Jose Aguilar was shocked, but also angry, when he received a letter of apology earlier this fall from Wells Fargo.
Aguilar and his family lost their home in Chittenango, N.Y., in 2015 after trying time and again to get a mortgage modification from Wells. “I was denied, denied, denied, denied, denied, denied,” he recalled.
Now the San Francisco bank was saying that it made a mistake. Aguilar’s application should have been approved.
The 41-year-old father recounted how the foreclosure upended his kids’ lives, who moved to Florida after being uprooted from their home in upstate New York. Aguilar and his ex-wife have two boys, ages 9 and 15. Wells Fargo sent a $25,000 check, an amount that Aguilar saw as inadequate.
“To me, it’s a slap in face,” he said. “It’s not going to repair my life. I mean, my kids have been traumatized.”
Aguilar is one of hundreds of homeowners that Wells has identified as victims of a calculation error involving foreclosure attorneys’ fees. He took the $1.9 trillion-asset bank to court on Tuesday, filing a petition that aims to compel Wells to disclose additional information that could be used as the basis for an eventual lawsuit.
The mortgage servicing errors add to the list of woes at scandal-plagued Wells. The bank’s critics say the mistakes are emblematic of a company that devotes insufficient resources to back-office operations and then litigates the resulting customer grievances aggressively.
“This is a problem that goes back to the beginning of the Great Recession, and continues to plague customers of Wells Fargo,” said Timothy Blood, a San Diego attorney who filed a class-action lawsuit in 2010 that alleged the bank improperly denied applications for mortgage modifications.
“They seem to constantly be making errors in processing loan modifications. That’s what their job is.”
The class action that Blood brought in 2010 alleged that Wells did not follow through with its obligations under the post-crisis program that used federal taxpayer dollars to pay for mortgage modifications. Seven years later, the case was settled for $750,000 plus attorneys’ fees, which worked out to $65.45 per affected borrower.
In July 2018, Wells disclosed in a securities filing that it had identified a calculation error that affected certain accounts that were in the foreclosure process. The bank said at the time that the problem was corrected in October 2015, and that approximately 625 customers were incorrectly denied loan modifications, of whom roughly 400 lost their homes.
Three months later, Wells Fargo revised its previous disclosure, stating that the errors actually persisted until April 2018. The bank also raised its estimates of the number of customers affected, stating that roughly 870 borrowers were incorrectly denied mortgage modifications, and that foreclosures were completed in approximately 545 of those cases.
In recent weeks, Wells has been sending apology letters to affected borrowers. “We have some difficult news to share,” the letters begin.
The letters state that a payment enclosed will help make up for the borrower’s financial loss, and note that Wells Fargo is reaching out to consumer bureaus to ask that any negative reporting be removed. They also offer mediation at no cost to borrowers who feel the bank’s compensation is inadequate.
Tom Goyda, a Wells Fargo spokesman, declined to provide the range of financial sums that the bank is sending to borrowers, or to provide details about how the bank calculated its offers. The bank said in August that it accrued $8 million for customer remediation, which would amount to an average of less than $13,000 per victim.
“We’re trying to work with each customer to arrive at a solution that addresses their personal situation,” Goyda said.
Goyda noted that affected customers can request mediation even if they cash the checks that Wells sends to them. And if they are unsatisfied with the results of mediation, they have the choice to pursue other legal options, he said.
But the bank’s offers to harmed customers fall short, according to 20 pro-consumer organizations that are writing to the Federal Reserve on Tuesday. In their letter, the organizations argue that Wells should be required to make affected homeowners whole as a condition of lifting the nine-month-old cap on asset growth at the bank.
Organizations that signed the letter include Americans for Financial Reform, Public Citizen, the National Fair Housing Alliance and the Consumer Federation of America.
“Until proper compensation is provided and Wells Fargo demonstrates that it has reformed its systems and practices to prevent problems like this in the future, Wells Fargo’s apologies are hollow and insufficient,” said Linda Jun, senior policy counsel at Americans for Financial Reform.
Some of the borrowers who recently received letters from Wells Fargo are now exploring their legal options. Marc Dann, an Ohio attorney, said that he has three such clients, including Aguilar.
Because the bank’s letters did not include details about what went wrong, Dann recently wrote to Wells Fargo to request additional information about what happened to one of his clients. He cited federal mortgage servicing rules that in certain circumstances require the disclosure of information to borrowers.
A lawyer for Wells Fargo declined the request, stating that the regulation’s requirements are not applicable in situations where the information is being sought more than one year after the mortgage was discharged.
“They’re like a stone wall on this issue,” Dann said.
So Dann has resorted to asking courts to order Wells Fargo to provide additional information prior to the filing of a lawsuit — an unusual step that he says is necessary because he does not know enough to determine which laws may have been violated.
“There’s no question, there’s a wrong that happened here,” Dann said. “The question is, how do we properly litigate it?”
When Goyda, the Wells Fargo spokesman, was asked whether the bank intends to fight efforts by affected borrowers who want to go to court, he said: “I don’t know that there’s one single answer that we could give to that question.”
“It may very well depend on the circumstance, but we would approach each legal action individually,” he added.
Aguilar said in a recent interview that he bought his home outside of Syracuse, N.Y., in 2005. The problems began after the discovery that the house had mold; health concerns prompted the family to move.
Thinking that they might never return, Aguilar fell behind on the mortgage. But the family later decided that the mold could be remediated and moved back in.
Aguilar said he that spent many months trying to get a mortgage modification from Wells, and was repeatedly told that his paperwork had been lost.
Aguilar estimated that houses in Chittenango comparable to the one his family lost are selling today for around $130,000 to $140,000. He said that he owed $92,000 on the mortgage before losing the home.
But it is difficult to put a price tag on a wrongful foreclosure.
“It’s been hard for me. It’s been hard for my kids too,” he said. “I lost my house, I lost my family, all because of a computer glitch.”
Kate Berry contributed to this story.
