KEVIN M. CUFF
‘More questions’ raised
National financial services company Wells Fargo has come under scrutiny from the low-income and minority community activist group known as ACORN, which claims Wells Fargo has been engaging in predatory lending practices nationally and in New England.
In the past year, the Massachusetts Division of Banks received five mortgage-related complaints relative to Wells Fargo. According to the Massachusetts Attorney General’s Office, over the past three years there have been a total of 19 complaints against Wells Fargo.
According to Association of Community Organizations for Reform Now Communications Coordinator David Swanson, Wells Fargo is the 10th-largest subprime lender in the United States and Wells Fargo loans around the country display predatory practices and features, but the company does not report its subprime and prime loans separately.
Wells Fargo has strongly denied the accusations.
“The ACORN report is focused on Wells Fargo Financial – one of the companies focused within Wells Fargo – and in some cases they are involved in mortgages … but the practices described in these allegations are certainly contradictory to our ethics,” said Alejandro Hernandez, a Wells Fargo spokesman. “We are examining the report and at this point, we really don’t have any comment on the findings.”
Following a nationwide protest last Monday at Wells Fargo locations and a 15-page report documenting Wells Fargo predatory lending activities, ACORN launched a campaign on its Web site pointing a finger at Wells Fargo’s lending practices.
“It’s a nationwide campaign, and we’ve talked to a number of people who have had problems with Wells Fargo,” said Chris Leonard, a spokesman at the Boston office of ACORN. “Predatory lending has been getting worse in Massachusetts and we feel that it’s important not only to go after individual companies, but ultimately to pass legislation that would put an end to most of these predatory lending practices.”
‘Different Subsidiaries’
According to ACORN, Wells Fargo’s predatory lending practices include: charging interest rates much higher than warranted by borrowers’ credit; imposing excessive fees, which inflate the amount of home loans; securing loans with both a house and a car, which increases the loan size and the vulnerability of borrowers; utilizing extended and high prepayment penalties, which trap borrowers in high-cost loans; and refinancing borrowers into loans that leave them with more debt staked against their homes, higher payments and higher rates.
However, Wells Fargo is a large financial conglomerate – and much like other financial companies, many subdivisions make up the Wells Fargo family.
According to an ACORN statement, Wells Fargo Bank and Wells Fargo Home Mortgage combine to make the company “the country’s largest originator of prime home loans. Wells Fargo also has affiliates, Wells Fargo Financial and Wells Fargo Funding, that originate subprime loans.”
ACORN also claims that Wells Fargo has not been reporting Home Mortgage Disclosure Act data for loans made through its two main subprime lending affiliates – Wells Fargo Financial and Wells Fargo Funding – in metro areas around the country.
“We strongly suspect that these subprime loans are being reported as being originated by Wells Fargo’s prime lenders in an attempt to falsely inflate the [ratio] of prime loans to low- and moderate-income and communities of color,” said David Swanson, ACORN spokesman in Washington, D.C.
Judy Corcoran, a spokeswoman for Wells Fargo Financial, said ACORN is combining a variety of different practices into one false claim.
“The practices [ACORN] describes are contrary to how we do business. They are sales practices and are not the kind of practices we practice,” said Corcoran. “They are mixing up a number of issues – we don’t make purchase-money mortgages and very little of what we do falls under HMDA regulations.”
ACORN charges that the proportions of Wells Fargo’s reported prime refinance and home improvement loans made to African-American and Latino populations significantly trail behind those groups’ shares of population in every metro area studied.
In each of the 28 ACORN metro areas where Wells Fargo reported over 2,000 prime loans, the black and Latino shares of the local populations were more than twice their share of Wells Fargo’s prime loans.
In Boston, blacks make up 5.64 percent of the minority share of the population and Latino’s make up 6.66 percent.
ACORN stated that Wells Fargo distributed only 2.94 percent of its prime lending loans to the black community and 2.35 percent went to the Latino community.
Hernandez said Wells Fargo in Massachusetts has “continued to improve on the origination of our loans to minority homebuyers,” adding that the company has a policy for those customers with complaints and if there “has been an error, we’ll do what’s right.”
Members of the Massachusetts Mortgage Bankers Association said the association continues both to educate its members on ethical standards and appropriate business practices and to participate in the “appropriate oversight of the mortgage lending industry.”
“We believe in the policies and regulations outlined by the Massachusetts Division of Banks and Office of the Attorney General, including new proposed legislation to prevent abusive mortgage lending,” said Kevin M. Cuff, executive director of the MMBA. “As an association and as an industry, we do not condone in any way deceptive or predatory lending practices.”
Cuff said the ACORN case against Wells Fargo Financial and Wells Fargo Funding presents “more questions than it provides answers” and pledged to learn more about the case and the accusations made by ACORN.
Cuff also emphasized Wells Fargo’s position as a leading originator and servicer of residential mortgages and the No. 1 lender in the nation to low- and moderate- income homebuyers
“From a home mortgage perspective, it’s important to know that in Massachusetts [Wells Fargo is] the No. 1 lender to minorities in the state,” noted Thomas Gamache, New England regional sales manager for Wells Fargo Home Mortgage. “There are different subsidiaries that offer different types of loans … We’ll always continue to do the right thing. Our job is to be as accurate as possible.”
Melanie Nayer may be reached at mnayer@thewarrengroup.com.
