In tiny print in a huge financial report, Wells Fargo & Co. (WFC) - Get Report admitted to a massive mistake: The bank may have helped cause hundreds of customers in foreclosure lose their homes and hundreds more to lose loans due to "calculation" errors.
In the disclosure, the banking giant said an "internal review" of a tool used for mortgage loan modification underwriting found a "calculation error" related to foreclosure attorneys' fees as far back as 2010. After a first check through 2015 found an error, new controls were put in place but another error was spotted later.
"These errors caused an overstatement of the attorneys' fees," said Wells Fargo, that were used to determine whether customers qualified for mortgage loan modifications or repayment plans according to government requirements.
"As a result of these errors, taken together and subject to final validation, approximately 870 customers were incorrectly denied a loan modification or were not offered a loan modification or repayment plan in cases where they otherwise would have qualified. In approximately 545 of these instances, after the loan modification was denied or the customer was deemed ineligible to be offered a loan modification or repayment plan, a foreclosure was completed."
"We're very sorry these errors occurred," Wells Fargo spokesman Tom Goyda told TheStreet, adding that the bank wasn't saying the foreclosures were wrong.
"The errors identified resulted in improper modification denials, but the foreclosures themselves weren't necessarily improper. About 545 customers eventually went to foreclosure sale after being impacted by the errors but all of the customers impacted were in foreclosure prior to the modification reviews in question and many were able to avoid foreclosure. So a straightforward factual statement- that the customers were denied a modification in error and ultimately lost their homes to foreclosure- is the most accurate way to describe the situation."
Goyda also said the news was simply an "update from the disclosure we released in August" with similar findings.
"We continued the review after the August audit," said Goyda.
Wells Fargo said it has contacted a "substantial majority" of the 870 customers to "provide remediation" and an offer for free mediation services.