Regulators ordered Wells Fargo on Thursday to pay a $250 million penalty in connection with problems in its home lending unit and violations of a 2018 consent order.
The Office of the Comptroller of the Currency also placed new restrictions on business practices in the scandal-plagued bank’s mortgage division. Wells, which has been operating under an asset cap for three and a half years, will now also be restricted from acquiring certain residential mortgage servicing rights, among other constraints.
“Wells Fargo has not met the requirements of the OCC’s 2018 action against the bank. This is unacceptable,” acting Comptroller Michael Hsu said in a press release.
The OCC said that Wells Fargo lacks controls and oversight for the loss mitigation practices in its home lending division, and that the problems have impaired the bank’s ability to remediate harmed consumers.
The $1.9 trillion-asset bank has failed to detect, prevent and quantify inaccurate loan modification decisions in a timely way, the OCC said in a consent order that was signed Wednesday.
Bloomberg News reported last month on the possibility of new penalties from the OCC.
Wells Fargo CEO Charlie Scharf, who was hired in 2019 to help the bank recover from various consumer-related scandals, said in a press release Thursday that the bank’s progress “will not follow a straight line” and that “progress will come alongside setbacks.”
“Though the OCC’s issuance of new orders is disappointing,” Scharf said in a memo to Wells Fargo employees, “our risk and control-related work spans multiple areas, and we should not lose sight of the progress we are making.”
Wells Fargo noted that its 2016 consent order with the Consumer Financial Protection Bureau over retail sales practices expired Wednesday. As evidence that it has made progress, the bank also pointed to the termination, near the start of 2021, of an OCC consent order over money laundering controls, and the OCC’s decision last year to upgrade its Community Reinvestment Act rating to “outstanding.”
The OCC’s latest action came during the same week that Wells announced a new head of its home lending servicing group, Ann Thorn, who most recently was chief loan administration officer at Caliber Home Loans.
Thorn will replace Jeff Smith, who had been in that position since 2018. Smith announced his retirement in January, according to a Wells Fargo spokesperson, who said there was no connection to the action announced Thursday by the OCC.
Until the latest consent order is lifted, Wells Fargo will be limited in its ability to buy servicing rights for some third-party residential loans. The bank will also have to ensure that it fixes any borrowers’ issues before their loans are transferred out of its own loan servicing portfolio, except as required by investors pursuant to their contractual rights.
Wells Fargo’s litany of regulatory problems in recent years includes several related to its mortgage unit.
Three years ago, a $1 billion penalty imposed by the OCC and the Consumer Financial Protection Bureau was partly tied to the bank’s practice of improperly charging customers fees for mortgage interest rate locks even if the bank’s actions had resulted in the loan failing to close in the specified window of time.
The 10-digit penalty in April 2018 was accompanied by a consent order with the OCC, which found that the bank had failed to implement and maintain a compliance risk management program commensurate with its size, complexity and risk profile.
Some of the language in that three-year-old order was mirrored in the one signed this week, as the OCC said that the San Francisco bank had failed to fully implement adequate loss mitigation practices — and related risk management practices — commensurate with its size, complexity and risk profile.
In July 2018, Wells Fargo disclosed in a securities filing that it had identified a calculation error that affected certain accounts that were in the foreclosure process. The bank said at the time that the problem was corrected in October 2015, and that approximately 625 customers were incorrectly denied loan modifications, including roughly 400 who lost their homes.
Three months later, Wells Fargo revised its previous disclosure, stating that the errors actually persisted until April 2018. The bank also raised its estimates of the number of customers affected.