On December 20, 2022, the Consumer Financial Protection Bureau (CFPB) fined Wells Fargo, the third largest bank in the United States, $3.7 billion under a consent order for alleged customer abuses.
The CFPB ordered the bank to pay a $1.7 billion civil penalty and more than $2 billion to compensate consumers for various unlawful activities, including illegal foreclosures.
The CFPB said Wells Fargo repeatedly engaged in unfair acts and practices, including unjustly repossessing borrowers' vehicles, charging surprise overdraft fees, and illegally freezing customer bank accounts.
The bank also wrongfully foreclosed on borrowers after improperly denying mortgage loan modifications and miscalculating fees and other charges. Under the order, Wells Fargo must pay $195 million in refunds to affected mortgage borrowers.
The CFPB said that Wells Fargo has had a pattern of making mortgage servicing errors.
For instance, in 2018, Wells Fargo admitted that it failed to give modifications to hundreds of mortgage borrowers—even though they qualified for relief—due to a computer glitch. In that situation, an underwriting tool the company used to process loan modifications consistently made a calculation error that affected specific accounts between April 13, 2010, and April 2018.
The bank eventually carried out foreclosures on many of those homeowners.
You might be surprised to learn that mistakes happen all the time in the mortgage servicing industry, especially when it comes to processing loan modifications. In recent years, state regulators and the CFPB have performed multiple examinations of different loan servicers and found serious issues of noncompliance with state and federal mortgage servicing laws.
Also, these examinations have found that the remedial actions that servicers took to strengthen their internal processes after issues were discovered often didn't meet the regulator's expectations.
If you want to avoid losing your home to foreclosure, here are some ways to be proactive.
Call your servicer as soon as you think you're going to have trouble making your monthly payment or shortly after you fall behind. Also, don't ignore phone calls or letters from your servicer.
Calls and letters from your servicer will likely explain your options to avoid a foreclosure and how to apply for those alternatives.
People facing foreclosure should seek help from a HUD-approved housing counselor and, in many cases, a foreclosure lawyer so they can learn about their rights under the law and options for their particular circumstances.
Many states offer borrowers the right to participate in mediation before a foreclosure can go forward. Often, borrowers can work out a modification or other alternative to foreclosure during mediation.
A federal law, the Real Estate Settlement Procedures Act (RESPA), provides a way to dispute errors with your mortgage servicer or get information about your account. Under amendments to RESPA, you can send a letter, called a "notice of error" or a "request for information," and the servicer must respond within specific time limits.
Sending this kind of letter is a good way to try to resolve a servicer error, but only if the servicer hasn't already started a foreclosure. Disputing an error this way is very unlikely to stop a foreclosure already in progress.
If your loan servicer made a serious mistake and is foreclosing on your home, talk to a lawyer immediately to learn about your options, including possibly fighting the foreclosure in court.
Effective date: December 20, 2022