It’s been a tough year or so for Wells Fargo, the undisputed king of mortgages.
While they continue to lead the nation in home loan origination volume, they seem to be getting hit from every angle thanks to some alleged unscrupulous behavior.
Their mortgage business seemed to survive the big fake account scandal relatively unscathed, but now they’re dealing with another potential embarrassment related to mortgages.
I guess it was only a matter of time.
Did Wells Fargo Make Customers Pay Lock Extension Fees Unfairly?
In other words, it wasn’t his fault that the bank didn’t close the loan before the lock expired, yet they still charged him a $287.50 extension fee.
Apparently, Muniz was told by an employee that the bank would cover the charge, only to have that decision reversed by a regional manager.
That may have turned out to be a big mistake because now the Consumer Financial Protection Bureau (CFPB) is investigating the bank’s lock practices.
It’s common for locks to run out if a mortgage gets tied up in paperwork delays, or an appraisal issue comes up. That’s why borrowers may float for a bit and lock later on when they know they’re in the homestretch.
Other borrowers may lock almost immediately for fear of missing out on that super low mortgage rate. Unfortunately, even a 90-day lock might not be enough if the mortgage is delayed enough.
Typically, you’ll need to extend your lock for X number of days if your loan doesn’t close by the lock expiration date. Who pays for that extension is always a sticking point.
Sometimes, the bank will extend the lock as a courtesy to the borrower, even if it wasn’t explicitly the bank’s fault. Other times the bank will ask that the borrower pay an extension fee, which can be quite expensive depending on the size of the loan amount.
Wells Fargo Apparently Blamed Borrowers for Its Own Delays
Here’s where Wells Fargo may have gotten into trouble. The bank’s managers allegedly pressured their loan officers to blame homeowners for any delays that resulted in a rate lock expiration, even if it wasn’t the borrower’s fault.
Apparently, it was a systematic issue, whereby the employees would falsely claim that paperwork was missing, even if the borrower satisfied all paperwork requests and conditions. The delays may have actually been the result of understaffing, but the bank supposedly didn’t own up to that.
Now the bank is reviewing their past rate lock extensions to determine what steps, if any, it will take for customers, per a statement from Wells Fargo Spokesman Tom Goyda.
On the one hand, it seems like a pretty trivial thing for the bank to engage in, especially a massive bank like Wells Fargo that can probably absorb small fees.
Of course, a rate lock extension fee here and another few thousand more there, and we’re talking about a lot of money.
The big question is proving guilt. The lock thing has always been a bit of a gray area because so many parties are involved. You can blame the real estate agent, the seller, the buyer, the bank, the appraiser, and so on.
And as mentioned, banks often just extend locks as a courtesy because they typically have some wiggle room. At least if it’s only for a few days.
It might be difficult to prove fault, though if Wells Fargo’s own employees testify, it could be a major scandal and another blow to the big bank. The suit is seeking class action status.
Still, Wells Fargo was the top mortgage lender in 2016, doubling their nearest competitor’s (Chase) loan volume. And it doesn’t appear they’ll be losing their #1 rank anytime soon.