Wells Fargo Faces Allegations of Improper Mortgage Charges and Abusive Sales Practices

BY Roxanne Minott

Wells Fargo Improper Mortgage Charges
Closeup of new homeowner signing a contract of house sale or mortgage papers with a wooden toy house on the document. Suitable for real estate concept.


Wells Fargo is the defendant in a lawsuit in which a homeowner is alleging that the bank improperly charged thousands of customers across the nation to lock in interest rates when there was a delay in their mortgage applications.

The lawsuit, Muniz v. Wells Fargo & Co., U.S. District Court, California Northern District, No. 17-cv-4995, which was filed on Monday, August 7, in San Francisco federal court, states that the managers at Wells Fargo urged employees to place responsibility for the delays on homeowners, at times by incorrectly stating that there were missing documents.

In this way, homeowners were liable for additional fees.

According to Wells Fargo Spokesman Tom Goyda, the bank is conducting a review of prior practices regarding rate lock extensions, and will implement measures for customers as needed. The lawsuit, which is asking the court for class action status, occurs at a time when Wells Fargo is attempting to recover from a scandal in 2016 in which the bank was fined for opening accounts for customers without their approval for the purpose of increasing sales numbers.

Wells Fargo increased its estimate of the number of fictitious accounts that employees may have established, thereby suggesting that the bank is still grappling with a scandal that resulted in record fines and congressional investigations. According to a statement issued by the bank, there were an extra 1.4 million deposit and credit-card accounts that were possibly unauthorized, making the total amount approximately 3.5 million. The modified estimate applies to the time period from January 2009 to September 2016, nearly twice as long as the length of time scrutinized in the first review.

Just last month, in a new lawsuit, Wells Fargo is alleged to have charged several hundred thousand borrowers for auto insurance for which they did not ask. The lawsuit filed by the homeowners accused Wells Fargo of acting in violation of state and federal consumer protection laws, including the U.S. Real Estate Settlement Procedures Act (RESPA) and the U.S. Truth in Lending Act (TILA). Early in August, Wells Fargo revealed that the Consumer Financial Protection Bureau was performing an investigation into the fees the company charged to lock in interest rates for deferred mortgage loans. The bank said in a securities filing that it was cooperating with regulators to determine whether customers suffered harm because of the fees.

Comments from a foreclosure defense and real estate lawyer
New York foreclosure defense and real estate lawyer Yuriy Moshes of the Law Office of Yuriy Moshes says, “Although the court of public opinion may force Wells Fargo into settlement . . ., each cause of action brought by the plaintiff may suffer a loss at the hands of the court of law.”

“First cause of action: Plaintiff alleges that Wells Fargo violated RESPA by accepting 'unearned fees,' including any portion, split or percentage of any charge made or received for the rendering of a real estate settlement service in connection with a transaction involving a federally related mortgage loan other than for services actually performed. Wells Fargo will probably defeat this cause of action in a summary judgment because there is no evidence that plaintiff’s loan was a federally related loan and most importantly, because plaintiff concedes in his pleadings that, though allegedly late, the services were actually performed by Wells Fargo, which is a defense to the unearned fees cause of action under RESPA.”

“Second cause of action: Plaintiff alleges that Wells Fargo violated the Truth in Lending Act . . . by failing to in good faith disclose to borrowers who obtained mortgage interest rate locks that Wells Fargo had a system under which it would charge borrowers finance charges/fees to extend the rate lock period in cases of bank-caused delays, increasing financing and/or closing costs in a way borrowers could not predict. TILA requires disclosure by the lender. The facts alleged in the pleadings show that plaintiff was aware of the fees for the extension of the rate lock period. If plaintiff did not like the fees, he had every opportunity to walk away from the loan. Plaintiff was aware of the fees and what they were for. TILA requires nothing more. Wells Fargo should easily defeat this cause of action.”

Interest rate locks are guarantees by a lender to lock in an established interest rate, generally for many weeks, using the time at which a loan is being processed. If the rate lock expires prior to the closing of the loan, lenders frequently cover the cost of the extension of the lock if they were to blame for the delay. The lawsuit claims Wells Fargo locked in rates for 30 to 90 days. However, the bank frequently took longer than that to process applications due to the lack of sufficient staff.

The bank customarily blamed borrowers for delays and charged them to extend rate locks. The complaint says that the fees can be considerable, ranging from 0.125 percent to 0.25 percent of the loan amount. The plaintiff named in the lawsuit, Victor Muniz, who resides in Nevada, said he was charged $287.50 for a rate lock extension this year after his mortgage application was beset with bank delays. He said a bank employee told him that Wells Fargo would pay to extend the rate lock. However, a regional manager issued a reversal of that decision.

Roxanne Minott

Roxanne Minott is a staff contributor to Bigger Law Firm Magazine and legal content writer for Custom Legal Marketing.


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