Big bank sets aside $8 million for remediation
Wells Fargo revealed Friday that an error in its mortgage underwriting software led to hundreds of improperly denied mortgage modifications for borrowers facing foreclosure over a five-year period.
The disclosure was made in the bank’s 10-Q quarterly filing with the Securities and Exchange Commission, and the contents of the filing were first reported by Reuters.
As the Reuters report notes, Wells Fargo disclosed in the SEC filing that a review of its use of a mortgage modification underwriting tool found a “calculation error” that affected certain mortgages that were in the foreclosure process between April 13, 2010 and Oct. 20, 2015.
According to Wells Fargo, the error caused an automated miscalculation of attorneys’ fees that were used to then determine whether a borrower qualified for a loan modification with Fannie Mae or Freddie Mac, or under the terms of the government’s Home Affordable Modification Program.
In the SEC filing, Wells Fargo said that the borrowers were not actually charged the attorneys’ fees in question.
As a result of the error, approximately 625 customers were incorrectly denied a mortgage modification or were not offered one in cases where they would have qualified if not for the error.
And of those roughly 625 customers, approximately 400 of them were foreclosed upon after the loan modification was incorrectly denied or not offered as a result of the underwriting software error.