Another Wells Fargo Scandal?
According to The New York Times, a class action and other lawsuits have been filed against Wells Fargo alleging that since 2015, Wells Fargo has been making unauthorized charges to the loans of borrowers who are in bankruptcy. The changes involve shadowing a lengthier loan term (extensions as high as several decades) behind an enticing lower monthly payment. According to the lawsuits, the changes were made without the approval of the bankruptcy courts, which is a major no-no, and also without consent of the borrowers.
Wells Fargo’s (substantial) Financial Motive
Why would Wells Fargo want to do this? The extensions were hardly an act of kindness toward borrowers. By extending the terms of a mortgage by such an extensive period, (as in the case of the lead plaintiffs from North Carolina that had an extension of 26 years) Wells Fargo would be due substantially more in interest payments than under the original loan. In addition, the adjustments would enable Wells Fargo to receive as much as $1,600.00 for each loan that was adjusted, based upon a federal program setup with the intention of encouraging lenders to help struggling borrowers through modifications.
Ramifications in Bankruptcy Court
The filed lawsuits allege that Wells Fargo would implement these unauthorized changes by using documentation routinely filed with bankruptcy court to track new real estate taxes or homeowners’ insurance costs. Wells Fargo’s conduct is a problem for borrowers who may have been placed in danger of default and foreclosure because of the meddling with their payment plans as ordered by the bankruptcy court. Its conduct is also a huge problem for Wells Fargo itself, which is at risk of bankruptcy court sanctions and further federal investigation.
From the trenches,