has been and remains Wells Fargo’s top priority. Scharf acknowledged that the OCC’s actions “indicate the work we must continue to do to address significant and long-standing shortcomings.”

In one consent orderthe OCC said it found “significant deficiencies” in Wells Fargo’s loss mitigation practices – procedures it uses when homeowners struggle to make their monthly mortgage payments.

Wells Fargo’s “loss mitigation decision tools” — software applications and IT tools for end users — contributed to “errors in the bank’s loss mitigation processes and controls that negatively affected borrowers,” the regulators said.

In offering loan modifications to borrowers, Wells Fargo made errors that it failed to “detect, prevent, and quantify” in a timely manner, which impaired the bank’s ability to “fully and in a timely manner to aggrieved customers”.

The OCC has given Wells Fargo 150 days to submit an action plan to improve the loss mitigation program within its home lending business, ensuring the bank “conducts loss mitigation activities effective and sustainable, including loan modification decisions”.

The OCC will require quarterly assessments of the effectiveness of loss mitigation systems and “post-implementation testing and review processes to ensure that changes to loss mitigation tools have been delivered as planned”.

In the meantime, the OCC said Wells Fargo should determine “whether it is necessary to establish and maintain foreclosure holds for affected borrowers until corrective action is taken.”

While the order is in effect, Wells Fargo does not have the right to acquire other companies that provide residential mortgages, or to acquire the right to collect payments from, or “service,” mortgages. issued by other companies. These restrictions do not apply to Wells Fargo retail, brokerage or correspondent channels. It can still initiate and refinance new loans.

Scharf noted that a 2016 Consent Order imposed by the Consumer Financial Protection Bureau on Wells Fargo’s retail practices recently expired. The order required Wells Fargo to pay a $100 million fine and compensate customers who were charged fees and other charges when the bank opened deposit and credit card accounts without their knowledge or consent. .

In 2018, the CFPB hit Wells Fargo with a $1 billion fine for its administration of a mandatory insurance program tied to its auto loans, and charges the bank imposed on certain borrowers when granting mortgage interest rate lock-in extensions. The OCC has published its own fine and consent order in this case, which she now accuses Wells Fargo of having raped.

“The expiry of the CFPB’s 2016 consent order is representative of the progress we are making,” Scharf said. “We have done substantial work to ensure that the conduct at the heart of the consent order – which was wrongful and completely inconsistent with the values ​​on which this company was built – will not happen again.”

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