DOJ Starts Probe on Wells Fargo for Allegedly Preying on Borrowers

Wells Fargo may have gotten out of reverse mortgages, but it’s getting into trouble with the Department of Justice, the Huffington Post reports.

The DOJ has started a probe into Wells Fargo’s lending practices and is preparing a case against the lender for allegedly preying on African-American borrowers during the housing bubble and inappropriately directing them to high-cost subprime loans.

Last week, the Federal Reserve filed a suit against Wells Fargo amidst accusations from Baltimore-area African-American borrowers that they were steered into expensive subprime mortgages, or had loan documents falsified by bank personnel. In this case, HuffPo reports, the bank agreed to pay $85 million to the Reserve to settle the charges, but did not admit to any wrong doing.

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“We have a very strong commitment to serving all customers along the credit spectrum, and we do so without bias,” Vickee Adams, a spokeswoman for Wells Fargo, was quoted as saying in the Huffington Post article regarding the Baltimore case. “That’s the type of responsible lending that we practice.”

The DOJ is currently in pre-lawsuit negotiations with the bank, which may seek to settle the accusations and avoid a public lawsuit, says HuffPo. The probe, which is being led by a Civil Rights division, the Fair Lending Unit, and overseen by Assistant Attorney General Thomas E. Perez, reportedly brings credence to Baltimore’s suit.

The Huffington Post article lists a number of incidents it says are marring the bank’s “once-pristine” reputation, including alleged illegal foreclosure proceedings and Department of Housing and Urban Development audits regarding questionable foreclosure practices.

Read the full article here.

Written by Alyssa Gerace

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  • Perhaps this helps explain why Wells hired Vicki Bott and why they are so sensitive about reputational risk.  Will the investigation encompass Wells consistent claims that it has never originated a single negatively amortizing mortgage?

    Perhaps now is the time the facade of better training and higher standards will finally be stripped away from the fictional image of the lending practices of national banks.  It is about time.

    Should SAFE licensing standards be applied to employees at the national banks?  If they apply to anyone, why not everyone?

  • Not a bad comment Cynic. I feel you are on target! I don’t think it matters if you are a mortgage banker or a bank, fraud is going surface regardless. The big Jolly Green Giant may not be so Jolly as the investigative probe begins!It does not appear that reverse mortgages were involved but time will tell?John A. Smaldone

    • John,

      I doubt if the allegations will bleed through to their HECM originations as well.  But that does not mean that the impact of those accusations will not. 
       
      It is still surprising to this day to read that John Stumpf has declared over and over and even testified before Congress that Wells has never done even one negatively amortizing mortgage.  Once is a mistake, twice is forgivable, but more than twice is a trend.

    • John,

      I doubt if the allegations will bleed through to their HECM originations as well.  But that does not mean that the impact of those accusations will not. 
       
      It is still surprising to this day to read that John Stumpf has declared over and over and even testified before Congress that Wells has never done even one negatively amortizing mortgage.  Once is a mistake, twice is forgivable, but more than twice is a trend.

  • Not a bad comment Cynic. I feel you are on target! I don’t think it matters if you are a mortgage banker or a bank, fraud is going surface regardless. The big Jolly Green Giant may not be so Jolly as the investigative probe begins!It does not appear that reverse mortgages were involved but time will tell?John A. Smaldone

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