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.

The Mortgage Market is Now Dominated by Non-Bank Lenders

The Washington Post | February 23, 2017         Most borrowers, whether they are purchasing property or refinancing their home, focus on their mortgage rate and loan terms rather than the type of lender they choose. 

Quicken Loans has seized a larger share of the mortgage market but rising interest rates and anticipated deregulation under President Trump could change things. (Uli Deck/picture-alliance/dpa/AP )

Quicken Loans has seized a larger share of the mortgage market but rising interest rates and anticipated deregulation under President Trump could change things. (Uli Deck/picture-alliance/dpa/AP )

Yet the landscape of the lending market has shifted dramatically over the past few years from domination by big banks to a market where more loans are made by non-banks — financial institutions that only make loans and do not offer deposit accounts such as a savings account or checking account. 

“For consumers, it doesn’t really matter whether you get your loan through a bank or a non-bank, although in some ways non-banks are a little more nimble and can offer more loan products,” says Paul Noring, a managing director of the financial-risk-management practice of Navigant Consulting in Washington. “The impact is bigger on the housing market overall, because without the non-banks we would be even further behind where we should be in terms of the number of transactions.”  Read full story here.

Spanish Banks Ordered to Repay Customers Over Unfair Mortgages

The New York Times | December 21, 2016         MADRID — Europe’s highest court ruled on Wednesday that customers of banks in Spain can reclaim billions of euros because lenders did not pass on savings from interest rate cuts on variable-rate mortgages, sending shares in several of the country’s top lenders crashing.

The ruling centered on the use of a “floor clause” in Spanish mortgage contracts during the aftermath of the global financial crisis. Such agreements meant that the interest rate on an adjustable-rate mortgage was always held above a predetermined level, regardless of how low central bank rates fell.

Spain’s lenders began to use the clauses in 2009, after the global financial crisis pushed central banks around the world to slash interest rates. That helped preserve bank profit margins but failed to pass rate cuts on to customers beyond a certain level.

In 2013, Spain’s supreme court ruled that such deals were illegal, in part because the country’s banks did not adequately explain them to customers. The court did not, however, penalize lenders retroactively.

The European Court of Justice on Wednesday confirmed that the agreements were illegal, but went further by ruling that customers could claim reimbursement, without any time limit, for all payments made at a rate that was judged to be too high.

The decision, which cannot be appealed, means Spain’s banks could have to return 4.5 billion euros, or about $4.68 billion, to customers, according to Afi, a Spanish financial consultancy.  Read more here.

Goldman Reaches $5 Billion Settlement Over Mortgage-Backed Securities

The Wall Street Journal | January 15, 2016      Goldman Sachs Group Inc. agreed to the largest regulatory penalty in its history, resolving U.S. and state claims stemming from the Wall Street firm’s sale of mortgage bonds heading into the financial crisis.

In settling with the Justice Department and a collection of other state and federal entities for more than $5 billion, Goldman will join a list of other big banks in moving past one of the biggest, and most costly, legal headaches of the crisis era.  Read more here