The Wells Fargo saga continues –with the latest report claiming customers were forced to pay hefty fees associated with mortgage delays, even when it was the bank’s fault.
During the mortgage underwriting process, lenders go through a series of steps to make sure a borrower is qualified — basically to ensure that the terms of the application and all personal information meet the necessary guidelines.
Sometimes this can take a while — so long, in fact, that the interest rate a borrower was originally offered may increase during the time it takes to complete the process. Borrowers typically have a specific window of time when they can ‘lock in’ the quoted interest rate on a mortgage, but if the deadline is missed, they may have to pay a fee to extend the offer. If the bank causes the delay, it will usually cover the charge.
Report: Wells Fargo customers forced to pay for mortgage delays caused by the bank
According to a report by Pro Publica, four former Wells Fargo employees say the bank made customers in the Los Angeles area pay fees for loan delays, ‘even though the delays were the bank’s fault.’
The report claims that bank management told the employees to blame and charge borrowers, regardless of who actually caused the delays.
In a letter written to Congress in November, a former Wells Fargo loan officer explained in detail what allegedly had been happening at branches in that region, “We are talking about millions of dollars, in just the Los Angeles area alone, which were wrongly paid by borrowers/customers instead of Wells Fargo,’ wrote Frank Chavez, a 10-year Wells veteran who resigned from his job last April.
According to Pro Publica, three other Wells Fargo staffers confirmed these statements, saying the bank’s underwriting staff was inexperienced and underpaid, which led to delays that impacted customers’ interest rates. They also said the bank kept the team understaffed in order ‘to keep costs down.’
The former employees say that when loan officers asked the bank to cover an extension fee that the bank itself had caused, the answer ‘was always the same: No. Declined. ‘Borrower paid,’ never ‘Lender paid.’”
Banks don’t necessarily have to cover extension fees — but if Wells Fargo knew its own employees were to blame and led customers to believe the fee they were being charged was their fault — that’s a problem.
Plus, former staffers say that the executive in charge of the region was ‘very upfront that his bonus is tied to extension fees,’ which would be another big problem.
In response to Pro Publica, a Wells Fargo spokesman wrote the following in an email:
“We are reviewing these questions about the implementation of our mortgage rate-lock extension fee policies. Our goal is always to work efficiently, correctly and in the best interests of our customers and we will do a thorough evaluation to ensure that’s consistently true of the way we manage our rate-lock extensions.”