San-Francisco based Wells Fargo Bank was involved in a recent crackdown by the Federal Reserve regarding its poor lending practices. Although the bank will have to fork over $85 million in penalty fees, it won't be admitting any wrongdoings, according to San Francisco's KGO-TV. However, it will no longer run the targeted loan unit.
The source reported that Wells Fargo is the first to face a penalty regarding its laundry list of allegations, including those that claim the bank steered borrowers into sub-prime loans by falsifying their income information and credit decisions
on loan applications. Moves such as this were made as a result of incentive pay, sales figures and poor controls.
Some borrowers impacted by the bank's practices might benefit from the penalty by receiving monetary compensation. For example, Debbie Lopez has been struggling with the bank for seven years to modify her home loan, as the payments are too high. She claims the bank doesn't want to work with her, the television station reports.
"$85 million is not enough," said Ana Guardado with the Alliance of California for Community Empowerment, to the source. "What we have lost in homes, and our community has suffered so much."
The bank claims the actions were committed by a "relatively small group," and it will reinforce the oversight of its mortgage lending practices while implementing efforts to identify and compensate those consumers who were impacted.
The Federal Reserve expects that up to 10,000 borrowers will be elligible to receive compensation packages between $1,000 and $20,000 for loans taken out between 2004 and 2008. However, consumers are skeptical.
"I'm suggesting they don't have a heart," said Lopez to the source. "Shame on Wells Fargo. If they don't work with me, me and my three children will be out on the street."
To further help consumers gain home loans or make other big ticket credit decisions, the Federal Trade Commission is finalizing regulations that will offer consumers free access to their credit scores. This will be particularly beneficial to individuals whose scores were negatively impacted by the recession, allowing them to boost their number so that they may make necessary purchases, such as a new car or home.