Law­suits claim Wells Fargo il­le­gally re­vised mort­gages

Bank strongly de­nies it pulled off ‘stealth mod­i­fi­ca­tions’

USA TODAY US Edition - - MONEY - Nathan Bomey @NathanBomey Con­tribut­ing: Kevin McCoy

Wells Fargo faces new ac­cu­sa­tions it tried to cap­i­tal­ize fi­nan­cially on its cus­tomers with­out their per­mis­sion, this time by al­legedly mod­i­fy­ing mort­gage terms for peo­ple who had filed for bank­ruptcy protection.

With the smoke still lin­ger­ing from the firestorm that erupted from the bank’s open­ing of fake con­sumer ac­counts, Wells Fargo was hit with mul­ti­ple law­suits al­leg­ing the bank sur­rep­ti­tiously ex­tended loan lengths, po­ten­tially cost­ing some home­own­ers tens of thou­sands of dol­lars.

The bank pulled off a “vir­tual hi­jack­ing ” with the al­leged scam by im­ple­ment­ing “il­le­gal stealth mod­i­fi­ca­tions” in at least 100 cases across the U.S., plain­tiffs at­tor­neys said in court pa­pers filed June 7 in U.S. Bank­ruptcy Court for the Western Dis­trict of North Carolina, where they are hop­ing to as­sem­ble a class-ac­tion group.

Wells Fargo spokesman Tom Goyda said the bank “strongly de­nies the claims” be­cause the com­pany clearly iden­ti­fied “mod­i­fi­ca­tion of­fers” in let­ters to cus­tomers, their at­tor­neys and the re­spec­tive bank­ruptcy courts.

“In no event would we fi­nal­ize a mod­i­fi­ca­tion with­out re­ceiv­ing signed doc­u­ments from the cus­tomer and, where re­quired, ap­proval from the bank­ruptcy court,” Goyda said in an email.

The lat­est ac­cu­sa­tions en­sure a fresh round of scru­tiny over Wells Fargo’s prac­tices, not long af­ter the bank reached a $185 mil­lion fed­eral set­tle­ment over an ac­knowl­edg­ment that ag­gres­sive sales in­cen­tives and pres­sure prompted many branch em­ploy­ees to open fake ac­counts to meet their goals.

That episode led to the res­ig­na­tion of CEO John Stumpf and the claw­back of tens of mil­lions of dol­lars in ex­ec­u­tive pay.

To be sure, mod­i­fi­ca­tions of loan terms, in­clud­ing ex­tend­ing pay­ment over longer pe­ri­ods and low­er­ing monthly amounts, are of­ten help­ful to cus­tomers who are seek­ing short-term breath­ing room on their fi­nances. But longer loan pe­ri­ods of­ten in­volve larger pay­ments over time.

The com­plaint seek­ing clas­s­ac­tion sta­tus was sub­mit­ted on be­half of North Carolina res­i­dents Christopher Dee Cot­ton and Al­li­son Hedrick Cot­ton, who filed for Chap­ter 13 bank­ruptcy protection in Fe­bru­ary 2014 with a Wells Fargo-ser­viced mort­gage bal­ance of $171,215 at a 20-year in­ter­est rate of 4.875%. They re­mained cur­rent on their pay­ments be­fore and dur­ing the bank­ruptcy, ac­cord­ing to their lawyers.

But the bank nonethe­less sub­mit­ted rou­tine doc­u­men­ta­tion through the le­gal sys­tem that re­sulted in an ex­ten­sion of their orig­i­nal 20-year loan to 40 years, with a re­duced in­ter­est rate of 3.875% ul­ti­mately cost­ing them an ex­tra $84,939 in in­ter­est over the life of the mort­gage, ac­cord­ing to the suit.

The ac­cu­sa­tions come less than two years af­ter Wells Fargo reached a set­tle­ment with the Jus­tice De­part­ment in which it agreed to pay $81.6 mil­lion over an al­leged fail­ure to no­tify cus­tomers of pay­ment changes on a timely ba­sis for more than 68,000 home­own­ers in bank­ruptcy from De­cem­ber 2011 through March 2015.

The com­pany agreed as part of that process to over­haul its op­er­a­tions and ac­cept over­sight from an in­de­pen­dent re­viewer.

It was not im­me­di­ately clear whether the lat­est ac­cu­sa­tions would carry im­pli­ca­tions for the Nov. 5, 2015, Jus­tice set­tle­ment.

“In no event would we fi­nal­ize a mod­i­fi­ca­tion with­out re­ceiv­ing signed doc­u­ments from the cus­tomer and, where re­quired, ap­proval from the bank­ruptcy court.” Wells Fargo spokesman Tom Goyda


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