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.
