Wells Fargo penalized by Fed over lending practices
SAN FRANCISCO (KGO) -- The Federal Reserve cracked down hard on San Francisco-based Wells Fargo Bank over it's sub-prime lending practices.
Wells Fargo will pay an $85 million penalty, but it did not admit any wrongdoing. Still, some customers might benefit from the penalty in the way of compensation.
Debbie Lopez says she's been fighting with Wells Fargo for seven years to get a loan modification. Lopez says she can't handle the payments on her home loan.
"It's been very frustrating," Lopes said. "They don't seem to want to work with us."
Wells Fargo is the first lender to face a penalty by the Federal Reserve over a list of allegations that it steered potential prime borrowers into more-costly sub-prime loans, and it falsified income information in loan applications as a result of incentive pay and sales quotas and a lack of adequate controls.
"$85 million is not enough," said Ana Guardado with the Alliance of California for Community Empowerment. "What we have lost in homes, and our community has suffered so much."
The $85 million penalty is spelled out in an agreement with the Fed. The bank no longer operates the targeted loan unit, and it does not admit any wrongdoing.
Wells Fargo's chairman and CEO issued a statement that the alleged actions were "committed by a relatively small group." It is currently "reinforcing oversight of mortgage lending practices," and it is "implementing processes that will identify and provide compensation to customers harmed."
The Federal Reserve estimates up to 10,000 borrowers could be eligible for compensation, ranging from $1,000 to $20,000, but they had to have taken out their loans between 2004 and 2008.
A plan to contact those loan customers will be submitted to the fed in 90 days; however, customers express skepticism that the action against Wells Fargo will make any difference.
"I'm suggesting they don't have a heart," said Lopes. "Shame on Wells Fargo. If they don't work with me, me and my three children will be out on the street."
Wells Fargo says customers who wish to discuss the issue in greater depth can call their hotline at 1-877-546-0090.
loans, economy, wells fargo, business, david louie
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