Extra Wells fees alleged
rate — assuming the loan is approved within a certain period, often 30 to 45 days. If approval takes longer, borrowers can still get the promised rate, but there are financing costs associated with extending guarantees.
Wells Fargo’s policy, like that of most lenders, is to cover those costs itself unless the delay is the borrower’s fault. Then, borrowers are charged what’s called a rate-lock extension fee.
In his lawsuit, former banker Mauricio Alaniz alleged that Wells Fargo’s mortgage-processing and underwriting division was understaffed, leading to chronic delays that were not borrowers’ fault. But rather than have the bank waive the rate-lock fee, workers would falsely report that borrowers had submitted incomplete or inaccurate information, according to the lawsuit.
Wells Fargo is by far the nation’s largest mortgage lender, originating $244 billion in home loans last year, or about 12 percent of all U.S. mortgages. Bank spokesman Tom Goyda said that he could not comment on Alaniz’s lawsuit but that the bank is reviewing “questions that have been raised about past practices” related to rate-lock fees.
Alaniz’s complaint mirrors claims made by another former Wells Fargo mortgage banker, Frank Chavez, in a letter sent last year to members of the House Financial Services Committee and the Senate banking committee.
Chavez, who also worked in Beverly Hills before resigning in April 2016, said delays in loan processing became more common starting in 2014, the year after Wells Fargo eliminated 2,300 mortgage-processing jobs. Other mortgage lenders cut back around that time, too, as the volume of mortgage applications declined following a surge of refinancing driven by record low interest rates.
On Friday, Wells Fargo said its profit edged higher in the second quarter as the bank got a boost from rising interest rates and the planned sale of its insurance service business.
Profit grew 5 percent to $5.8 billion, or $1.07 per share. That was more than the $1.01 per share expected by analysts, according to FactSet. The Associated Press contributed to this report.