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How A Technical Glitch at Wells Fargo Led to Foreclosures

On Friday, Wells Fargo admitted that a computer error, which led to miscalculations left 400 people losing their homes to foreclosure. According to the bank's quarterly filing to the SEC, the error caused more than 600 customers to be denied or not being offered loan modifications despite being qualified for them, leading to foreclosures for around 400 borrowers.

According to its filing, Wells Fargo said that the bank could be subject to "consent orders and settlement agreements with federal and state regulators for alleged servicing issues and practices."

The bank said that regulatory actions, in this case, could include providing customers with a loan modification, refinancing relief as well as foreclosure prevention and action. It said that its mortgage-based liability stood at $179 million at the end of Q2 2018 and it had recorded a provision of $2 million due to loan sales, which decreased net gains on mortgage loan origination and sales activities compared with "a release of $39 million in second quarter 2017."

"We incurred net losses on repurchased loans and investor reimbursements totaling $4 million in the second quarter 2018 and $5 million in second quarter 2017," Wells Fargo said in the filings.

The filing came days after Wells Fargo agreed to pay a fine of more than $2 billion to the Department of Justice (DOJ) for allegedly misrepresenting the quality of loans used in residential mortgage-backed securities (RMBS). The settlement came in the form of a penalty after allegations that it originated and sold residential mortgage loans that it knew did not meet the standard the bank represented. This allegedly caused investors, including federally insured financial institutions, billions in losses due to investing in these RMBSs which contained loans originated by Wells Fargo, according to a statement by the DOJ.

Read more about Wells Fargo's settlement with the Department of Justice:

Why Wells Fargo Agreed to Pay a $2B Penalty

About Author: Radhika Ojha

Radhika Ojha, Online Editor at the Five Star Institute, is a graduate of the University of Pune, India, where she received her B.A. in Commerce with a concentration in Accounting and Marketing and an M.A. in Mass Communication. Upon completion of her master’s degree, Ojha worked at a national English daily publication in India (The Indian Express) where she was a staff writer in the cultural and arts features section. Ojha also worked as Principal Correspondent at HT Media Ltd and at Honeywell as an executive in corporate communications. She and her husband currently reside in Dallas, Texas. You can contact her at Radhika.Ojha@theMReport.com.

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