A calculation error by a tool used by Wells Fargo & Co. to determine whether a borrower would qualify for a loan modification caused borrowers to be denied — including hundreds who lost their homes to foreclosure.
The San Francisco-based bank-holding company reported the error in its second-quarter 10-Q filing with the Securities and Exchange Commission. Impacted loans were in the foreclosure process between April 2010 and October 2015.
According to the filing, a loan modification underwriting tool caused an automated miscalculation of attorney’s fees on government-sponsored housing enterprise loans and transactions processed through the Home Affordable Modification Program.
Wells Fargo said it uncovered the error through an internal investigation.
An estimated 625 borrowers were wrongly denied loan modifications. Of those, roughly 400 wound up losing their home to foreclosure.
“To the extent issues are identified, we will continue to assess any customer harm and provide remediation as appropriate,” the report stated. “This effort to identify other instances in which customers may have experienced harm is ongoing, and it is possible that we may identify other areas of potential concern.”
