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.


CHECKLIST — FDCPA Damages and Recovery: Revisiting the Montana S Ct Decision in Jacobson v Bayview

What is unique and instructive about this decision from the Montana Supreme Court is that it gives details of each and every fraudulent, wrongful and otherwise illegal acts that were committed by a self-proclaimed servicer and the “defective” trustee on the deed of trust.

You need to read the case to see how many different times the same court in the same case awarded damages, attorney fees and sanctions against Bayview who persisted in their behavior even after the judgment was entered.

Get a consult! 202-838-6345

https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.


This case overall stands for the proposition that the violations of federal law by self proclaimed servicers, trusts, trustees, substituted trustees, etc. are NOT insignificant or irrelevant. The consequences of merely applying the law in a fair and balanced way could and should be devastating to the TBTF banks, once the veil is pierced from servicers like Bayview, Ocwen et al and the real players are revealed.

I offer the following for legal practitioners as a checklist of issues that are usually present, in one form or another, in virtually all foreclosure cases and the consequences to the bad actors when the law is actually applied. The interesting thing is that this checklist does not just represent my perspective. It comes directly from the Jacobson decision by the high court in Montana. That decision should be read, studied and analyzed several times. You need to read the case to see how many different times the same court in the same case awarded damages, attorney fees and sanctions against Bayview who persisted in their behavior even after the judgment was entered.

One additional note: If you think about it, you can easily see how this case represents the overall infrastructure employed by the super banks. It is obvious that all of Bayview’s actions were at the behest of Citi, who like any other organized crime figure, sought to avoid getting their hands dirty. The self proclamations inevitably employ the name of US Bank whose involvement is shown in this case to be zero. Nonetheless the attorneys for Bayview and Peterson sought to pile up paper documents to create the illusion that they were acting properly.

  1. FDCPA —abusive debt collection practices by debt collectors
  2. FDCPA who is a debt collector — anyone other than the creditor
  3. FDCPA Strict Liability 
  10. HAMP Modifications Scam — initial and incentive payments
  11. Estopped and fraud: 90 day delinquency disinformation — fraud and UPL
  12. Rejected Payment
  13. Default Letter: Not authorized because sender is neither servicer nor interested party.
  14. Default letter naming creditor
  15. Default letter declaring amount due — usually wrong
  16. Default letter with deadline date for reinstatement: CURE DATE
  17. Late charges improper
  18. Extra interest improper
  19. Fees even after they lose added to balance “due.”
  20. Notice of acceleration based upon default letter which contains inaccurate information. [Not authorized because sender is neither servicer nor interested party.]
  21. Damages: Negative credit rating — [How would bank feel if their investment rating dropped? Would their stock drop? would thousands of stockholders lose money as a result?]
  22. damages: emotional stress
  23. Damages: Lost opportunities to save home
  24. Damages: Lost ability to receive incentive payments for modification
  25. FDCPA etc: Use of nonexistent or inactive entities
  26. FDCPA Illegal notarizations
  27. Illegal notarizations on behalf of nonexistent or uninvolved entities.
  28. FDCPA naming self proclaimed servicer as beneficiary (creditor/mortgagee)
  29. Assignments following self proclamation of beneficiary (creditor/mortgagee)
  30. Falsely Informing homeowner they cannot reinstate
  31. Wrongful appointment of Trustee under deed of trust
  32. Wrongful and non existent Power of Attorney
  33. False promises to modify
  34. False representations to the Court
  35. Musical entities
  36. False and fraudulent utterance of a document
  37. False and fraudulent recording of a false document
  38. False representations concerning “US Bank, Trustee” — a whole category unto itself. (the BOA deal and others who “sold” trustee position of REMICs to US Bank.) 

CHAIN OF NOTHING: Wells Fargo Fraud Is Causing the Curtain to Fall Revealing Fraud in Foreclosures and Ultimately Mortgage Bonds

“Defendant Wells Fargo’s deceptive and intentional conduct displayed a complete and total disregard for the rights” of the couple, wrote Judge Elliott, a circuit judge in the 43rd Judicial District of Missouri. “Wells Fargo took its money and moved on, with complete disregard to the human damage left in its wake.”

see http://www.nytimes.com/2016/09/22/business/in-wells-fargos-bogus-accounts-echoes-of-foreclosure-abuses.html?_r=0

Gretchen Morgenson of the New York times has revived the issues of fraudulent foreclosures in mainstream media by publishing a sharply critical attack on Wells Fargo. Like Elizabeth Warren has done, Morgenson brings attention to two connected policies of the TBTF banks: (1) the the recent revelation that Wells Fargo forced 8 accounts upon each customer of the commercial banking side of the bank — regardless of whether the customer even knew those accounts existed and (2) the obvious similarity with the fraudulent sales of MBS and the fraudulent foreclosures initiated by Wells Fargo.

Senator Elizabeth Warren, who always knows more than she says, made a statement on one of the network news shows that the Banks decided that the best way to make more money was to cheat their customers. She went on to say that the latest Wells Fargo scandal was revealing something that has always been the case with the large banks since the early 1990’s, to wit: that there is a commonality between this one Wells Fargo abuse that occurred over many years and the conduct of the same bank and the other major banks in the global economic crisis of 2008 caused by those banks.

Warren chooses her words carefully. So her use of the word “customers” instead of consumers might be an indication that she was thinking about the “investors” in mortgage bonds as customers of the same bank. Pension Funds and other managed funds were customers of the banks when they gave those banks money for the purchase of mortgage bonds issued by a new business – a REMIC Trust that would use the money to acquire residential mortgage loans. The banks called it securitization. But the rest of us who have analyzed it are quite sure that it was a fraudulent scheme from the very beginning. — And it was not a securitization scheme.

The “new business” did not exist. In most cases the illusion of its existence was created by partially complete written documents that were never used or followed. The new business never had a bank account and never received the proceeds from the sale of the mortgage bonds. This was no ordinary IPO. The “new business” was actually just a proprietary arm of the investment bank that used the false documents to claim a position as Master Servicer — over a Trust that was empty.

Pretending that the “new business” was real, Wells Fargo and other participants in the scheme pocketed the money from the managed funds except for that part that was used to fund the origination of mostly toxic loans. They needed the loans to be toxic so they could foreclose. When they foreclosed they received the first legal document in the entire chain — either a foreclosure judgment or a Trustee’s deed.

CHAIN OF NOTHING: The banks treated the deposits of money from the managed funds as if it were their own. They broke every promise they made to the “investors”, commingled the money and acquired no loans because the loans were already funded at origination by the illegal use of investor (bank customer) money. In all the assignments ever represented over the last ten years, at least, there is zero evidence that any transaction occurred in which the assignee paid anything for the loans said to have been transferred by the words in the assignment. Why would the assignor not insist on receiving money in exchange for the assignment? The answer is obvious — they didn’t own the loan. And following all that back to origination you find that the originator was, in nearly all cases, never paid for the assignment of the loan because the originator did not make the loan. In fact, you find that there was no loan contract between the “borrower” and anyone who advanced money to or on behalf of the homeowner. The investors were left out in the cold while the supposed “intermediary” banks played as though they were the lenders.




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