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Politics & MoneyMortgage

Wells Fargo to pay $250 million for “reckless practices”

The OCC alleges that the bank failed to establish an effective home lending loss mitigation program and violated a 2018 compliance order

Wells Fargo has been slapped with a $250 million civil money penalty by the Office of the Comptroller of the Currency for “unsafe or unsound practices” pertaining to their home lending loss mitigation program this week.

According to the OCC, the fine is also a result of the bank violating the terms of a 2018 compliance consent order, which alleged that Wells Fargo did not implement or maintain a compliance risk management program proportionate with the bank’s size, complexity and risk profile, resulting in “reckless practices.”

Specifically, the agency accused the bank of charging customers mortgage interest rate lock extension fees, even though some of the loan closings failed due to the bank’s own volition. The OCC also alleged that the bank’s auto-lending unit improperly maintained collateral protection insurance policies on automobile loan accounts.

The consent order from three years ago mandated that Wells Fargo appoint and maintain an active compliance committee of at least three members and develop a compliance risk management proposal to address these issues.

However, it seems that the bank did not check all the boxes that were required by the OCC.

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“Wells Fargo has not met the requirements of the OCC’s 2018 action against the bank. This is unacceptable,” said Michael J. Hsu, acting comptroller of the currency in a statement.  

Concurrently, the agency issued a cease-and-desist order against the bank for it’s failure to establish “an effective home lending loss mitigation program.”

While the order is in effect, the bank is restricted “from acquiring certain third-party residential mortgage servicing and requires the bank to ensure that borrowers are not transferred out of the bank’s loan servicing portfolio until remediation is provided, except as required by an investor pursuant to a contractual right,” the OCC said.

“Today’s action puts limits on the bank’s future activities until existing problems in mortgage servicing are adequately addressed,” Hsu said.

The order requires the bank to take broad and comprehensive corrective actions to improve risk management and oversight of the bank’s loss mitigation program, the agency noted.

In response, Wells Fargo’s CEO Charlie Scharf issued a statement remarking that OCC’s actions “point to the work we must continue to do to address significant, longstanding deficiencies.”

Scharf added: “As I’ve said over the past year, our work to build the right foundation for a company of our size and complexity will not follow a straight line. We are managing multiple issues concurrently, and progress will come alongside setbacks. That said, we believe we’re making significant progress, the work required is clear, and I remain confident in our ability to complete it.”

Scharf also announced that a separate Consumer Financial Protection Bureau consent order issued in Sept. 2016 regarding the bank’s retail sales practices expired a few days prior.

The CEO said that its expiration shows that progress is being made by the company.

“The focus of the transformation we’ve undertaken is to build a stronger, better company — one that serves customers at the highest standards,” he said. ” Sometimes — as is the case today — we will reach a positive milestone on one set of issues and be reminded that we need to redouble our focus on another. That will not stop us from getting to where everyone expects us to be, and where we expect ourselves to be.”

Since 2016, Wells Fargo has paid out close to $4 billion in fines and penalties for sketchy sales practices that encouraged employees to allegedly open millions of unauthorized bank accounts.

Earlier in the year, Wells Fargo also agreed to pay $95.7 million to over 5,300 home mortgage consultants to resolve alleged wage-and-hour violations in California.

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