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Sloppy seconds: Feds Probe $150 Million Double Billing Scheme By Banks

January 1, 2012 By 4 Comments

Catherine Curan, NY Post

John Stumpf, CEO of Wells Fargo and others may start feeling the heat from the feds for double billing homeowners

Federal investigators are looking into allegations that banks have wrongly pocketed tens of millions of dollars from troubled homeowners by double-billing for mortgage escrow fees, The Post has learned.

Exactly how much in phony profits the banks may have pocketed from this alleged practice is not known, but an analysis by The Post of bankruptcy cases in 2011 shows it could range higher than $150 million for just the new cases filed this year.

The problem has gotten so out of hand that lawyers and accountants at the New York City office of US Trustee — charged with protecting the integrity of US bankruptcy courts — are poring over local Chapter 13 bankruptcy cases for evidence of wrongdoing.

The federal investigators were tipped to the alleged practice by metro area bankruptcy lawyers. Cases specifically involved Wells Fargo and GMAC Mortgage, but lawyers say most banks had double-dipped.

“It seems prevalent, and it’s a moneymaking machine,” David Shaev, a Manhattan bankruptcy defense lawyer, said of the banks’ double-dipping.

Westchester bankruptcy defense lawyer Linda Tirelli says 75 percent of her clients face escrow double-billing by their lender or mortgage servicer, for amounts up to $2,800.

Here’s how the double-dipping scam can be pulled off.

Many homeowners opt to pay part of their property taxes and homeowners insurance with their mortgage every month. The funds are then put into an escrow account and used to periodically pay the taxes and insurance.
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Wells Fargo Illegally Pushed Homeowners Into Sub-Prime Loans & Falsified Docs

July 20, 2011 By Leave a Comment

Shahien Nasiripour, Huffington Post

Perhaps more than 10,000 Wells Fargo borrowers were inappropriately steered into more expensive subprime mortgages or had their loan documents falsified by bank personnel, the Federal Reserve said Wednesday.

The bank, the largest U.S. mortgage lender, agreed to pay $85 million to settle civil charges. On Tuesday, the company announced that it turned a $3.9 billion profit last quarter. It’s made $7.7 billion in profit thus far this year.

The fine is the largest the Fed has ever imposed in a consumer case, the central bank said. It’s also the first formal enforcement action taken by a federal bank regulator against allegations that banks steered borrowers into high-cost, subprime loans, it added.

Wells Fargo did not admit wrongdoing.

“The alleged actions committed by a relatively small group of team members are not what we stand for at Wells Fargo,” John Stumpf, the bank’s chief executive and chairman, said in a statement. The bank has already voluntarily compensated 600 customers, the statement said.

The fraudulent activity took place over four years from early 2004 to the autumn of 2008, according to the Fed. The bank must compensate borrowers for losses, some of whom could receive more than $20,000. At least 3,700 borrowers will be compensated, the Fed estimated. Wells Fargo has to review a subset of borrowers who took out subprime loans to determine whether they were illegally steered into more expensive mortgages.

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Banks question mortgage pact

March 11, 2011 By Leave a Comment

But Bank of America, Wells are reducing principal for some borrowers voluntarily.

Rick Rothacker, Charlotte Observer

Big banks continue to push back against a possible settlement that could require them to forgive billions in mortgage balances, even as they reduce principal through select programs.

Bank of America Corp. on Thursday announced a plan to assist borrowers in the military, days after executives raised concerns about the fairness and effectiveness of a regulatory settlement that could cost big banks $20 billion or more.

The military program makes principal reduction a first step for struggling borrowers who are leaving active duty, trimming a customer’s mortgage to as low as 100 percent of the home’s current market value. The bank will also reduce interest rates for some customers to as low as 4 percent.

Also Thursday, Wells Fargo & Co. chief executive John Stumpf told investors that principal reduction is “not always the answer,” while noting his bank has forgiven nearly $4billion in balances for former Wachovia Pick-A-Payment borrowers.

Banks are resisting a broad settlement with federal banking regulators and attorneys general for a number of reasons, experts said. In many cases, the lenders who service the loans don’t actually own the mortgages. There are questions about who deserves to receive principal reduction – distressed borrowers or borrowers working hard to make their payments. And then there’s the magnitude of the problem.

More than 11 million, nearly 25percent, of all U.S. residential properties are “underwater,” meaning the borrower owes more than the value of the home, according to research firm CoreLogic. Altogether, borrowers have negative equity of $750 billion.

“It’s the sheer size of it,” Guy Cecala, publisher of Inside Mortgage Finance, said of the banks’ resistance.

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E-mails reveal Wells Fargo worries

May 12, 2010 By 1 Comment

Internal communications by executives play a big role in a St. Paul trial over disputed investment strategy.

David Phelps, Minneapolis Star-Tribune

An e-mail sent by a Wells Fargo & Co. executive in early 2008 offered this warning to colleagues: “Everything we say will be used against us.”

That e-mail now is among the mound of internal bank documents, including handwritten meeting notes, introduced by attorneys for four nonprofits who are suing Wells Fargo over its securities-lending investment program.

Halfway through a projected six-week trial in St. Paul, the question is whether such evidence can convince a jury to award the nonprofits $407 million in damages.

Wells Fargo will present its defense in the coming weeks, but offered some insight last week when its lawyers noted that the plaintiffs are not unsophisticated investors. The nonprofits employ outside financial advisers and are governed by boards that include directors with backgrounds in banking and finance, the bank’s lawyers contend.

Bank executives have been confronted at the trial with e-mails and e-mail chains about the Wells Fargo securities lending program, which ran into trouble when the credit markets soured in 2007. The e-mails suggest that executives fretted over responding to the credit crisis and debated what to tell clients.

“I think it is a bad idea to answer these questions right now,” one executive in the securities lending department said in an e-mail about client inquiries as the market tanked. The same e-mail contained the warning that executives’ statements will be used against them.

Several months later, the same executive said in another e-mail about continuing client inquiries, “We never admit to ‘having problems.’”

The e-mails were introduced by Mike Ciresi, lead attorney for three charities and an insurance fund, as he cross-examined bank executives, including retired chairman Richard Kovacevich and current chairman John Stumpf. Other e-mails and meeting notes reveal worries about the management of the program and whether the bank or investors should bear the losses.

Read more here: http://www.startribune.com/business/93143674.html?elr=KArksLckD8EQDUoaEyqyP4O:DW3ckUiD3aPc:_Yyc:aULPQL7PQLanchO7DiUsT&utm_source=web&utm_medium=twitter

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