Wells Fargo said Tuesday (Nov. 6) that an underwriting error internally prompted it to reject home loan modifications, which resulted in the bank foreclosing on more homes than planned.
According to a report in Reuters, citing a filing with regulators, Wells Fargo said an expanded internal review at the bank found that 870 customers were erroneously denied mortgage changes, with 545 of them losing their homes as a result of the error. In August, the bank first announced a calculation error during the internal underwriting process, which resulted in 625 borrowers being denied mortgage loan modifications for which they were actually eligible. Of those, 400 lost their homes to foreclosures.
“We’re very sorry that the errors occurred and have assigned a single, dedicated point of contact to ensure that each customer is engaged with and assisted individually,” Tom Goyda, a spokesman for the company, said in an email to Reuters. The expanded internal inquiry is still ongoing, and now includes customers who were involved with the foreclosure process from March 15, 2010, through April 30, 2018. The spokesman told Reuters the bank had contacted "a substantial majority" of those impacted to provide remediation and the option to engage in free mediation with an independent mediator.
Wells Fargo blamed the problem on a calculation error that overstated fees that went to attorneys when deciding if customers could get loan modifications. The bank said in August that it had fixed the glitch and put $8 million aside to compensate borrowers, but didn't update the money in reserve with Tuesday's disclosure, noted the report.
This latest revelation comes a few days after Wells Fargo announced its Chief Administrative Officer Hope Hardison and Chief Auditor David Julian have begun leaves of absence from the bank and will no longer be members of the company’s operating committee. In a press release, Wells Fargo said the leaves are related to ongoing reviews by regulatory agencies in connection with the historical retail banking sales practices. Wells Fargo noted their leaves have nothing to do with the bank's reported financial results or internal financial controls.