Wells Fargo acknowledged Tuesday that, due to a calculation error, it had improperly foreclosed on 545 distressed homeowners after they asked for help with their mortgages.
Overall, 870 homeowners were denied help they qualified for – with more than half losing their homes afterward, Wells Fargo said.
The acknowledgment is sure to increase pressure on the San Francisco-based bank, which has been struggling to repair its image after a series of missteps. It has already paid more than $1 billion in fines to various regulators for opening up sham accounts people didn’t want and improperly repossessing thousands of cars.
Wells Fargo has repeatedly apologized for its missteps but has yet to win over many lawmakers, including Democrats who have called for its chief executive, Tim Sloan, to testify again about the bank’s actions. The bank is also under orders from the Federal Reserve not to grow any bigger that its current $2 trillion in assets until it addresses its various problems.
In this case, Wells Fargo said an internal review found that the bank had denied help to hundreds of homeowners after fees charged by foreclosure attorneys were improperly used when the bank determined whom to offer mortgage help. The problem began in 2010 and wasn’t corrected until last April, the bank said.
The revelation echoes the complaints of thousands of borrowers in the years after the financial crisis that banks were stingy about offering help with their exploding loans.
“It is really astounding that it has taken so long to find these problems and it is not at all clear that this is the end of it. A homeowner in distress deserves better,” said Alys Cohen, staff attorney for the National Consumer Law Center. “Why don’t we know more about how this happened? And where are the regulators ensuring that homeowners get fully compensated?”
Wells Fargo initially disclosed the problem in August and said it would set aside $8 million, or about $12,800 per customer, to address the problem. But on Tuesday it increased the number of people it believes were affected after conducting an expanded review. A “substantial majority” of the borrowers have already been contacted and will be offered “remediation,” the bank said.
The bank did not say how much more money, if any, it expects to set aside to compensate the additional borrowers.
“This effort to identify other instances in which customers may have experienced harm is ongoing, and it is possible that we may identify other areas of potential concern,” the bank said in its SEC filing.
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