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A D V E R T I S E M E N T
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A D V E R T I S E M E N T
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Wells Fargo Woes
ACORN and local borrowers say the banking giant is abusive.
By KEN SHIMAMOTO
The relationship between financial institutions and their customers is based on trust — the customers’ belief that the institutions will take care of their money and act in their interest. But a Watauga woman and a national consumer advocacy group say there’s evidence that Wells Fargo, America’s largest originator of prime home loans and the 10th largest participant in the lucrative and growing subprime mortgage market, has been playing fast and loose with that trust.
The consumer advocacy group ACORN, in a nationwide campaign, is alleging that Wells Fargo, through two subsidiaries that make loans to higher-risk customers, has engaged in predatory lending practices and deceptive sales tactics that take advantage of low-to-middle income homeowners, stripping away their equity and leaving them vulnerable to foreclosure on their homes.
Patrick Corkrean, spokesman for one of those subsidiaries, Des Moines-based Wells Fargo Financial, denied the charges. “The company’s practices described in ACORN’s recent allegations are totally contrary to our ethical standards and business practices and are simply not tolerated in any Wells Fargo company,” he said, adding that ACORN and similar organizations “are preying on the people who may have fallen behind on their payments or had unrealistic expectations.”
Malissa Patterson-Leggett of Watauga is one Wells Fargo borrower, however, who says ACORN’s complaints describe what happened to her.
The Verizon customer-service representative had been doing business with her bank — formerly Norwest, acquired by Wells Fargo in 1999 — for 10 years. She was buying her $63,000 home through a mortgage with Washington Mutual at 6 percent interest and had a good credit record. When her central air conditioning failed, she bought a new unit on credit.
The payments on the air conditioner, however, stretched her finances too thin, and she started falling behind on her bills. So she turned to her bank for help. She took out a $3,000 loan — not with her bank itself, but with Wells Fargo Acceptance, a subsidiary of Wells Fargo Financial specializing in automotive loans. The July 2001 loan carried a whopping 22.5 percent interest rate, with her truck as collateral.
The loan didn’t solve her problem, however. Bills were piling up and Patterson-Leggett didn’t want to lose her truck or ruin her credit. Over the next few months, she said, Wells Fargo repeatedly contacted her by mail and phone offering to refinance her house and consolidate her other bills into a single loan. Patterson-Leggett was initially leery of such refinancing, but she said Wells Fargo Financial branch manager Gwen Newsom told her the company could get the house appraised at a high enough level to cover the extra amount needed to pay off the Watauga woman’s bills — in fact, could get it re-appraised for whatever amount they wanted. “We just tell [the appraiser] the amount we want your home to come in at, and he appraises the home at about that amount,” she quoted Newsom as saying. Sure enough, the house was appraised at $82,500, enough to secure Patterson-Leggett a 15-year loan for $63,000 — her home’s original appraised value. Wells Fargo Financial kindly doubled her interest rate, to 12 percent, and charged her a 10 percent origination fee, added to the loan principal.
A report from ACORN’s national headquarters said that as recently as August 2002, Wells Fargo was routinely collecting excessive loan origination fees like those charged to Patterson-Leggett, often taking the fees from borrowers’ home equity. Origination fees for prime loans are often less than 1 percent, and Wells Fargo announced earlier this year that it was lowering its standard fee for subprime loans to 5 percent. However, ACORN said that Wells Fargo continues to charge excessive interest rates — 10 to 12 percent, for instance, for borrowers whose credit would qualify them for rates of 6 or 7 percent.
Additionally, the ACORN report alleges, Wells Fargo borrowers are often misled into believing that their monthly payments cover property taxes and homeowner’s insurance when in fact they do not. And the lender markets aggressively, often mailing homeowners checks — actual cashable checks, not the non-negotiable come-ons that many companies mail out — for several thousand dollars that are really loans with interest rates of 25 to 30 percent.
The company’s sales tactics were “always high-pressure,” said Patterson-Leggett. “They said I’d be saving thousands of dollars. They’d tell me if I waited, they’d have to re-do the paperwork.” The loan was made in November 2001 after a loan officer visited Patterson-Leggett at home to deliver a sales pitch. The loan was supposed to pay off her previous mortgage and the earlier Wells Fargo Acceptance loan, she said she was told, as well as $6,850 in other debts. Besides adding the 10 percent origination fee to the principal — labeled misleadingly in loan documents as “discount points” — the company added another $1,103 in “third party charges.” Wells Fargo’s web site says that discount points are “paid to the lender to buy down or lower an interest rate” — but the Watauga woman’s mortgage interest rate went up steeply, not down.
Patterson-Leggett understood that her new, higher monthly payments — $756, compared to her old $481 house payment — did not include homeowner’s insurance. She wasn’t certain that her property taxes would be included in the payment, so she called Wells Fargo Financial to make sure. She said branch manager Gwen Newsom told her they would be.
In March 2002, Patterson-Leggett received a bill for about $2,000 in unpaid property taxes and penalties. Collection notices started arriving for bills that were listed in her loan paperwork as being paid off. Wells Fargo claimed the payoffs had been made, but her creditors insisted they had not. Then in February 2003, she was laid off from her job. She managed to find another, lower-paying position but struggled to make her payments. Around the same time, she began suffering from a still-undiagnosed ailment that was originally thought to be cancer. Desperate, Patterson-Leggett put her house on the market in April and quickly found a buyer. She planned to use her 2002 income tax refund to pay the property taxes, but she said that Cindy Matella, another Wells Fargo representative, told her not to do that — “she said the buyer would cover it at closing.”
Although Patterson-Leggett’s latest statement from Wells Fargo said she owed $61,470 on her mortgage, new branch manager Michael Yett told her she owed an additional $3,000 in “accrued interest.” Her real estate agent left a phone message urging her to sign a statement saying she owed Wells Fargo $64,000. The next day, she said, Yett offered to pay $1,200 in title fees if she agreed to pay Wells Fargo the additional $3,000. The sale fell apart.
Patterson-Leggett’s experience is not an isolated case. Brennan Griffin, head organizer of Fort Worth ACORN, said the group knows of four other Tarrant County homeowners who’ve had similar experiences, and that Wells’ predatory practices are a problem nationwide. “Pretty much every case we’ve seen nationally has problems,” said Griffin. “And there are thousands of people who have gotten loans from Wells Fargo’s subprime affiliates.” The group wants to bring scrutiny to bear from the federal Office of the Comptroller of the Currency, which regulates lending institutions, and the Federal Reserve Board, which could block a plan by Wells to acquire Pacific Northwest Bancorp.
On June 27, Patterson-Leggett was told by Matella to pay Wells Fargo the $3,000 or face foreclosure. (Both Newsom and Yett said they don’t remember anything about Patterson-Leggett’s loans.) Meanwhile, her doctors have ruled out a pituitary tumor and breast cancer as the cause of her health problems; she’s still waiting to see an endocrinologist. “I feel betrayed,” she said. “I trusted [Wells Fargo] and thought they’d do right. I’ve learned a tough lesson: not to trust anybody. If you’re going to refinance your house, get a lawyer, even if you’ve been doing business with your bank for 25 years.”
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