It seems that banking giant Wells Fargo, who has faced one lawsuit after
another over the past couple of years, is facing yet another class action
lawsuit, as new information about shady banking practices continue to
come to light. The latest occurrence of questionable banking practices
was made public in the fall of this year, when a class action lawsuit
was filed by consumers, alleging Wells Fargo charged extra fees to home
loan borrowers when their mortgage applications were delayed.
While that practice might be reasonable if the borrowers were the ones
delaying the application, Wells Fargo slapped these charges on borrowers
when it was clearly the bank’s fault the application was delayed.
The controversy regarding the home loan unit of Wells Fargo seems never-ending,
particularly in the wake of last year’s scandal (employees were
opening bank accounts in customer’s names without their knowledge
or approval), and an admission this July that the bank forced hundreds
of thousands of auto loan customers to pay for unnecessary insurance policies.
Wells Fargo Subject of Consumer Financial Protection Bureau Inquiry
These mortgage fees have already been the subject of a probe by the Consumer
Financial Protection Bureau which triggered an internal review and a subsequent
shake-up in the mortgage division of Wells Fargo. Further, the mortgage
fee matter is also the subject of a whistleblower lawsuit filed by a mortgage
banker who worked for Wells Fargo. The mortgage banker alleges that Wells
Fargo falsified records in order to blame delays on borrowers, and, when
he reported the practice, he was fired.
Those who have applied for a home loan mortgage know they are usually guaranteed
a specific interest rate which is fixed at that time, so long as the loan
reaches the approval state within a set time frame—usually 30-45
days. When approval of a home loan exceeds this allotted time, the borrower
may still receive the stated interest rate, but will pay extra financing
costs. Unless the delay is specifically related to the borrower, banks
usually cover the costs. If the borrower is causing the delay, they may
be charged what is known as a rate-lock extension fee.
The whistleblower claims the mortgage division of Wells Fargo was chronically
shorthanded, which led to delays in mortgage approvals. Because of the
understaffing, the delays were rarely the fault of the borrower. Rather
than the bank waiving the rate-lock fees—as they should have done—Wells
Fargo employees in the mortgage division would report (falsely) that the
borrower submitted inaccurate information or an incomplete application.
The fees associated with this practice were substantial—typically
from .125% to .25% of the total mortgage. As an example, a homebuyer who
was applying for a mortgage in the amount of $400,000 could pay as much
as $1,000 each time there was a delay—a delay which was usually
the fault of the bank. Alaniz claims the fees improperly charged by Wells
Fargo amounted to millions of dollars.
Wells Fargo Facing Multiple Lawsuits
Since Wells Fargo is currently the nation’s largest mortgage lender
($244 billion in home loans last year, or about
12% of all mortgages), these improper fees could realistically amount to millions of dollars.
The lawsuit filed by the whistleblower alleges discrimination (he is gay),
and whistleblower retaliation. Another former Wells Fargo mortgage banker
sent a letter to members of the Senate Banking Committee and the House
Financial Services Committee last year, making similar allegations as
those made by the whistleblower.
Chavez says the rate-lock fee “scam” began in 2014, after
Wells Fargo eliminated 2,300 mortgage-processing jobs. As a result of fewer employees in the mortgage division, it was common
for loan approvals to extend past the rate-lock period, therefore Wells
Fargo began sending those fees to borrowers rather than absorbing the
cost—particularly when most of the extensions were the fault of
the bank. A spokesman for Wells Fargo gave the expected “no comment,”
when asked about the current debacle.
Consumer Protection Lawyers
If you or someone you love has been a victim of unfair banking practices,
national consumer protection lawyers at Golomb & Honik today at 1-800-355-3300 or 1-215-985-9177, or fill
out our confidentialContact Form. We have successfully fought credit card companies, banks, and financial
institutions and protected consumer rights for decades. Call us today
to review your case.
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