Wells Fargo to pay $4.1 million to settle charges of illegal student loan practices

Wells Fargo to pay homeowners $3.45 million over mailing error The Wells Fargo bank branch is seen in Golden, Colorado in an October 11, 2013 file photo. REUTERS/Rick Wilking/Files The Wells Fargo bank branch is seen in Golden, Colorado in an October 11, 2013 file photo. REUTERS/Rick Wilking/Files By Suzanne Barlyn A Wells Fargo & Co mortgage unit will pay $3.45 million to some customers because of a processing error that delayed the mailing of letters to almost 8,000 homeowners in bankruptcy and shortened their notice period about changes to monthly mortgage payment amounts, according to a court document. The unit, called Wells Fargo Bank NA, agreed on the sum in a pact with the Department of Justice's U.S. Trustee Program, which oversees the country's bankruptcy system, according to a letter from the bank filed in U.S. Bankruptcy Court in Greenbelt, Maryland. Wells Fargo agreed to fix the mailing error and give credits and refunds worth $3.45 million to affected homeowners. Inquiries by an independent compliance monitor hired by the bank as part of an $81.6 million settlement with the Justice Department last year uncovered the problem, said Cliff White, director of the U.S. Trustee Program's executive office, in a statement. [L1N13025Y] In that agreement last year, Wells Fargo settled claims that it denied thousands of homeowners a chance to challenge mortgage payment increases imposed during their bankruptcy proceedings. The latest $3.45 million deal reached with Wells Fargo supplements that settlement, the U.S. Trustee Program said. The bank also has agreed to expanded compliance monitoring. A Wells Fargo spokesman said it self-reported the mailing delay to the U.S. Trustee Program upon learning of the problem and that it is providing timely delivery of documents. (Reporting by Suzanne Barlyn; Editing by Bill Rigby) ================================ CFPB’s Arbitration Proposal Draws 13,000 Comments Flood of comments indicates consumer agency faces tough time completing regulation By Yuka Hayashi Aug. 23, 2016 4:12 p.m. ET WASHINGTON—The Consumer Financial Protection Bureau was flooded with nearly 13,000 public comments on its proposed rule to restrict the use of arbitration clauses in consumer financial contracts, indicating a rough road ahead for completing the contentious regulation. Hours before the public comment period ended late Monday, letters of support and opposition were sent in by leading groups vying to ======================== Money | Mon Aug 22, 2016 3:33pm EDT The sign outside the Wells Fargo & Co. bank in downtown Denver April 13, 2016. REUTERS/Rick Wilking The sign outside the Wells Fargo & Co. bank in downtown Denver April 13, 2016. REUTERS/Rick Wilking By Suzanne Barlyn A Wells Fargo & Co unit will pay $4.1 million to settle allegations that it engaged in illegal private student loan servicing practices that unfairly penalized certain borrowers, the Consumer Finance Protection Bureau (CFPB) said on Monday. The bureau said it identified breakdowns throughout Wells Fargo's servicing process, including failing to provide important payment information to consumers, charging illegal fees and failing to update inaccurate credit report information. Wells neither admitted nor denied the charges, the bureau said. The settlement resolves three areas of concern related to "procedures that were retired or improved many years ago, and addresses the impact to a small number of customers," a Wells Fargo spokesman said. The procedures at issue were either retired or corrected between 2011 and 2013. The $4.1 million sum includes a $3.6 million penalty to the bureau and a $410,000 fund for borrowers. Last year, the CFPB found that more than 8 million U.S. borrowers are in default on more than $110 billion in student loans. Breakdowns in student loan servicing may be driving the problem, the bureau said. Student loans make up the second largest U.S. consumer debt market with roughly $1.3 trillion owed by borrowers who took out federal and private loans, the bureau said. Also In Money U.S. appeals court declines to reconsider Bank of America ruling U.S. banks want to cut branches, but customers keep coming From the Olympics to Wall Street: The athletes who become brokers Bonnie Baha, DoubleLine's director of global credit, dies Loans from private lenders are a small fraction of that amount, totaling about $100 billion owed. But they are often used by borrowers with high debt levels who also have federal loans, the CFPB said. The bureau said the bank processed payments in a way that made consumers pay more fees. If a borrower's payment was not enough to cover the total amount due for all loans in an account, the bank divided that payment among the loans in a way that maximized late fees rather than satisfying payments for some of the loans, the bureau said. Wells Fargo's Sioux Falls, South Dakota-based education finance unit services about 1.3 million U.S. consumers, the CFPB said. (Reporting by Suzanne Barlyn; Editing by Alan Crosby, Bernard Orr)

U.S. mortgage collectors gag homeowners in loan deals

By Michelle Conlin Wed May 21, 2014 4:24am EDT A bank-owned property for sale sign in Arvada, Colorado June 23, 2009. Credit: Reuters/Rick Wilking Related Video 10 million Americans still under water on mortgages-Zillow Tue, May 20 2014Related TopicsMoney » Housing Market » (Reuters) - Joseph and Neidin Henard thought they had finally fixed the mortgage that was crushing them. In January, the couple reached a settlement with every company that had a stake in the mortgage on their house in Santa Cruz, California, a deal that would have slashed their monthly payment by almost 40 percent to $3,337. It was the end of a process that started with their defaulting in 2009. But when they saw the final paperwork for their settlement, they found that Ocwen Financial Corp, the company that collected and processed their mortgage payments, had added an extra clause: they could not say or print or post anything negative about Ocwen, ever. The Henards' experience was not unusual. Mortgage payment collectors at companies including Ocwen, Bank of America Corp and PNC Financial Services Group are agreeing to ease the terms of borrowers' underwater mortgages, but they are increasingly demanding that homeowners promise not to insult them publicly, consumer lawyers say. In many cases, they are demanding that homeowners' lawyers agree to the same terms. Sometimes, they even require borrowers to agree not to sue them again. These clauses can hurt borrowers who later have problems with their mortgage collector by preventing them from complaining publicly about their difficulties or suing, lawyers said. If a collector, known as a servicer, makes an error, getting everything fixed can be a nightmare without litigation or public outcry. A 2013 report by the National Consumer Law Center found that servicers routinely lost borrowers' paperwork, inaccurately input information, failed to send important letters to the correct address—or sometimes just didn't send them at all. "If your servicer screws up, you can't say anything about it," said homeowner attorney Danielle Kelley in Tallahassee, Florida. "The homeowner has no defense." Gag orders and bans on suing are appearing when borrowers use litigation to settle foreclosure and loan modification cases. But they are also popping up when servicers modify loan terms outside of the courts, known as "ordinary loan modifications," according to consumer lawyers. Bank of America doesn't include non-disparagement clauses and releases of claims in the course of ordinary loan modifications - just in ones involving negotiated legal settlements, spokesman Rick Simon said. Waivers don't preclude customers from filing suits on post-settlement issues, he said. PNC's vice president of external communications, Marcey Zwiebel, said "these clauses are part of the consideration we receive for agreeing to settle the case. This helps to ensure that the discussion is not re-opened in public after the case has been settled." Ocwen declined to comment, citing pending litigation. Attorneys for lenders and servicers say consumer lawyers are overstating the importance of these clauses. Banks are looking to avoid being sued again for the issues resolved in the settlement, but understand they may be sued if they are responsible for a future wrong, said Martin Bryce, a partner with Ballard Spahr in Philadelphia who specializes in consumer finance and banking. Bryce acknowledges that the language is ambiguous - under the waivers, homeowners often give up the right to sue on claims "whether existing now or to come into existence in the future." The non-disparagement clauses are meant to protect banks from public insults from borrowers, which the lender can often not respond to without violating privacy laws, Bryce said. Banks and servicers have been facing bad publicity along these lines for years, and while quantifying the impact of this bad-mouthing is difficult, few banks would choose to face it.

On a Facebook page devoted to denigrating Bank of America, one homeowner said, "They are without a doubt the worst organization I have ever dealt with. Keep suing them America! They deserve it!!"

JUST WANTING IT TO END Clauses preventing future disparagement and lawsuits first started appearing after the housing crash, but they have grown more widespread in the last six months, said Ira Rheingold, executive director of the National Association of Consumer Advocates in Washington. In January, the Consumer Financial Protection Bureau, a U.S. government agency, said it examined two servicers who were requiring homeowners to give up their right to sue as part of ordinary loan modifications. The CFPB said the practice was "unfair," and required the two servicers to cease the practice. The agency also directed the servicers to stop enforcing existing waiver clauses and "to provide notice to the borrowers that it would not enforce these waivers in the future," according to a CFPB Supervisory Highlights bulletin. The agency didn't name the two servicers. These clauses are likely more popular because mortgage companies are trying to stem their expenses from the housing crisis, which triggered some 5.1 million foreclosures, consumer lawyers said. Having helped create the foreclosure epidemic, banks are now paying the price, spending billions of dollars on fines, penalties, mortgage settlements with borrowers, and other charges associated with working through the glut of bad loans. Since 2009, Bank of America alone has logged some $50 billion of expenses for settlements of lawsuits and related legal costs, many of them linked to mortgages. Without those charges, its income before taxes would have been about three times higher. Homeowner attorneys say they advise their clients not to sign non-disparagement agreements. But some of them do so just end the ordeal. "I try to talk my clients out of agreeing to it, but a lot of times they will agree," said Pamela Simmons, an attorney with the law office of Simmons & Purdy in Soquel, California. LOAN MODIFICATIONS During the past few years, loan servicers have been renegotiating mortgage terms with borrowers who have fallen behind on their payments. Since the housing crash, there have been about 1.3 million loan modifications done under the government's Home Affordable Modification Program, according to the U.S. Department of Treasury. Servicers have done an additional 5.6 million modifications in-house. Companies like Ocwen say that modifying mortgages is cheaper than foreclosing. Servicers modify mortgages through some combination of changing monthly payments or interest rates, lengthening the terms of loans, and changing the principal owed, either by forgiving some of the loan or by adding on penalties and fees to make it bigger. The 2012 National Mortgage settlement, which covered Ally Financial Group, Bank of America, Citigroup Inc, JPMorgan Chase & Co and Wells Fargo & Co prohibited the use of waivers during the course of offering normal loan modifications—though it did allow for waivers in the event of litigation. Waivers were also forbidden under HAMP modifications. That still leaves plenty of room for servicers to try to block borrowers from suing, or to use gag clauses. Attorneys say the experience of the Henards was typical: the gag orders often pop up after borrowers think deal negotiations have been completed. The Henards balked when they saw the Ocwen clause stating that they were to "not make any derogatory and/or disparaging comments about Ocwen or publish or discuss this Agreement or the settlement and compromise evidenced hereby on the internet or with the media." "We are worried about them coming back against people in the future," said Dan Mulligan, the Henards' attorney. "It's just a risk you don't want to take." The Henards have about $680,000 outstanding on their mortgage. Ocwen responded in court documents that the language was "standard boilerplate." The Henards haven't signed the non-disparagement clause. The issue is still being dealt with by the two sides' lawyers. Consumer lawyers also object to being gagged themselves. Some lawyers challenge the banks to strike the language — or water it down. Attorneys also sometimes instruct their clients to fire them. That way, the homeowner can agree to the terms while the attorney doesn't have to. "The banks are attempting to hold our clients hostage with a provision they know we cannot agree to," said University of Notre Dame law professor Judith Fox, who runs a clinic for troubled homeowners and who has also petitioned the Indiana Bar Association over attempts to muzzle attorneys. "It is coercive and unethical." (Reporting by Michelle Conlin, Editing by Dan Wilchins and John Pickering)

Consumer agency proposes rules for mortgage servicers

Fri, Aug 10 00:20 AM EDT By Emily Stephenson WASHINGTON (Reuters) - The new consumer oversight agency proposed rules on Friday to make the practices of companies that service mortgages more transparent for borrowers. The rules, which could be modified after a comment period, are designed to protect borrowers from being forced to buy expensive homeowners insurance, for example. They are also aimed at helping delinquent borrowers stay out of the foreclosure process. Among the rules announced on Friday are protections to help borrowers avoid so-called force-placed insurance, or insurance purchased on homeowners' behalf by mortgage servicers. Homeowners insurance is required for many mortgages, but force-placed insurance is often more expensive than what borrowers might find on their own. The consumer bureau's rules would require servicers to give advance notice and pricing information to borrowers before they can charge for insurance. Servicers would have 15 days to cancel the insurance if borrowers can prove they already have the necessary homeowners insurance. Under the new rules, mortgage servicers also would be required to tell delinquent borrowers about options for avoiding foreclosure, such as loan modification, and to promptly consider applications for these alternatives. Critics say the new requirements could restrict borrowers' access to lending and slow the housing market recovery. They say the added costs of complying with new rules could drive smaller operators out of business. "It is important that consumers receive clear and accurate information about their mortgage loan," Bob Davis, executive vice president of the American Bankers Association, said in a statement. "Yet, we want to make sure servicing doesn't get tangled in so much red tape that high-quality, responsive servicing is no longer viable, particularly at small banks." The Consumer Financial Protection Bureau (CFPB) said its new rules would ensure that the mortgage servicers responsible for collecting payments from borrowers and handling issues such as foreclosures are more transparent and accessible to borrowers. "From processing payments to evaluating struggling homeowners and helping them avoid foreclosures, the bottom line is to treat consumers fairly by preventing surprises and run-arounds," said CFPB Director Richard Cordray. Some of the CFPB's rules are designed to help implement the changes established in the mortgage settlement, while others are new. The consumer watchdog was created by the Dodd-Frank financial oversight law and tasked with policing markets for mortgages and other products. The agency said in April it would tackle new regulations for mortgage servicers. Among the industry practices that gained notoriety in the wake of the 2007-2008 financial crisis were poor record-keeping, limited customer service and the use of "robo-signers" to sign unread foreclosure documents. The rules address some of those practices. Five large U.S. banks entered into a $25 billion settlement earlier this year with state and federal authorities over abusive servicing and foreclosure actions. Bank of America Corp, Citigroup Inc, JPMorgan Chase & Co, Wells Fargo & Co and Ally Financial Inc agreed to clean up many of their practices. (Editing by Fred Barbash and Matthew Lewis) ===========