Wells Fargo said a software glitch in its mortgage loan modification underwriting tool led to hundreds of its customers losing their houses to foreclosure.
In its latest quarterly filing with the U.S. Securities and Exchange Commission (SEC), Wells Fargo said that the calculation error caused about 625 customers to either be incorrectly denied a government-sponsored mortgage loan modification or not offered a loan modification when they would have qualified.
“In approximately 400 of these instances, after the loan modification was denied or the customer was deemed ineligible to be offered a loan modification, a foreclosure was completed,” Wells Fargo said in its SEC filing.
The San Francisco-based bank said the glitch existed from April 13, 2010, until it was fixed on Oct. 20, 2015. The bank added that it completed its internal review of the error and has allocated $8 million in remediation to the affected customers – a figure that amounts to roughly $20,000 for each person harmed by its calculating error.
Although the calculating glitch may be a small one for Wells Fargo – the nation’s second-largest mortgage lender – its impact on the affected customers was undoubtedly devastating. The personal, social, and economic repercussions of losing one’s home to foreclosure can be severe and long-lasting.
The cruel irony of the story is the fact that Wells Fargo’s fraudulent business practices greatly contributed to the housing crisis that left millions of U.S. homeowners underwater in their home’s value and drove many into foreclosure and homelessness.
Just days ago, on Aug. 1, Wells Fargo agreed to pay $2.1 billion to settle the federal government’s allegations that it understated the risk and quality of at least 73,500 subprime mortgage loans it sold to investors between 2005 and 2007. A full half of those subprime loans defaulted in the following years resulting in billions of dollars of investor losses and a real estate market that fell into a tailspin.