Wells Fargo has agreed to pay a $250 million fine after an investigation by federal banking regulators found fault with the bank’s practices for helping homeowners who are having trouble paying their mortgages.

In announcing the fine, the Office of the Comptroller of the Currency said Wells Fargo had failed to establish an effective home lending loss mitigation program, and that it had uncovered mistakes the bank made when offering loan modifications to homeowners.

Michael J. Hsu

“In addition to the $250 million civil money penalty that we are assessing against Wells Fargo, today’s action puts limits on the bank’s future activities until existing problems in mortgage servicing are adequately addressed,” Acting Comptroller of the Currency Michael J. Hsu said in a statement. “The OCC will continue to use all the tools at our disposal, including business restrictions, to ensure that national banks address problems in a timely manner, treat customers fairly and operate in a safe and sound manner.”

The OCC said Wells Fargo also violated the terms of a 2018 consent order that required the bank to develop and implement “an effective enterprise-wide compliance risk management program,” after uncovering problematic practices in its auto lending business.

Charlie Scharf

In a statement, Wells Fargo CEO Charlie Scharf said, “Building an appropriate risk and control infrastructure has been and remains Wells Fargo’s top priority.” Scharf acknowledged that the OCC’s actions “point to work we must continue to do to address significant, longstanding deficiencies.”

In a consent order, the OCC said it found “significant deficiencies” in Wells Fargo’s loss mitigation practices — procedures that it employs when homeowners have trouble making their monthly mortgage payments.

Wells Fargo’s “loss mitigation decisioning tools” — software applications and end-user computing tools — contributed to “errors in the bank’s loss mitigation processes and controls that negatively affected borrowers,” regulators said.

In offering loan modifications to borrowers, Wells Fargo has made mistakes that it has failed to “detect, prevent, and quantify” in a timely manner, impairing the bank’s ability to “fully and timely remediate harmed customers.”

The OCC gave Wells Fargo 150 days to submit an action plan for improving the loss mitigation program within its home lending business, ensuring the bank “conducts effective and sustainable loss mitigation activities, including loan modification decisions.”

The OCC will require quarterly evaluations on the effectiveness of loss mitigation systems, and “post-implementation testing and review processes to ensure that loss mitigation tool changes have been made as intended.”

In the mean time, the OCC said Wells Fargo should determine “whether there is a need to establish and maintain foreclosure holds for impacted borrowers until remediation is provided.”

For as long as the order is in effect, Wells Fargo is barred from acquiring other companies that make residential mortgage loans, or acquiring the right to collect payments, or “service,” mortgages originated by other companies. Those restrictions do not apply to Wells Fargo’s retail, broker or correspondent channels. It can still originate and refinance new loans.

Scharf noted that a 2016 consent order imposed by the Consumer Financial Protection Bureau over Wells Fargo’s retail sales practices recently expired. That order required Wells Fargo to pay a $100 million fine and provide restitution to customers who were assessed fees and other charges when the bank opened deposit and credit card accounts without their knowledge or consent.

In 2018, the CFPB hit Wells Fargo with a $1 billion penalty for its administration of a mandatory insurance program related to its auto loans, and charges the bank assessed to some borrowers when granting mortgage interest rate-lock extensions. The OCC issued its own fine and consent order in that case, which it now accuses Wells Fargo of violating.

“The expiration of the CFPB’s 2016 consent order is representative of progress we are making,” Scharf said. “We have done substantial work designed to ensure that the conduct at the core of the consent order — which was reprehensible and wholly inconsistent with the values on which this company was built — will not recur.”

Email Matt Carter

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