Wells Fargo cus­tomers ask: Did er­ror cost my house?

The Charlotte Observer (Sunday) - - Front Page - BY DEON ROBERTS AND BRUCE HEN­DER­SON der­[email protected]­lot­teob­server.com bhen­der­[email protected]­lot­teob­server.com

When the econ­omy tanked in the Great Re­ces­sion a decade ago, Diana John­son and her hus­band strug­gled to make pay­ments on a Wells Fargo mort­gage for her home in up­state New York, which she ul­ti­mately lost.

Af­ter Wells re­cently an­nounced it wrongly with­held mort­gage mod­i­fi­ca­tions from home­own­ers be­cause of a soft­ware prob­lem, John­son was among many around the coun­try won­der­ing whether they were among the roughly 625 peo­ple the bank says were harmed. Wells has said about 400 peo­ple lost their homes af­ter its er­ror.

Al­though Wells has an­nounced plans for $8 mil­lion in re­lief for the vic­tims, it said it hasn’t con­tacted them yet nor said when it will do so.

More than 300 peo­ple con­tacted the Ob­server af­ter Wells re­vealed the mod­i­fi­ca­tion prob­lem, want­ing to know if they qual­ify for any com­pen­sa­tion – and many won­der­ing if the Wells Fargo er­ror had cost them their homes.

John­son, who now lives in Char­lotte, and other cus­tomers de­scribed the wait to learn if they qual­ify for com­pen­sa­tion as frus­trat­ing and up­set­ting. In ad­di­tion, the dis­clo­sure of Wells’ er­ror has dredged up mem­o­ries from a painful time in their lives, they said.

“We lost a lot when we lost that house,” said John­son, 51. “It was tough enough when you had to go through it the first time, and now we’re go­ing through it a sec­ond time.”

In its lat­est ad­mis­sion of wrong­do­ing to cus­tomers,

Wells Fargo said faulty com­puter soft­ware that the bank de­vel­oped caused it to deny, or not of­fer, lower mort­gage pay­ments to cus­tomers who should have qual­i­fied for the ad­just­ments.

The bank dis­closed the er­ror the af­ter­noon of Aug. 3 in a 173-page quar­terly se­cu­ri­ties fil­ing gen­er­ally read by in­vestors, in a sec­tion ti­tled “Ad­di­tional Ef­forts to Re­build Trust.”

Wells apol­o­gized for the mod­i­fi­ca­tion mis­take. The bank said the prob­lem af­fected homes in the fore­clo­sure process from 2010 to 2015, when many peo­ple were still stag­ger­ing from the soured econ­omy.

In a mort­gage mod­i­fi­ca­tion, a bank agrees to lower the monthly pay­ment as a way to help strug­gling bor­row­ers avoid los­ing their home.

Some de­scribed the mod­i­fi­ca­tion process as night­mar­ish, say­ing it in­volved sub­mit­ting large amounts of pa­per­work that the bank would lose and later ask for again.

One for­mer cus­tomer said he faxed doc­u­ments for months to a ma­chine that he even­tu­ally learned had long been out of pa­per.

Oth­ers said they were of­ten given con­flict­ing in­for­ma­tion by bank rep­re­sen­ta­tives.

In an­nounc­ing the mis­take, Wells noted that it cor­rected the prob­lem in 2015. That prompted cus­tomers to ques­tion why the er­ror wasn’t dis­closed sooner.

“They should have im­me­di­ately come out and said we made a mis­take and cor­rect it, not three years later,” said Phillip Jack­son, who said he had Wells Fargo mort­gages on his home in Cal­i­for­nia and rental prop­erty in Mas­sachusetts that were in fore­clo­sure dur­ing the af­fected time pe­riod.

Wells Fargo re­peat­edly de­nied his re­quests for loan mod­i­fi­ca­tions, he said.

“They knew they made this er­ror in 2015,” said Jack­son, 66, who had to sell his home and lost the rental in a fore­clo­sure sale. “How many peo­ple lost their homes af­ter that er­ror was dis­cov­ered? That ain’t even wrong. That’s evil.”

The Ob­server told Wells Fargo about the hun­dreds of re­sponses to the bank’s dis­clo­sure. The bank said it could not com­ment on in­di­vid­ual cases.

Wells spokesman Kurt Schroeder said the bank is in the process of com­plet­ing a “very thor­ough” re­view to en­sure it has iden­ti­fied ev­ery cus­tomer im­pacted by the mod­i­fi­ca­tion er­ror.

Cus­tomers and con­sumer ad­vo­cates have also crit­i­cized Wells for the amount of com­pen­sa­tion, which works out to less than $13,000 per per­son on av­er­age.

Wells hasn’t dis­closed in­di­vid­ual awards or how it de­ter­mined the amounts. Cus­tomers are re­ceiv­ing what the bank be­lieves is ap­pro­pri­ate given the cir­cum­stances, Wells has said.

Crit­ics say the com­pen­sa­tion is not nearly enough to re­im­burse peo­ple for the fi­nan­cial, phys­i­cal and emo­tional tur­moil of los­ing a home to fore­clo­sure – one of the most dev­as­tat­ing events a fam­ily can face.

The ef­fects can haunt a per­son for years.

In some cases, home­own­ers will file for bank­ruptcy to stop a fore­clo­sure. Bankrupt­cies and fore­clo­sures can lower a per­son’s credit score, which af­fects ev­ery­thing from the abil­ity to rent an apart­ment to be­ing ap- proved for loans.

Ac­cord­ing to con­sumer ad­vo­cates, a fore­clo­sure can also have gen­er­a­tional im­pacts, in­creas­ing the like­li­hood that chil­dren will do poorly in school dur­ing the fore­clo­sure process then later if they re­lo­cate to a new school af­ter the home is lost.

“It wouldn’t be enough for me to buy an­other house,” said Jack­son, not­ing it could cost $100,000 just for a down pay­ment on a home in Cal­i­for­nia. “You’re never go­ing to get back what you had.”


Phillip Jack­son, 66, who had to sell his home and lost a rental in a fore­clo­sure sale


Joe Fer­ris, 62, is also won­der­ing if he’s one of the 625 vic­tims af­ter he and his wife Ch­eryl lost their home of 18 years in Lawrenceville, Ga.

When the re­ces­sion hit in 2007 and 2008, Fer­ris’ in­come from a car busi­ness and build­ing barns dropped, he said. In 2009, he asked Wells to mod­ify his loan.

Fer­ris said he sent doc­u­ments to bank of­fices in Roanoke, Va.; Philadel­phia; Port­land, Ore.; Hous­ton; and Cal­i­for­nia and South Dakota.

The bank de­nied his ap­pli­ca­tions twice, Fer­ris said.

In 2011, he said, he filed bank­ruptcy on an at­tor­ney’s ad­vice in an ef­fort to de­lay fore­clo­sure by a few months. In late 2011 or early 2012, he said, Wells sent him a let­ter in­form­ing he had to move out of the house.

Four months later, he said, af­ter he and his wife had moved away, the bank ap­proved his lat­est loan mod­i­fi­ca­tion.

“We wanted our home, and I was try­ing to work with them to get it done,” Fer­ris said. “It’s like the right doesn’t know the left, and the left didn’t know the right.”


The mort­gage mod­i­fi­ca­tion er­ror is the lat­est dis­clo­sure of prob­lems that have hurt cus­tomers at the San Fran­cisco-based bank, which main­tains its largest em­ploy­ment hub in Char­lotte.

The rev­e­la­tion also comes nearly two years af­ter au­thor­i­ties fined Wells $185 mil­lion over al­le­ga­tions it opened mil­lions of cus­tomer ac­counts with­out au­tho­riza­tion.

Since then, Wells has ac­knowl­edged other prac­tices that have harmed cus­tomers in auto lend­ing, wealth man­age­ment and other ar­eas.

In Fe­bru­ary, the Fed­eral Re­serve, in an un­prece­dented step, an­nounced it was re­strict­ing Wells’ growth and ac­cused the bank’s board of fail­ing to prop­erly over­see the com­pany.

Such prob­lems have taken their toll on the bank, whose share price is down about 4 per­cent for the year, com­pared to a 2.4 per­cent rise in the KBW Bank In­dex, which tracks shares of large U.S. banks.

To im­prove its im­age with cus­tomers, Wells rolled out a new mar­ket­ing cam­paign this spring: “Re-es­tab­lished 2018.”

In its se­cu­ri­ties fil­ing, Wells did not rule out un­cov­er­ing “other ar­eas of po­ten­tial con­cern” in its re­view.

“We are very sorry and will be reach­ing out proac­tively as quickly as pos­si­ble to each im­pacted cus­tomer to make it right,” Schroeder, the Wells spokesman, said. “If cus­tomers have con­cerns or ques­tions, we urge them to con­tact us” at 877-645-1641.

Since dis­clos­ing the mod­i­fi­ca­tion er­ror, Wells has pointed out that it has com­pleted more than 1 mil­lion mod­i­fi­ca­tions since the be­gin­ning of 2009.

Schroeder also noted that from 2009 to 2015, Wells par­tic­i­pated in 1,775 home-preser­va­tion out­reach events, in­clud­ing 318 work­shops where the com­pany met in­di­vid­u­ally with more than 50,000 cus­tomers to seek op­tions for avoid­ing fore­clo­sure.

It’s un­clear whether home­own­ers would have been able to hold onto their prop­er­ties even if Wells gave them mod­i­fi­ca­tions. Fur­ther re­duc­tions in in­come dur­ing the re­ces­sion could have ul­ti­mately cost peo­ple their homes, if they were un­able to pay even a mod­i­fied mort­gage.

But it’s not the first time Wells has come un­der scru­tiny for how it’s han­dled mort­gage mod­i­fi­ca­tions.

In a pend­ing class-ac­tion case filed in fed­eral court in Char­lotte last year, two Gas­ton County home­own­ers al­lege Wells made “stealth” mort­gage mod­i­fi­ca­tions that could vastly in­crease home­own­ers’ bor­row­ing costs. Wells has de­nied the claims in the case, which has gen­er­ated na­tional at­ten­tion.

Also, in 2016, the Of­fice of the Comptroller of the Cur­rency, a fed­eral bank­ing reg­u­la­tor, fined Wells $ 70 mil­lion and ac­cused it, among other things, of mak­ing es­crow cal­cu­la­tion er­rors that in some cases led to in­cor­rect loan mod­i­fi­ca­tion de­nials and con­sti­tuted un­safe or un­sound bank­ing prac­tices.


For John­son, the for­mer New Yorker, it be­came dif­fi­cult for her fam­ily to make mort­gage pay­ments af­ter her hus­band, who owned a com­puter busi­ness, lost about half of his busi­ness when the econ­omy soured.

John­son said she ap­plied for the fed­eral gov­ern­ment’s Home Af­ford­able Mod­i­fi­ca­tion Pro­gram, or HAMP. The Trea­sury De­part­ment launched the pro­gram in 2009 to help home­own­ers avoid fore­clo­sure.

She de­scribed the process as a “pa­per shuf­fle” – 18 months of send­ing and re-send­ing the same pa­per­work.

She said Wells Fargo re­jected mul­ti­ple mod­i­fi­ca­tion at­tempts, telling her the fam­ily would not be able to af­ford a mod­i­fied mort­gage. The home went into fore­clo­sure when it be­came im­pos­si­ble to af­ford the notes, she said.

The or­deal cre­ated a lot of stress in her mar­riage, and she had to seek ther­apy, she said. The fam­ily filed for bank­ruptcy, wreck­ing their credit, which had been im­pec­ca­ble, she said.

“We took a lot of pride in our home, our fi­nances and stuff. We worked very hard to get what we had,” she said. “We wound up los­ing ev­ery­thing that we worked for.”

Hear­ing Wells Fargo ad­mit to its er­ror all these years later is like re­liv­ing those dark days, John­son said.

“It’s hap­pen­ing all over again,” she said. “It’s like: add some more salt, you know?”


Diana John­son said she and her hus­band, Harold, strug­gled to make pay­ments on a Wells Fargo mort­gage for their home in up­state New York, which they ul­ti­mately lost. The fam­ily now live in Char­lotte.

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