As Wells Fargo reels from revelations that its mistake cost hundreds of people their homes, the bank is blaming the problem on faulty computer software.
Last week, the bank apologized for denying, or not offering, lower mortgage payments to about 625 customers who should have qualified for the adjustments as they struggled to pay their mortgages in the Great Recession. Wells said that after its error, about 400 people in the group ultimately lost their homes to foreclosure.
Wells did not rule out uncovering additional people who lost their homes because of this problem.
The software was used by Wells to determine customers' eligibility for the mortgage modifications, Wells Fargo spokesman Tom Goyda said Wednesday. Wells Fargo developed the tool, he said.
Here's how it worked, according to Goyda.
Customers qualified for modifications if the reduced mortgage payments would meet certain payment-to-income ratios considered to be affordable for the borrower, Goyda said.
For example, some modifications being done through the federal Home Affordable Modification Program, or HAMP, would not allow a monthly mortgage payment that was more than 31 percent of the borrower's monthly gross income.
One of the costs that Wells Fargo rolled into the new payments was attorney's fees the bank would incur if the customer failed to keep up with mortgage payments and the home fell into foreclosure, Goyda said.
If those fees made the mortgage unaffordable - by pushing the debt over the required percentages - Wells would deny a borrower's modification request, or in other cases not offer a modification, he said.
Wells Fargo has performed more than 1 million modifications since the beginning of 2009, the vast majority before 2016, Goyda said.
For the 625 customers, the computer program miscalculated the attorney's fees as higher than they actually were, he said. If those fees had been correctly calculated, the borrowers would have qualified for modifications.
The bank has said customers were not charged the incorrect attorney's fees.
Wells Fargo, which disclosed the error Friday, said it was uncovered in an internal review and corrected in 2015. The bank said it has set aside $8 million for customers who were caught up in the problem, which affected homes in the foreclosure process between April 13, 2010, and Oct. 20, 2015.
Customers who may have questions about the error can call Wells at 877-645-1641, 6 a.m. to 10 p.m. Monday to Friday and 8 a.m. to 2 p.m. Saturday.
The bank said it has not begun contacting affected customers and did not have a timeframe for doing so. The error affected people in most states, but Wells Fargo is not saying where.
via MSN Money