NYTimes Gretchen Morgenson: Wells Fargo accused of making improper changes to Mortgages

Editor’s Note: Wells Fargo is a lawless operation that exploits unsuspecting consumers by opening accounts in their name without permission, and modifying and foreclosing on homes it doesn’t own with fabricated notes and fraudulent documents.   Not to mention participating in identity theft and accessing credit reports without authorization.

Meanwhile, for the most part, Wells Fargo operates above the law and receives pathetically inconsequential penalties and fines for its illegal conduct.   If you continue to bank with Wells Fargo we implore you to look at its track-record and move your accounts to a local credit union or small bank.

Wells Fargo targeted undocumented immigrants, stalked street corners, lawsuit claims

On “Hit the Streets Thursday,” Wells Fargo bankers and tellers, specifically those of Latino descent, scouted the streets and Social Security offices for potential clients. Their goal: Find undocumented immigrants, take them to a local branch and persuade them to open bank accounts.

Others hit construction sites and factories, according to court documents. Knowing that undocumented workers there needed a place to cash their checks, Wells Fargo employees urged them to open new accounts while promising to waive check-cashing fees. Some offered the immigrants money to open an account.

The more people signed up, whether it was for checking and savings accounts, credit and debit cards, online banking or overdraft protection, the better. If they signed up for all of the features, even better. Each new account was considered a sale, and the more sales employees rack up, the better their future was with the company.

That’s according to former employees’ sworn statements obtained last month by a law firm that has been handling a shareholder’s lawsuit against Wells Fargo. Former bank managers, personal bankers and tellers say they were forced to resort to questionable tactics to meet the company’s unrealistic sales quotas.

Mark Molumphy, an attorney for the firm, said the sales practices, which spanned 15 years, were not a secret to the bank’s executives and should have also been known to its board members.

“The conduct we have come up with is scandalous,” another attorney, Joseph Cotchett, told the San Francisco Chronicle. “It’s outrageous to think that regulators let the bank get away with this.”

The alarming statements are the latest in a massive scandal that continues to engulf the San Francisco-based banking giant.

In September, Wells Fargo was forced to pay $185 million in regulatory penalties following revelations that more than 2 million bank and credit card accounts were opened on behalf of customers without their knowledge. The fraudulent accounts netted more than $2 million in fees charged to customers for services they didn’t sign up for.

Wells Fargo has strongly denied the allegations from former employees.

“These allegations are inconsistent with our policies, values and the relationships we work hard to build with all parts of our community. Wells Fargo has long been committed to providing bank services to immigrants in a manner that complies fully with the law, and we have controls in place to ensure we comply with requirements,” spokesman Ancel Martinez said in a statement. “[T]hese assertions are offensive, because they run counter to the expectations of Wells Fargo, and would be in violation of policies we have in place to safeguard against abuses.”

Wells Fargo CEO John Stumpf apologized in front of a Senate panel on Sept. 20, 2016. Wells Fargo has faced criticism for its handling of a scandal involving fake accounts set up by Wells Fargo employees. (Reuters)

The statements reveal that personal bankers and bank managers turned to unethical and potentially illegal ways to reach their daily quotas, while those who dared to report the bad practices were fired. They also raise questions about whether the alleged tactics may have violated federal law, which requires financial institutions to verify the identity of their customers.

Some of the practices involved creating fake bank accounts with fictitious names, and opening multiple accounts for customers, including undocumented immigrants, without their authorization, according to court documents. Federal law says that banks must first obtain information such as customers’ date of birth, address and identification number before opening accounts.

Ricky Hansen Jr., who worked for several years as a manager at Wells Fargo branches in Arizona, said in court documents he witnessed sales tactics “that started out okay but then evolved into massive fraud.”

Hansen said he discovered that one employee was opening 40 to 50 bank accounts under fake names every week, and funding those accounts by transferring other customers’ money. The employee later moved the funds back, after he’d received credit for the sales, hoping the customers didn’t notice. Hansen added that customer signatures on bank records appear to have been written by the same person using the same pen.

Still, the employee was praised by upper management, Hansen said. When he reported to the bank manager what he knew, he was told the employees’ sales were legitimate.

“You have to decide if you want a job here. You can either run with us or not,” Hansen recalled his district manager telling him, according to court records. “Play ball or get out.”

Hansen was later fired, while the employee he reported was promoted, he said.

Julia Miller, who worked at a Wells Fargo branch in Pennsylvania for eight years, said she received calls from her district manager every day, multiple times a day, to check whether daily quotas were being met.

“I was told by my supervisors to work our employees ‘like dogs’ to meet our sales goals,” Miller said, according to court records. “I was not allowed to pay my employees overtime if their quotas were not met and had to stay late to meet their sales objectives. I was personally forced to stay late and cold-call customers until the sales goals established by upper management were met.”

A branch in Wisconsin had what’s called “Call Nights.” Employees were asked to stay long after their shifts ended to call customers, said Angela Payden, a former personal banker who worked for Wells Fargo for three years. The wealthy ones are the target, and employees were urged to call them around 6 p.m., when they’re most likely in the middle of family dinners and are more likely to agree to sign up just to get off the phone. Employees signed them up for new credit card accounts with limits of $25,000 or higher, Payden said.

The emphasis was on what’s called the “Great Eight,” according to the former employees. That’s eight different products and services that employees are urged to have each customer sign up for to generate fees, Molumphy, the attorney, said.

The pressure of the job became so intense that it drove some employees to panic attacks and mental breakdowns.

Sarah Rush, who worked for United Healthcare, which contracted with Wells Fargo to provide mental health services to employees and their families, said about 90 percent of calls she received were from bank workers who were stressed out, anxious and depressed. At least one woman was suicidal, Rush said.

The practices at Wells Fargo first came to light in 2013, when the Los Angeles Times published a damning investigative report describing an aggressive sales culture that “has battered employee morale and led to unethical breaches, customer complaints and labor lawsuits.”

John Stumpf, Wells Fargo’s former chairman and chief executive, resigned in the wake of the scandal. Carrie Tolstedt, the executive in charge of Wells Fargo’s community banking division, left the company last year — with more than $120 million in retirement package. More than 5,000 low-level employees have been fired.

In February, Wells Fargo fired four executives as the company’s board of directors was completing an investigation into fake accounts believed to have been set up by low-level employees to meet sales quotas.

And in April, Wells Fargo ordered Stumpf and Tolstedt to pay a total of $75 million after the board’s six-month investigation revealed that bad sales practices stretched as far back as 2002.

Martinez, the Wells Fargo spokesman, said the company has made several changes to ensure that customers receive only the products they want.

“We continue to make additional improvements in our Retail Bank operations and we have eliminated product sales goals and introduced new compensation plan focused on customer experience for branch team members,” Martinez said.

A hearing on a motion to dismiss filed by Wells Fargo in the shareholder lawsuit is scheduled on Tuesday.

Renae Merle contributed to this story.

Wells Fargo: Brand-Control gone wrong


It is remarkable how well Wells Fargo is performing given all that management is facing these days resulting from the “scandal” in the retail banking division.

New leadership has been put in place, but there is still little evidence that “control” has been reestablished and a new culture has been implemented.

The future of the bank depends upon the vision of the bank leadership and the execution of this vision, and this, at least at this point, has not been accomplished.

Wells Fargo & Co. (NYSE: WFC) turned in a “peer-beating” return on equity performance in the first quarter of 2017 of 11.54 percent.

That is the good news. From here it is all “downhill.”

The ROE was down from the first quarter in 2016, and down from the 2012-2015 period when returns were generally well above 12.0 percent and Wells Fargo was considered to be the commercial bank of the future.

One important factor here is that Wells Fargo was and still is a commercial bank, unlike most of its large competitors. Wells Fargo does not have investment banking and trading departments that can goose up earnings during times when financial markets are volatile, like JPMorgan Chase (NYSE: JPM) and Citigroup (NYSE: C).

Both JPMorgan and Citigroup posted impressive first-quarter gains in net income, boosted by 17.0 percent increases in trading results and substantial gains in fee income from debt issues.

Wells Fargo has to rely primarily upon dull old consumer and commercial banking business for most of its revenue.

Higher interest rates, for example, have resulted in some borrower pull back in recent months. Mortgage production was down, as were the fees on mortgage originations, which fell by 26 percent. Mortgage servicing income dropped by 46 percent.

Commercial and industrial loans were up, year over year, but by only one percent.

The net interest margin earned by Wells was actually down, year over year, falling from 2.90 percent to 2.87 percent this year. Note that the NIM at JPMorgan Chase and Citigroup rose over the same time period.

Perhaps the greatest hit to the Wells Fargo bottom line was the increase in expenses. Costs at the bank were up by almost 6.0 percent, and expenses as a share of revenue, an important gauge for management referred to as the “efficiency ratio,” rose to 62.7 percent above the banks’ target range of 55 percent to 59 percent.

There were two major contributors to the increase in the efficiency ratio. First, there were the direct costs associated with the retail banking “scandal” and the efforts of the consumer areas to repair relationships and maintain customers.

Second, there were the costs associated with hiring lawyers, consultants and other “risk professionals” to deal with the aftermath of the scandal.

But, the greatest challenge that Wells Fargo has to overcome is the decline in the brand.

The top management at Wells just cannot seem to get over the scandal and move on into the future. This, to me, is a shame and points to a real concern over the leadership of the bank.

As I have written about before, the reputation of a management is an all-important element of the culture of an organization. Once damaged, it is hard to build up, once again.

Earlier on, Wells Fargo had an outstanding record and its top management received high marks for the culture that was embedded in the organization. The return on equity of the bank was well above 15.0 percent, making it a leading performer in a tough industry.

Wells Fargo retained its image as a commercial bank, emphasizing commercial lending and mortgage lending and staying away from investment banking. Its focus kept it at the top of large bank performance during the Great Recession and put it in an enviable position for the subsequent economic recovery.

Something had changed, however, and the drive to sustain business led to practices that were unacceptable. The culture of the bank, at least in certain areas, declined and created a cancer. And, these practices were denied and covered up from others along the way.

And, as I have written before, these cancers eat away at the organization and have longer-term impacts on overall performance. And, these impacts linger.

Wells Fargo is facing the longer-term consequences right now and can’t seem to get rid of them. It appeared as if the top management changes were in the right directions and that the bank was, in fact, restarting,

Subsequent events, like the $75 million claw back last week of compensation from two top executives keeps the scandal before the public.

And, there was the release by the bank’s board not long ago of an independent investigation into what had gone on. This is just one of several investigations going on conducted by state and federal officials, including the US Department of Justice and the Securities and Exchange Commission.

Finally, the Board is facing a shareholder’s meeting on April 25 and there is a movement to vote against 12 of the 15 bank directors, including the Chairman Stephen Sanger.

“Crap” happens when you lose control of your culture. Right now, the new top management team is not doing what it needs to do to get Wells Fargo “restarted.” It must gain control over the message.

The bank is performing remarkably well given all that is going on at the bank and the distractions being faced by all employees and management, not only just the top management.

However, this is the time that the “new” leader needs to step up to the podium and show us what he (or she) is made of. It is time to “get the past behind it.”

Disclosure:I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article

Wells Fargo loan applications and originations plunge

by the Lendinglies Team

Wells Fargo’s Q4 earnings  last year created an alarm because with rising interest rates, bad publicity, and a slew of lawsuits from investors, governmental entities and homeowners, Wells Fargo appeared to be in for a rough ride.  Residential mortgage applications also plunged in Q4 by $25 billion from the prior quarter, while the mortgage origination pipeline plunged by nearly half to $30 billion.  The scenario was starting to look like the all time record lows seen in late 2013.

It appears Well’s troubles have not improved with the results from 2017 Q1 coming in.  Mortgage applications fell by another 23% to $59 billion.  This is a new low since the financial crisis occurred.  Mortgage origination’s are Wells Fargo’s signature product.

Although the Wells’ application pipeline wasn’t terrible at $28 billion, it reflects a troubling trend.

Mortgage originations plunged by 39% sequentially from $72 billion to only $44 billion but Wells spins this loss on higher interest rates and seasonal influences.  Since this number lags the mortgage applications, analysts predict that Wells Fargo will see post-crisis lows in the second quarter.

What these number truly reveal, is that the average American consumer cannot afford to take out mortgages when rates rise by as little as 1%, which is where they peaked in the first quarter. The FED is predicting another rate increase in June.  If the rate hikes continue it is fair to predict that the US domestic housing market will falter no matter what Pollyanna-ish predictions are coming from the fake media.

Anemic US consumer demand for mortgages is indicative of a recession and confirms the Fed is unable to raise rates without crashing the housing market. Furthermore, consumer loans also show a decline in every single category for one simple reason: lack of demand.  Lack of demand stems from more than rising interest rates but the inability to take on more debt, flat wages, inflation, and an inflated housing market.  People have once again over-leveraged themselves by purchasing homes that were artificially inflated by access to cheap money.   It sounds a lot like 2008 again.

JPM, Citi and PNC also confirmed today that the loan market has slowed slowdown and that the US is quickly approaching an economic contraction caused by excessive debt accumulation.  Trump is bullish on lower rates all of a sudden and bolstering the US Dollar.  The only way out is another quantitative easing and that won’t happen this time around.



Source: Wells Fargo

Wells Fargo faces another Investor lawsuit over defective mortgage securities

By the Lending Lies Team

Too Big to Fail behemoth Wells Fargo faces another lawsuit over faulty residential mortgage-backed securities.  As investors become aware of the fraudulent securities purchased, more lawsuits are sure to be ignited.

According to a Reuters article by Jonathan Stempel, U.S. District Judge Katherine Polk Failla in Manhattan said on Thursday that Wells Fargo must face litigation seeking to hold it responsible for billions of dollars of claimed investor losses.  Judge Failla is the same judge that ruled last week in Costa v. Deutsche Bank that the New York six-year statute of limitations applied.  It appears New York has a judge who applies the law as written.

The plaintiffs in this settlement include BlackRock, Pacific Investment Management, Prudential Financial and others.

From the article:

Failla’s 80-page decision covers five lawsuits, which comprise one of the largest remaining pieces of U.S. litigation seeking to hold banks liable for risky mortgage securities that were a major cause of the 2008 global financial crisis.

“It is plaintiffs’ contention that such allegations go far beyond many other RMBS trustee complaints, which themselves have been found sufficient to state a claim,” Failla wrote, without ruling on the merits. “The court agrees.”

While litigation that dates back to the financial crisis is winding down for Wells Fargo, it wasn’t too long ago that it reached a settlement that dealt with faulty MBS from that period.

Earlier in March, Deutsche BankRoyal Bank of Scotland, and Wells Fargo reached a $165 million settlement in class action lawsuit brought by pension funds over faulty crisis-era mortgages originated NovaStar Mortgage.

The lawsuit charged NovaStar, RBS, Wells Fargo and Deutsche Bank with “misleading investors into believing that the securities they bought were safer than they proved to be.”  This is likely the tip of the iceberg as many investors discover they bought a defective and costly product called mortgage backed securities.



From the Clouded Titles Blog: https://cloudedtitlesblog.com/2017/03/03/missouri-supreme-court-upholds-sanctions-against-wells-fargo/


Whether you’ve caught wind of this or not, Missouri Attorney Greg Leyh will have a shot in front of a rural Missouri county jury to convince them that Wells Fargo’s (and others’) actions in wrongfully foreclosing against David and Crystal Holm of Clinton County warrant serious money damages.

See the Missouri Supreme Court opinion here: holm-v-wells-fargo-mtg-inc-et-al-sup-ct-mo-no-sc95755-feb-28-2017

Because of Wells Fargo’s evasive actions to thwart discovery, the county judge sanctioned Wells Fargo by striking their pleadings and preventing them from (1) presenting any evidence at trial; (2) objecting to the Holms’ evidence; and (3) cross-examining any of the Holm’s witnesses.  Wells Fargo maintained it never waived its right to a jury trial.  The circuit judge denied their request, held a bench trial, and entered judgment in favor of the Holms, quieting title to their home.

The Missouri Supreme Court reversed the quiet title action, but refused to vacate the sanctions award, and further held that the wrongful foreclosure “was supported by substantial evidence and was not against the weight of the evidence.”  What the new trial by jury will determine is what the Holm’s damages are for the wrongful foreclosure.  A recent trial in Clinton County resulted in a $4.7-million jury award.  The Holms were originally awarded $2.92-million in punitive damages as part of their overall award.


The issue here is how a jury is going to treat Wells Fargo, given the recent spate of bad press surrounding the creation of dummy accounts to get the bank’s numbers up.  With the way that most rural folks view banks these days, it’s likely that Wells’s request for a jury trial may get them in more financial hot water than they bargained for, rather than just paying up and taking their loss with grace, lesson learned.  I personally don’t think it’s going to end that way for the bank and I’m sure the quiet title action that was vacated is going to be revisited.

Wells Fargo Foreclosure: Another Unconscionable Foreclosure Tale


THE BIGGER PICTURE: Foreclosure fight


  • By SPENCER TULIS nyp2904@yahoo.com



In 1998, Leanne Labadee bought a three-unit home on Ogden Street in Penn Yan for $75,000. The 50-year-old faithfully paid her mortgage every month, the majority of the time with money orders.

She never missed a payment.

Like many, she received notices about her loan being resold to another mortgage company; federal banking laws allow financial institutions to sell mortgages or transfer the servicing rights to other institutions. Consumer consent is not required. It’s a common practice, and Leanne’s mortgage has been owned by at least three different banks.

In short, the secondary mortgage industry is huge.

In 2008, out of the blue, she was informed foreclosure proceedings were being started on her home unless the mortgage was paid in full. The mortgage company? Wells Fargo, an outfit that has dealt with controversy in recent years because of questionable business practices.

Leanne has been in a fight with Wells Fargo ever since, all the while still not missing a payment. She even enlisted Congressman Tom Reed to help fight on her behalf for two years — with no success.

One would think a few phone calls would be able to straighten things out. Leanne certainly couldn’t afford to fly to Wells Fargo’s headquarters in Des Moines, Iowa. Chances are it wouldn’t have mattered anyway because it seems no one can find all the paperwork and account information that relates to her property.

Her sister, Lori, has been a tremendous help in this fight. Leanne is disabled due to a combination of diabetes, depression and anxiety. The ongoing foreclosure threats have done little to improve her health.

Lori has a file full of paperwork; it’s a foot tall. She couldn’t tell you the number of phone calls she has made on Leanne’s behalf, contacting the Consumer Financial Protection Bureau and New York State Attorney General’s Office, to name just two.

When mortgages are resold, consumers are not supposed to become collateral damage during the process. Mortgage companies have a legal obligation to protect consumers. That means paperwork should never be lost and should never hinder a consumer’s chance to save their home from unnecessary foreclosure.

Famous last words and, ultimately, empty promises for Leanne.

Two weeks ago her home was sold at foreclosure for $55,000. Not only did she lose out on all the equity she has put in through the years, but she received a bill from Wells Fargo saying the home was foreclosed for $87,200, and they insisted she has to continue making payments for the $32,200 difference.

If there is a “smoking gun” here, it may lay in some of the paperwork she possesses with the name Steven Baum on it.

In 2010, a federal, class-action complaint on behalf of tens of thousands of New York state homeowners who lost their homes to an alleged foreclosure fraud began. The fraud was orchestrated for years by a New York “foreclosure mill” attorney along with major mortgage companies. The case is filed in the U.S. District Court, Eastern District of New York, entitled “Connie Campbell against Steven Baum.

The action seeks to return tens of thousands of foreclosed homes to their owners, or its value, along with hundreds of millions in punitive damages against Baum.

“Mr. Baum is an attorney who knows better, yet his foreclosure filings for parties who have no standing to sue confuse the courts and homeowners while he and his banking clients profit tremendously by throwing people on the streets after their bad loans sold by the very same banks become unaffordable to innocent people,” said Susan Lask, who filed the claim: “The aforementioned false foreclosure filings potentially hit tens of thousands of New Yorkers who were foreclosed upon.”

Baum has been accused of deliberate sloppy filings to hasten foreclosures on unwitting homeowners and courts. In 2012, he was fined $6 million.

Last week Leanne found a Rochester attorney who has agreed to represent her in her fight against this injustice.

She is now living with her sister.


%d bloggers like this: