Wells Fargo software error led to hundreds of home foreclosures
The bank admitted to improperly denying 870 loan modifications
Wells Fargo disclosed that a software error contributed to hundreds of their customers losing their homes.
In a filing with the Securities and Exchange Commission on Tuesday, the bank said that it discovered 870 customers who were improperly denied loan modifications due to a defective underwriting tool. The cases, which were processed between March 2010 and April 2018, ultimately resulted in 545 foreclosures.
The errors, which were identified after the bank expanded an internal review, inflated attorneys fees, a figure that is necessary to determine whether a customer is eligible for a loan modification or a repayment plan.
The disclosure marks the second time that Wells Fargo has admitted to improperly denying loan modifications in the past four months. Last August, the firm said that 625 customers were denied loan modifications in spite of their eligibility. At the time, the company said that they are facing “informal inquiries or investigations” related to low-income housing loans.
“We’re very sorry those errors occurred and have contacted a substantial majority of the affected customers to provide remediation as well as the option to pursue no-cost mediation with an independent mediator,” said Tom Goyda, a spokesperson for Wells Fargo.
Goyda claims that the foreclosures were not necessarily improper, arguing that the customers were already facing foreclosure before the modification reviews. He declined to specify what kind of remediation they are offering customers, only saying that they are tailoring reparations on a case-to-case basis.
“The outcomes and circumstances for individual customers are varied; some have paid off their loans, others still have active accounts, etc. We are being careful to look at each customer and work through a process with them to address their specific situation,” he added.
The errors add to the company’s staggering collection of scandals. In 2016, it was revealed that the bank created millions of fake accounts to inflate sales figures. This led to the revision of its compensation policies. Earlier this year, the company was also fined $2.1 billion for knowingly issuing mortgages to borrowers who provided incorrect information.