Wells Fargo Plans to Refund Some Mortgage Customers

April 13, 2018 | USA Today        Wells Fargo outlined plans Wednesday to refund customers who were charged extra fees to extend rate locks on mortgages because of delays that were caused by the bank, not the customers.

The San Francisco-based bank, which is still working to repair its reputation following last year's fake account scandal, said it will refund customers who paid fees to extend interest rate locks between Sept. 16, 2013, through Feb. 28, 2017 but "who believe they shouldn't have paid those fees."

In a rate lock, the lender guarantees that it will provide the borrower with a mortgage at a specific rate, say 4%, for a specific time period, such as 60 days. There is often a charge to extend the rate-lock period.

In the Wells Fargo case, borrowers were hit with additional fees for allegedly getting their loan paperwork in late. But the bank, after a review of its rate-lock fee policies, acknowledged that the delays in some cases were caused on its end.

In a statement, the bank said its rate-lock extension policy put in place in September 2013 was "at times, not consistently applied, resulting in some borrowers being charged fees in cases where the company was primarily responsible for the delays that made the extensions necessary."

Effective March 1, 2017, Wells Fargo changed how the company manages the mortgage rate-lock extension process.

The company said it would reach out to customers and start issuing refunds in the final months of this year.

While roughly $98 million in rate-lock fees were assessed to about 110,000 loan applicants in the nearly two-and-a-half-year period in question, the company believes a "substantial number" of those fees were "appropriately charged."

As a result, Wells Fargo said "the amount ultimately refunded likely will be lower, as not all of the fees assessed were actually paid and some fees already have been refunded."

The move was the latest attempt by the bank to rebuild trust with customers, its CEO Tim Sloan said in a statement.

"We want to serve our customers as they would expect to be served, and are initiating these refunds as part of our ongoing efforts to rebuild trust," Sloan said.

Should Texas loosen lending laws that shielded the state from foreclosures?

Banks and realtors want to make more money on home equity loans.

Houston Chronicle | August 7, 2017        Twenty years ago, Texas became the last state in the union to legalize the home equity loan, allowing people for the first time to use their own homes as collateral. But lawmakers also kept tight restrictions on the loans, which saved Texans from the excesses that contributed to a housing bust that nearly brought down global economy.

Across the country, homeowners borrowed against the value of their properties to supplement their incomes as a bubble grew, piling on debt that became unsustainable when the market tanked. Texas' limits on home equity loans were widely credited with saving the state from the worst of the foreclosure crisis.

Now, a coalition of lenders and realtors is trying to loosen the rules on those loans in ways that homeowner advocates say could get borrowers in trouble.

"It's a wolf in sheep's clothing," says Charlie Duncan, a fair housing planner at the advocacy non-profit Texas Low-Income Housing Information Service. "Make no mistake, more families will lose their homes because of the irresponsible lending this amendment will allow."

The proposed changes will be on the ballot this fall as a constitutional amendment, having passed unanimously through both houses of the Legislature. (The section of the Texas Constitution that deals with home equity loans is the longest in the entire document, spelling out all terms and regulations rather than leaving them to statute, because of Texas' historic emphasis on property rights.)

In the ballot language, the changes seem innocuous, but may carry risk.

One provision would expand the list of entities able to make home equity loans from primarily banks to savings and loan companies, mortgage bankers, subsidiaries of banks and credit unions.

Another provision lowers the cap on fees that lenders can charge homeowners from 3 percent of the loan to 2 percent. But the change would likely would increase the amount borrowers end up paying by shifting most of the large expenses in closing costs — surveys, appraisals, and title insurance — outside the cap. In that way, the fees paid by homeowners could rise to 4 to 5 percent of the loan, according to Chip Lane, a Houston attorney who represents homeowners in foreclosure cases.

Banks say the change is necessary to make it worth it for them to do smaller loans. Their profits took a hit in 2013, when the Texas Supreme Court overturned interpretations by the Texas Finance Commission that allowed lenders to add expenses on top of the 3 percent cap.

State-chartered banks how hold about $6.6 billion in home equity loans, which is down significantly since 2009. (That doesn't include loans made by national banks, which don't have to break out that loan category by state.) 

"There was a hesitance on the part of lenders to make smaller home equity loans," says Steve Scurlock, executive vice president of the Independent Bankers Association of Texas. "What we tried to do is get the banks back in the game, and get those homeowners who may not have a $2 million home to have an ability if they needed to borrow $20,000 or $30,000 a bit more opportunity to do it."

But Robert Doggett, a lawyer who has represented homeowners for decades and led the litigation that resulted in the 2013 Supreme Court decision, says the change would make these loans more expensive, and prompt lenders to pressure homeowners into taking out loans they don't need.

"Lender fees are not about simply bilking homeowners out of money," Doggett says. "Up-front fees are very dangerous because they incentivize bad loans, they give loan officers and bad originators a reason to make up stuff so the loan is approved." 

Banks shouldn't need to make money on up front fees, Doggett says, because interest on the loan generates a steady income, as long as lenders keep them on the books. Many lenders instead sell those loans, reducing their incentive to make sure the loan is sound in the first place — especially if they've already been paid well at closing.  

Advocates are also alarmed by a provision that would allow homeowners to convert their home equity loans into regular mortgage loans, which have lower interest rates, but fewer protections.

In order to foreclose on a home equity loan, a lender must get a ruling from a judge, and can't go after a homeowner's other assets if the value of the property doesn't cover the amount owed. Lenders can foreclose on regular mortgage loans more quickly and easily, and can claim the borrower's other assets if necessary in order to be paid back in full.

When it originally helped negotiate the legalization of home equity loans back in 1997, the Texas Association of Realtors had insisted that home equity loans should always have a thicker layer of protections, because a rash of foreclosures could be bad for the entire market. This year, they joined lender groups to allow homeowners to convert their home equity loans into regular mortgage loans.

"In order to have that protection, you pay a premium," says Daniel Gonzalez, legislative director for the Realtors' association. "We want to make sure we're not standing in the way of homeowners getting lower interest rates. What this amendment will do is simply give folks an option."

But advocates worry that sometimes people under financial stress will choose to convert their home equity into conventional loans loans for lower interest rates, and not  realize that they could more easily lose their properties if they fell behind on payments.

"If you're a regular homeowner in Texas, you're not going to know that you've got all these protections with a home equity loan," says Lane, who testified against the amendment in committee. "If they come along and say 'I can save you $200 on your monthly mortgage payment,' you're going to do it."  

One important part of the law, limiting the amount of the loan to 80 percent of the value of the home, will stay put. 

Along with the Realtors and community banks, the amendment is supported byJPMorgan Chase, Wells Fargo, the Texas Credit Union Association, the the Texas Land Title Association, the Texas Farm Bureau and Texas Mortgage Bankers Association.

Several of those organizations have been top donors  to  state Sen. Kelly Hancock, a Fort Worth Republican and chairman of the Senate Business and Commerce Committee, and state Rep. Tan Parker, R-Flower Mound,  chairman of the House Investments and Financial Services Committee. They were the lead sponsors of the bills underlying the constitutional amendment.

Hancock declined to comment. Parker said the Legislature approved the bill "as as a result of Texans sharing their challenges concerning the current home equity law" with him an his colleagues.

Correction: An earlier version of the story included data that reflected only home equity loans issued by lenders regulated by the Office of the Consumer Credit Commissioner. The story has been updated to include data from state-chartered banks. 

Link to Article:  Click Here

 

Wells Fargo Hit With Class-Action Lawsuit Over Auto Insurance Charges

Los Angeles Times | July 31, 2017          Wells Fargo & Co., which is still settling class-action lawsuits over its fake-accounts scandal, has now been hit with yet another — related to the bank’s revelation last week that it charged auto loan customers for unnecessary insurance.

An Indiana man who says he was charged $598 for auto coverage despite repeatedly asking Wells Fargo to rescind the charges is the lead plaintiff in the case, which accuses the San Francisco bank of scheming with National General Insurance Co. to “bilk millions of dollars from unsuspecting customers.”

The lawsuit, filed Sunday in U.S. District Court in San Francisco, does not name the insurance carrier as a defendant. It is seeking class-action status.

Last week, the bank acknowledged that an internal probe spurred by customer complaints found that, between 2012 and 2017, about 570,000 borrowers may have been wrongly pushed into auto-insurance policies despite having their own coverage.  Read more here.

New Firms Catching Up to Banks in Foreclosure Rankings

The New York Times | March 30, 2017           The number of home foreclosures is down sharply from the depths of the financial crisis, even as many of the mortgage firms involved remain the same, including Fannie Mae, Wells Fargo, Bank of America and JPMorgan Chase.

But the latest foreclosure rankings also include a number of firms that barely registered or did not exist when the crisis began a decade ago.

These new entrants include firms affiliated with the private equity giant Lone Star Funds, the mortgage lender PennyMac Loan Services, the investment bank Goldman Sachs and the mortgage firm Carrington Mortgage Services.

This changing of the guard in the foreclosure rankings, based on data compiled by RealtyTrac, reflects the new reality that most foreclosures today are not coming from mortgages written during the post-crisis period, but from soured loans written before the crisis that are in the final stages of liquidation.

Quicken Loans, for instance, one of the top originators of mortgages issued during the last few years, ranks relatively low in terms of recent completed foreclosures, according to the RealtyTrac data.

Most of these newer firms that are moving up in the foreclosure rankings are ones that have bought soured mortgages and are looking to profit by restructuring those loans and getting delinquent borrowers to start making payments again. And when those efforts fail, the firms are foreclosing on borrowers, taking back the homes and reselling them.

Firms affiliated with Lone Star, PennyMac, Goldman and Carrington all have been staple buyers of distressed mortgages, either from big banks directly or from government agencies. Lone Star, a $70 billion private equity firm based in Dallas, has been one of the largest buyers and works in tandem with its wholly owned mortgage firm, Caliber Home Loans.  Read more here.

Mortgage Delinquencies Among Some Homeowners Just Spiked, Spelling Trouble

CNBC | February 15, 2017         A troublesome signal just appeared in the housing market and could put taxpayers at risk.

Federal Housing Administration mortgage delinquencies jumped in the fourth quarter for the first time since 2006, the Mortgage Bankers Association reported Wednesday. The FHA insures low down-payment loans and is a favorite among first-time homebuyers.

The seasonally adjusted FHA delinquency rate increased to 9.02 percent in the fourth quarter from 8.3 percent in the third quarter, MBA data show. The jump, which followed the lowest delinquency rate since 1997, was driven by loans made since 2014 and early-stage delinquencies, those just 30 days past due.

It's too soon to know if it is a blip or a trend, but the jolt is clearly a warning.   Read more here.

Texas Mortgage Companies, Founder Must Pay $93 Million in Fraud Case: Jury

Reuters | December 1, 2016        A federal jury has ordered two Texas-based home mortgage entities and their chief executive to pay nearly $93 million for defrauding the U.S. government into insuring thousands of risky loans, according to court records.

Americus Mortgage Corp, AllQuest Home Mortgage Corp, and their founder, Jim Hodge, were found liable on Tuesday by a Houston federal jury for violating the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act.

The jury awarded nearly $93 million in damages, including $7.37 million against Hodge, a sum that is subject to mandatory tripling under the False Claims Act. Further penalties are expected, which U.S. District Judge George Hanks will set at a later date, Manhattan U.S. Attorney Preet Bharara's office said in a press statement released late on Wednesday.

During the period at issue, the companies were known as Allied Home Mortgage Capital Corp and Allied Home Mortgage Corp.

Wendell Odom, their lawyer, said he anticipated an appeal in the case, one of several the U.S. government has brought against lenders following the 2008 financial crisis.  Read more here.

What’s Behind a Sudden Foreclosure Spike

CNBC | November 10, 2016     Foreclosures had been falling steadily to the lowest levels in nine years, but a curious spike in October may be the first sign of a crack in the recovery.

The number of properties with a foreclosure filing, which includes default notices, scheduled auctions and bank repossessions, jumped 27 percent in October compared with September, according to a new report from Attom Data Solutions. The volume is still down 8 percent from a year ago, but annual drops had been in the double digits all year, until now. Government-insured FHA loans are fueling much of the jump.

Foreclosures had been falling steadily to the lowest levels in nine years, but a curious spike in October may be the first sign of a crack in the recovery.

The number of properties with a foreclosure filing, which includes default notices, scheduled auctions and bank repossessions, jumped 27 percent in October compared with September, according to a new report from Attom Data Solutions. The volume is still down 8 percent from a year ago, but annual drops had been in the double digits all year, until now. Government-insured FHA loans are fueling much of the jump.

"While some states are still slogging through the remnants of the last housing crisis, the foreclosure activity increases in states such as Arizona, Colorado and Georgia are more heavily tied to loans originated since 2009 — after most of the risky lending fueling the last housing boom had stopped," said Daren Blomquist, senior vice president at Attom Data Solutions.

"The increase in October isn't enough evidence to indicate a new foreclosure crisis emerging in these states, but it certainly demonstrates that this housing recovery is not completely devoid of risk."  Read more here.

 

In Wells Fargo’s Bogus Accounts, Echoes of Foreclosure Abuses

The New York Times | September 21, 2016         John Stumpf, the chairman and chief executive of Wells Fargo, won a dubious achievement award from one of his interrogators during Tuesday’s scorching hearings on Capitol Hill. The bank’s yearslong practice of opening bogus accounts for customers and charging fees to do so, said Senator Jon Tester, Democrat of Montana, had united the Senate Banking Committee on a major topic for the first time in a decade. “And not in a good way,” he added.

But this was not the first time problematic and pervasive activities at Wells Fargo succeeded in uniting a disparate group. After observing years of abusive mortgage loan servicing practices at the bank, an increasing number of judges hearing foreclosure cases after the financial crisis grew to understand that banks could not always be trusted in their pleadings.

This was a major shift: For decades, the nation’s courts had been largely pro-bank when hearing foreclosure cases, accepting what big financial institutions produced in documentation and amounts owed by borrowers.  Read more here.

HSBC to Pay $1.575 Billion, Ending Household International Class action

Reuters | June 16, 2016      A unit of HSBC Holdings Plc said on Thursday it will pay $1.575 billion to end a 14-year-old shareholder class action lawsuit stemming from the Household International consumer finance business that the British bank bought in 2003.

HSBC Finance Corp expects to take a roughly $585 million pre-tax charge in the second quarter for the settlement, which requires court approval. It said it could have faced liability as high as $3.6 billion.

The accord averts a second trial in the litigation, which had been expected to begin last week in the U.S. District Court in Chicago before being put on hold.

"We are pleased to resolve this 14-year case that's based on events that took place before HSBC acquired Household," HSBC spokesman Rob Sherman said in a statement.  Read more here.

Widows, Divorcees Struggle with Foreclosure Rules, Consumer Group Finds

Boston Globe |  March 23, 2016      Lenders and mortgage companies have been doing a better job in recent years helping homeowners avoid foreclosures, but widows, as well as other surviving family members, and the recently divorced continue to struggle to stay in their homes, according to a new report from the National Consumer Law Center.

The Boston-based consumer group estimates that thousands of homeowners, usually women who didn’t sign the original loan documents, are having trouble getting access to relief that new federal guidelines have provided other homeowners since the recent foreclosure crisis.

The center’s network of lawyers and housing counselors reports that while other foreclosure-related problems have declined, this remains an area of growing concern. It can still take years, reams of paperwork, and thousands in additional costs for spouses facing death, divorce, or domestic violence, who are seeking a loan modification to stay in the house, said Alys Cohen, a staff attorney at the consumer law center and author of the report.

“Every month of delay increases the interest that a homeowner owes, increases the fees on the loan amount, and decreases the chances of a loan modification,” Cohen said.

The law center is urging the federal Consumer Financial Protection Bureau to adopt rules that would expand protections to others who may have homeownership interest in a property, aside from just the primary borrower.  Read more here.