Wells Fargo sets aside $8M to cover loan-mod mistakes
Wells Fargo has set aside millions of dollars for borrowers affected by a miscalculation in its modification underwriting process, according to its recent 10-Q securities filing.
The company accrued $8 million in the second quarter to remediate customers that may have been affected by an automated miscalculation of attorneys' fees between April 13, 2010, and Oct. 20, 2015; and it may pay out more in the future.
"To the extent issues are identified, we will continue to assess any customer harm and provide remediation as appropriate," Wells said in the filing.
More than 600 Wells Fargo mortgage borrowers applying for modifications over a five-year period were incorrectly denied, or not offered, a mod because of the mistake. In roughly 400 instances, affected borrowers went through foreclosures after being found ineligible or denied for a modification.
The miscalculation specifically affected customers who applied for modifications through the government-sponsored enterprises and applied for relief under the Treasury Department's Home Affordable Modification Program.
Wells discovered the error in an internal review, which has been "substantially completed," according to the filing.
The company recently entered a more than $2 billion agreement with federal authorities that could mark one of the last major residential mortgage-backed securities settlements in the larger market, but it still is working on addressing a number of internal issues.
Among other recent concerns identified in the filing is an investigation related to low-income housing tax credits Wells purchased. The company also continues to review problems with improper procedures used to cross-sell financial products and remediate affected customers.