Hundreds of Wells Fargo customers lost their homes due to a 'software glitch'

By Cal Jeffrey · 7 replies
Aug 6, 2018
Post New Reply
  1. According to a filing with the federal Securities and Exchange Commission (SEC), the mortgage lender has allocated $8 million to compensate homeowners who were erroneously foreclosed on due to a “glitch” in a software system used to handle mortgages. The errors occurred between April 2010 and October 2015 on some accounts that had been undergoing foreclosure proceedings.

    Nearly 625 account holders had applied for mortgage modifications that they were qualified for but were auto-rejected by the software. Of those, 400 ended up getting foreclosed upon unjustly.

    The same filing also indicates that the bank is currently under investigation by unnamed government agencies. The probes are linked to Wells Fargo’s "financing of low-income housing developments" in which it received tax credits. While WF’s filing does not mention who is doing the investigating, Reuters reports that officials from the Internal Revenue Service, the Federal Housing Finance Agency, and the US Department of Housing and Urban Development are involved.

    "The $8 million accrual is intended for roughly 625 borrowers who should have qualified for a loan modification under a program the Treasury Department set up in 2009 to help Americans who were struggling to make mortgage payments."

    Wells Fargo has been caught in several scandals recently and over the years that have cost the company billions in revenue.

    According to CNN, just last week the bank was handed a $2.1 billion fine by the Justice Department for approving mortgage loans that knowingly contained incorrect income information. The DoJ insists that this irresponsible action helped contribute to the 2008 housing collapse.

    Back in June, the lender was accused by the SEC of taking advantage of investors by “improperly encouraging” them to trade off debt products (for a high fee) that were meant to be held to maturity. Wells Fargo didn’t officially admit to or deny any wrongdoing but did agree to pay a $4 million penalty over the alleged misconduct along with returning over a million dollar to investors.

    Other scandals the bank has been involved in include the creation of fake accounts to boost sales figures in 2016, applying “unfair mortgage fees,” and charging customers for car insurance that they did not require.

    Wells Fargo and the involved agencies have declined requests for comment.

    Permalink to story.

     
  2. brucek

    brucek TS Rookie

    There's some context I don't understand here. Are there states in which foreclosure does not involve a judge signing off on it? Because otherwise I'd just expect the homeowner to dispute the faulty reasoning or data in court, whereupon it is up to the judge and not the bank's software to determine if the foreclosure is legal or not.
     
    Cal Jeffrey likes this.
  3. Cal Jeffrey

    Cal Jeffrey TS Evangelist Topic Starter Posts: 1,080   +266

    No. The judge still has to sign off. But here is what I believe happened. In 2009 the govt. introduced a program to help those who were struggling with their mortgage payments. It allowed them to apply for a payment adjustment through the bank. If they qualified, the bank would renegotiate their loan payments.

    Wells Fargo had a computer program for screening these applications. Due to a "glitch" the program spit out hundreds of decline letters basically saying these people did not qualify for the program. Having no other way to know whether or not they qualified they took the bank's word on it.

    Some were able to weather on paying their high payments, but about 400 couldn't afford to and lost their homes. All of these people were already in the process of getting foreclosed on, so it was just an matter of thinking that they did not qualify for the program and not fighting it. So there was nothing for the judge to consider in the cases since they went uncontested.

    I might not have it all 100% correct there, because I didn't dig too deeply into it, but that, I believe, is the general gist of what happened.
     
    wiyosaya, bmw95 and cliffordcooley like this.
  4. Cycloid Torus

    Cycloid Torus Stone age computing. Posts: 3,492   +915

    Not sure $8 million covers it.
     
    Cal Jeffrey likes this.
  5. mailpup

    mailpup TS Special Forces Posts: 7,226   +527

    Yes, there are states that do not require a judge to sign off on a foreclosure. Many western states, including California where Wells Fargo is headquartered, have trust deeds instead of mortgages. Foreclosing on a trust deed is a nonjudicial proceeding.
     
  6. mbrowne5061

    mbrowne5061 TS Evangelist Posts: 929   +469

    "Sorry we foreclosed your home by accident. Here is $20k, go away"
     
  7. jobeard

    jobeard TS Ambassador Posts: 11,994   +1,314

    IMO, it's a "software glitch" only because they got caught.
     
    Cal Jeffrey likes this.
  8. wiyosaya

    wiyosaya TS Evangelist Posts: 2,748   +1,312

    There. Fixed the title for you!
     
    merikafyeah and Cal Jeffrey like this.

Similar Topics

Add your comment to this article

You need to be a member to leave a comment. Join thousands of tech enthusiasts and participate.
TechSpot Account You may also...