Wells Fargo improperly foreclosed on approximately 400 homes in which homeowners should have been eligible for a loan modification, according to the bank’s SEC filings. The troubled institution blamed the error on a computer glitch that occurred with an automated underwriting tool.
The homes were foreclosed on between April 13, 2010 and October 20, 2015, according to the filing.
“This error in the modification tool caused an automated miscalculation of attorneys’ fees that were included for purposes of determining whether a customer qualified for a mortgage loan modification pursuant to the requirements of government-sponsored enterprises,” the filing says.
“As a result of this error, approximately 625 customers were incorrectly denied a loan modification or were not offered a modification in cases where they would have otherwise qualified,” the filing continues. “In approximately 400 of these instances, after the loan modification was denied or the customer was deemed ineligible to be offered a loan modification, a foreclosure was completed.”
The bank said it set aside $8 million to pay back the homeowners who were impacted by the error, in the filing.
In a statement to the Los Angeles Times, Wells Fargo spokesman Tom Goyda, said some of the borrowers may still have lost their homes regardless of the error.
“There’s not a 100 percent clear cause and effect relationship between the modification denial and the ultimate foreclosure,” he told the LA Times.
In April, the scandal-prone banking behemoth was also smacked with a $1 billion fine after it was revealed the bank had been charging mortgage customers for its own mistakes.
A number of former Wells Fargo employees reported that the bank was charging customers a fee for failing to meet deadlines to lock-in mortgage rates. However, it was the bank that missed the deadline due to a delay in paperwork, a report from ProPublica found last year.