The Wells Fargo Wagon Keeps on Rolling

Once upon a time, as little Ronnie Howard and the future Mrs. Partridge show, Wells Fargo coming to town was news to sing about.

It was also loud and open. Something that hasn’t been the case with anything Wells Fargo has done in recent memory.  In 2016 the news was that tellers and other Wells bank branch employees were opening accounts in customers’ names without customer authorization in order to meet new account quotas and to receive bonuses. 

Now, Wells Fargo is at it again.

The New York Times reported yesterday that Wells has been  doing something similar with home mortgages,  it has been putting borrowers into unauthorized loan modifications.

That is, if someone was behind on their mortgage (and in some cases, even if they were not behind), Wells restructured the terms of the mortgage without permission of the homeowner.

They can’t do that!  A contract is a contract—if you signed up for a 30 year mortgage with a fixed interest rate of 4%, that’s what you get.

But Wells’ tactics included adding years to the loan payoff period (extending some loans out to a 40 year payoff).  That lowered the monthly mortgage payment (sounds good, right?) but if the borrower was repaying their mortgage and any missed payments through a Chapter 13 bankruptcy plan, that could mess everything up as those plans are based on income and amount of monthly expenses.

Lowering someone’s mortgage payment from $1500 to $1150 could force that homeowner out of their bankruptcy plan—and into foreclosure.  Not exactly out of the frying pan, but definitely into the fire.

Why would Wells bother?  The only logical motivation- profit.  The government provides incentives to lenders who modify mortgages (a program put in place to encourage lenders to quickly modify the glut of borrowers who went into default after the economy crashed in 2008-2009).  The Times reports that Wells may get up to $1600 per modified mortgage, plus all the extra interest that would be paid over the years that are added to the loan terms.

It should be noted that a possible warning sign that this has or may occur is a letter from Wells Fargo informing the customer that their “loans are seriously delinquent” while offering them a ‘trial loan modification’ with the admonition that “Time is of the essence. Act now to avoid foreclosure.”

I haven’t seen one of these ‘phantom’ modifications yet.  Let me know if you think it has happened to you.