Regulators on Thursday ordered Wells Fargo to pay a $ 250 million fine related to problems in its home loan department and violations of a 2018 consent order.
The auditor's office has also imposed new restrictions on business practices in the mortgage division of the scandal-ridden bank. Wells, which has operated below an asset ceiling for three and a half years, is now banned from acquiring certain residential mortgage service rights, among other restrictions.
“Wells Fargo failed to meet the requirements of the 2018 OCC lawsuit against the bank. That is unacceptable, ”said Acting Auditor Michael Hsu in a press release.
“While the OCC's awarding of contracts is disappointing,” said Charlie Scharf, Wells Fargo CEO, in a memo to the bank, “our risk and control work spans multiple areas and we shouldn't lose sight of our progress . "."
Cooper Neill / Bloomberg
The OCC said Wells Fargo has no controls or oversight over loss mitigation practices in its home loan division and that the issues have impacted the bank's ability to rehabilitate aggrieved consumers.
The bank, with assets of $ 1.9 trillion, has failed to identify, prevent and quantify inaccurate loan modification decisions in a timely manner, the OCC said in a consent order signed Wednesday.
Bloomberg News reported the possibility of new penalties from the OCC last month.
Wells Fargo CEO Charlie Scharf, hired in 2019 to help the bank recover from various consumer scandals, said in a press release Thursday that the bank's progress "will not follow a straight line" and that "progress comes with setbacks will go along. ”
"While the OCC is disappointing with the award of contracts," Scharf said in a memo to Wells Fargo staff, "our risk and control work spans multiple areas and we should not lose sight of our progress."
Wells Fargo noted that its 2016 consent filing with the Consumer Financial Protection Bureau on retail sales practices expired on Wednesday. As evidence that it has made progress, the bank also pointed to the termination of an OCC money laundering control consent order in early 2021 and the OCC's decision last year to upgrade its rating to "excellent" under the Community Reinvestment Act.
The OCC's most recent move came the same week that Wells announced the new head of its home loans group, Ann Thorn, who was most recently chief loan administration officer at Caliber Home Loans.
Thorn will replace Jeff Smith, who has held the position since 2018. Smith announced his resignation in January, a Wells Fargo spokesman said there was no connection to the action announced by the OCC on Thursday.
Until the final approval order is lifted, Wells Fargo will be limited in its ability to purchase servicing rights on some third party home loans. The bank must also ensure that borrowers' problems are addressed before their loans are transferred from its own loan service portfolio, unless investors are required to do so under their contractual rights.
Wells Fargo's litany of regulatory issues in recent years includes several related to its mortgage department.
Three years ago, a $ 1 billion fine imposed by the OCC and the Consumer Financial Protection Bureau was partially tied to the bank's practice of improperly charging customers for freezing mortgage rates, even under the bank's actions had resulted in the loan in the specified time window.
The 10-digit fine in April 2018 was accompanied by a consent order with the OCC, which found that the bank had failed to implement and maintain a compliance risk management program commensurate with its size, complexity and risk profile.
Some of the wordings in that three-year-old order was reflected in the one signed this week as the OCC said the San Francisco bank had failed to fully implement adequate loss mitigation practices – and related risk management practices – based on its size, complexity and risk profile.
In July 2018, Wells Fargo announced in a securities filing that a computational error had been found affecting certain accounts in foreclosure. The bank said at the time that the issue was fixed in October 2015 and that around 625 customers were falsely denied loan changes, including around 400 who have lost their homes.
Three months later, Wells Fargo revised its previous disclosure, stating that the errors actually persisted through April 2018. The bank also increased its estimates of the number of customers affected.