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Wells Fargo now accused of unfair home-mortgage rate hikes

Wells Fargo apparently had more than one way to cheat customers who were refinancing their homes.

The scandal-plagued bank’s Beverly Hills, Calif. branch routinely talked clients into paying higher interest rates in order to avoid fees for delays in processing mortgage-refinancing deals, a whistleblower told The Post.

That’s despite the fact that Wells Fargo’s understaffed team of loan officers at the Beverly Hills office were usually responsible for the processing delays, according to Frank Chavez, a former loan officer who has blown the whistle on other questionable tactics at the nation’s third-biggest bank.

The latest accusation comes to light less than a week after a federal class-action suit accused the beleaguered bank of delaying mortgage loans and refinancings — and then tricking customers into paying extension, or “rate lock,” fees in order to keep their agreed-upon interest rate.

As an alternative to those fees, which could easily surpass $1,000 for a $400,000 home, loan officers frequently suggested bumping up the mortgage rate by as much as a quarter of a percentage point — a hike which, over the long run, could cost customers far more.

“It sucked for everybody except the managers, who were looking good because they were keeping their expenses down,” Chavez told The Post.

“That was the real motivation behind it,” he added. “The regional manager wanted to make the expenses as small as possible.”

The scheme was widespread until late 2015, when it was being used for “the vast majority of these loans,” Chavez said. The tactics were unlikely to have been isolated to the busy office, which could clear over $1 billion a year in new mortgages, he added.

The accusations, which haven’t been previously reported, are the latest revelation that the San Francisco-based lender, now led by CEO Tim Sloan, went to extraordinary lengths, including angering some of its wealthiest customers, to pad its bottom line.

When clients confronted with fees complained that they weren’t at fault for a delayed refi, loan officers typically went to their managers for permission to cover the cost of extending a rate lock — and were typically denied.

Instead, Wells loan officers were given permission to strike another deal: charge a slightly higher interest rate in exchange for a “credit” to cover the rate-lock extension fee.

“Whatever credit they’re giving you would be less than what the person was paying in interest on the life of the loan,” Chavez said.

Often, the size of the rate hike was based on the size of the loan. Jumbo mortgage larger than $417,000 would see an increase by an eighth of a point, or $125 for every $100,000. Those who borrowed less would get hit with a higher rate: as much as 0.25 percent, or $250 for every $100,000.

“You’d make the borrower suck it up,” Chavez said, noting that customers who refused were typically faced with another home appraisal that could cost $500 alone. ”It’s either that or walk, and borrowers don’t want to go through with this all over again at Bank of America.”

While it was most often used during the refinancing process, the tactic was also used on home loan originations for people who were self-employed, since it took longer for underwriters to review and approve their financial information.

“It is common practice across the industry for customers to select—at application or later in the process—some combination of interest rate and points based on their individual circumstances and preferences,” Tom Goyda, a bank spokesman, told The Post.

“We continue to work through a comprehensive review of our past practices regarding rate-lock extensions and will address additional steps for our customers as appropriate,” he said.

Source: http://nypost.com/2017/09/05/wells-fargo-now-accused-of-unfair-home-mortgage-rate-hikes/

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