- REUTERS/Rick Wilking
Wells Fargo is coming under fire again.
The bank stands accused of making changes to customers’ mortgages without telling them. The charges, set out in lawsuits, come as the bank attempts to recover from the reputational carnage wrought by the fraudulent accounts scandal that cost the firm $185 million in fines last year.
Even as the company’s accounts scandal was coming to a boil in 2015, Wells Fargo was making unauthorized changes that extended the life of customers’ home loans, especially those in bankruptcy, according to a class action lawsuit and other lawsuits reported by Gretchen Morgenson of the New York Times.
The changes lowered home owners’ monthly mortgage payments, but it also meant they’d owe Wells Fargo a lot more money over a much longer period of time.
“Any change to a payment plan for a person in bankruptcy is subject to approval by the court and the other parties involved. But Wells Fargo put through big changes to the home loans without such approval, according to the lawsuits.
“The changes are part of a trial loan modification process from Wells Fargo. But they put borrowers in bankruptcy at risk of defaulting on the commitments they have made to the courts, and could make them vulnerable to foreclosure in the future.”
In one lawsuit the Times cites, a couple going through personal bankruptcy alleges they received notice that Wells Fargo had reduced their monthly mortgage payment from $1,019.03 to $663.15 – without receiving approval from the couple, their lawyer, or the bankruptcy court. The changes would have extended the life of their loan from nine years to 40 years and would have resulted in $40,000 in additional interest payments, according to the complaint.
Wells Fargo strongly denied the claims and characterizations made in the lawsuits, saying that both borrowers and the courts were notified.
“Modifications help customers stay in their homes when they encounter financial challenges,” Tom Goyda, a company spokesman, said to the Times, “and we have used them to help more than one million families since the beginning of 2009.”