The Federal Reserve said Wells Fargo Financial has agreed to pay a $85million fine and to repay its borrowers for falsifying loan documents. The action, which is the largest enforcement fine marked “the first formal enforcement action taken by a federal bank regulatory agency to address alleged steering of borrowers into high-cost, subprime loans. Borrowers received money additional monies in cash-out refinancing loans “
The Fed says the tactics were linked to the company’s “incentive compensation and sales quota programs and the lack of adequate controls to manage the risks resulting from these programs.”
In addition, 16 former Wells Fargo Financial sales personnel are barred from working in the banking industry, even though the bank did not admit any wrongdoing, while posting a record second-quarter net income of $3.9 billion.
In another mortgage-fraud case, the Federal Trade Commission said that 450,177 homeowners who took out loans with Countrywide Financial Corp. will begin receiving their share of a $108 million settlement over claims the lender did not give adequate notice, charged excessive fees and made false claims to borrowers facing foreclosure.
Bank of America Corp. acquired Countrywide in 2008.
“It’s astonishing that a single company could be responsible for overcharging more than 450,000 homeowners,” FTC Chairman Jon Leibowitz said in a news release.