One thing worse than going through a foreclosure is finding out you never should’ve lost your home in the first place.
In August, Wells Fargo disclosed that a technical error kept homeowners from qualifying for a mortgage loan modification. The glitch involved accounts in the foreclosure process between March 13, 2010 and Oct. 2, 2015. The bank said that 625 customers were denied a loan modification they should have qualified for. About 400 of those borrowers had their homes foreclosed.
According to a regulatory filing from November, an expanded review revealed that additional customers were impacted by a separate but similar calculation error involving foreclosure attorneys’ fees between March 15, 2010 and April 30, 2018. As a result, 870 customers were denied a loan modification they should have been eligible for or weren’t offered a repayment plan or mortgage modification they would’ve qualified for. Following that mistake, about 545 customers lost their homes to foreclosure.
“We’re very sorry these errors occurred and have contacted a substantial majority of the affected customers to provide remediation as well as the option to pursue no-cost mediation with an independent mediator,” said a spokesperson for the bank.
If there’s a chance you could’ve been affected by the glitch, consider speaking up. Customers can call the bank (877-645-1641).
More about the mishaps
Miscalculations in loans modification reviews were common before and during the financial crisis. And they remain an issue today, says Alys Cohen, a staff attorney at the National Consumer Law Center.
Often, the mistakes are related to income and appraisal values, Cohen says. In Wells Fargo’s case, the first error that was discovered involved the bank’s loan modification underwriting tool, which caused a miscalculation of attorneys’ fees. Though they weren’t charged for those fees, it appeared as though the qualified homeowners didn’t meet the requirements for loan modifications through the Home Affordable Modification Program and government-sponsored enterprises like Fannie Mae.
A second error caused an overstatement of attorneys’ fees used to decide whether a customer was eligible for a repayment plan or mortgage loan modification based on the requirements of government-sponsored enterprises and agencies like the Federal Housing Administration. Customers weren’t charged for those fees, either.
Though they were small glitches, they had major consequences for many borrowers facing financial difficulties.
“You’re talking about families who were under unbelievable amounts of stress already from their economic situation,” says Julia Gordon, a national expert on foreclosure and mortgage-related issues. “Losing your home is extremely traumatic for a family and to have gone through that because of a mistake. I can’t imagine how I would feel if that happened to me.”
Wells Fargo has set aside $8 million for customers who were impacted by the initial error that was revealed in August. A spokesperson for the bank says that so far, there’s no update on whether the amount expected to be paid out in remediation will change to account for the additional customers who were affected.
Best course of action
If you were denied a loan modification you should’ve qualified for, consider getting advice from a consumer attorney, a legal services attorney or a housing counselor. Besides contacting Wells Fargo, you can complain to the bank’s regulator, the Office of the Comptroller of the Currency.
Be prepared to stand your ground and make demands, if necessary. You shouldn’t have to face tax consequences or give up your right to take legal action against the bank, if desired.
“Consumers should not have to waive their legal rights and that way they can accept the payment and then figure out whether more is needed,” Cohen says. “That was standard several years ago when the regulators found systemic problems in loan modification reviews and set up the independent foreclosure review process. Claims were not waived.”
If you’ve already lost your home to foreclosure, you’ll need to carefully consider your options as well.
“It’s not like you can go back and put somebody back in their house if that house already got sold to somebody else,” Gordon says. “But you can find out how much money the mistake ultimately cost them. You can try to fix whatever bad thing happened to their credit score as a result.”