Wells Fargo reveals mortgage loan modification error

The company has set aside $8 million to remediate affected customers

By Francis Monfort

06 Aug 2018

Wells Fargo’s mortgage woes continue with its newly disclosed mortgage loan modification error.

The company revealed in a regulatory filing that the tool it used for modifications resulted in an error that affected certain accounts under foreclosure. An internal review found that the error started affecting accounts April 13, 2010. The error was only corrected on October 20, 2015.

While the review remains subject to final validation, Wells Fargo accrued $8 million during the second quarter to remediate customers whose modification decisions may have been affected by the calculation error.

The error caused an automated miscalculation of attorneys’ fees that were included for purposes of determining whether a customer qualified for a mortgage loan modification pursuant to the requirements of government-sponsored enterprises and the Treasury's Home Affordable Modification Program.

Although customers were not actually charged incorrect attorney’s fees, they were incorrectly denied a loan modification or were not offered a modification where they would have otherwise qualified. The error affected 625 customers, about 400 of which ended with a completed foreclosure.

Additionally, Wells Fargo disclosed that it is under investigation in relation to low-income housing tax credits. Specifically, federal government agencies have looked into how the company purchased, and negotiated the purchase of, certain federal low-income housing tax credits in connection with the financing of low-income housing developments.