A computer glitch at Wells Fargo may have caused more than 400 people to lose their homes, the company admitted on Friday.
As a result, 625 qualified customers were denied a loan modification, causing at least 400 to lose their homes. A spokesman for Wells Fargo said the people whose homes were lost after being denied a modification may have been foreclosed on regardless.
Because of an error @WellsFargo made, 400 of its customers lost their homes. What’s the bank doing to make it right? Setting aside a few thousand dollars for each of the people affected. Pathetic. The execs who oversaw this – including CEO Tim Sloan – should be fired. https://t.co/dqlp3Py6IS
— Elizabeth Warren (@SenWarren) August 6, 2018
“All of the customers impacted were in foreclosure prior to the modification review and many were able to avoid foreclosure,” he said. “Customers were denied a modification in error and ultimately lost their homes to foreclosure.”
Life-altering mistakes like this are actually fairly common, Julia Gordon, executive vice president at the National Community Stabilization Trust, said. She’s expressed surprise that the number wasn’t higher. “Throughout the housing crisis, servicers made innumerable errors. It’s hard to imagine these people were the only ones foreclosed upon mistakenly.”
Here are some ways to help the process:
Seek help to restructure the loan
People who are facing foreclosure should seek help from a qualified intermediary, Gordon said. The U.S. Department of Housing and Urban Development offers a list of mortgage insurance programs and legal help by state on its website and the Consumer Financial Protection Bureau also has a service that allows people to look up services by zip code.
Laws vary across the U.S., but many states provide consumers with a right to mediation prior to foreclosure. Many of these services provide people with independent advice on mortgage-loan terms for little or no cost.
A law enacted in 2016 also requires servicers to provide written early intervention notices to let the borrowers know mitigation options.
Ask for help from the bank early
Advocates suggest that homeowners reach out for help as soon as they realize they may be unable to make a mortgage payment, and not wait until they are behind on payments or until the foreclosure process has begun.
In many cases, a bank must file a lawsuit in order to foreclose, in which case people have 30 days to respond. Even if a bank does not file a suit, most states require a pre-foreclosure notice of 30 days or more.
If possible, visit the bank in person rather than trying to communicate with customer service representatives by phone, and document everything. Check out this Summary of State Foreclosure Laws to learn the process in your state.
Demand adequate compensation
For the error that caused some 400 foreclosures, Wells Fargo is offering customers $8 million, amounting to around $20,000 per customer, assuming all 400 were foreclosed upon in error.
Gordon called the $20,000 “insulting,” noting that the loss in value from a house in the years since 2010 would be worth far more than $20,000 — and the cost to homeowners goes beyond the financial. The Wells Fargo spokesman said the amount is “appropriate remediation regarding the circumstances.”
People from communities with high foreclosure rates were more likely to visit the hospital, a 2009 study by Princeton University found, for conditions like anxiety, suicide attempts, and heart attacks.
“Losing your home is one of the most traumatic things that can happen to a family,” Gordon said. In a situation where a home was foreclosed upon in error, she said the homeowner should be compensated for “pain and suffering” as well.