As Wells Fargo is trying to turn the corner on a scandal in its consumer banking segment that came to light a little under a year ago, it seems a new set of troubles are coming down the pipeline — this time in relation to the bank’s mortgage lending division.
Reports in The New York Times indicate officials in the mortgage lending unit were making unauthorized changes to home loans held by customers in bankruptcy.
A class action lawsuit for the alleged victims of the loan modifications contends that consumers were surprised to find out their monthly loan payments had gone down — which they didn’t mind — and to learn that the terms of their loans had been extended greatly to make those lower payments possible (that they minded). Decades longer on a loan term means much greater interest payments to the bank.
Those types of major changes for a consumer in bankruptcy are subject to approval by a bankruptcy court judge — but Wells Fago seems to have decided to skip that step and just put the changes through without alerting any involved party, according to filings in the ongoing class action lawsuit.
The changes are part of a trial loan modification process from Wells Fargo — however, failing to tell borrowers that they were involved in a trial loan modification put them in danger of defaulting on other commitments they’ve made to the courts.
A spokesman for Wells Fargo, Tom Goyda, said the bank strongly denied the claims made in the lawsuits and particularly disputed how the complaints characterized the bank’s actions. Wells Fargo contends that the borrowers and the bankruptcy courts were notified.
“Modifications help customers stay in their homes when they encounter financial challenges,” Mr. Goyda said, “and we have used them to help more than one million families since the beginning of 2009.”
According to court documents, Wells Fargo has been putting through unrequested changes to borrowers’ loans since 2015.