Wells Fargo recently agreed to pay an $85 million fine stemming from Federal Reserve charges about falsified mortgage applications and attempts to draw borrowers into taking out costlier loans than necessary, according to a report from Bloomberg News. It was the largest civil penalty ever issued by the central bank in a consumer protection case.
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As part of the deal, Wells Fargo will reevaluate qualifications for all borrowers who received a subprime cash-out refinance between January 2006 and June 2008, and must compensate those who were financially hurt by their predatory practices, the report said. Some estimates show that as many as 10,000 homeowners could have been affected.
It was alleged that Wells Fargo Financial employees pushed customers who had been eligible for better rates into loans with higher APRs that were intended for riskier borrowers, the report said. Meanwhile, others in the sales department made up bogus documents to make potential borrowers with incomes that were too low to qualify for loans appear as though they were creditworthy.
There have been a number of scandals in the mortgage industry in recent months, including the robo-signing practices that saw many of the nation’s top banks approve millions of foreclosure actions without properly reviewing them first. A recent Reuters report said some of those practices may still be active.
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