Wells Fargo to refund fees charged for mortgage delays that were primarily its own fault


Wells Fargo & Co. said Wednesday that it will refund a swath of fees it assessed to mortgage borrowers whose delays in completing their loan applications were primarily the bank’s fault.

As it looks to win back trust after a scandal over its sales practices, the San Francisco bank said it will reach out to customers who paid so-called “rate-lock extension” fees from Sept. 16, 2013, through Feb. 28, 2017, and give refunds to customers who don’t think they should have paid.

The fees are supposed to only be charged when borrowers fail to finish their paperwork on time and want to retain the initially quoted interest rate on their home loan.


The San Francisco bank said that roughly $98 million in extension fees were assessed to about 110,000 borrowers during that period, but it thinks a substantial number of the fees were appropriately charged. The bank said the amount to be refunded probably will be lower, as not all of the fees assessed were actually paid and some fees already have been refunded.

In July, The Times reported on a wrongful-termination lawsuit by a former Wells Fargo mortgage banker who alleged that the bank falsified records so it could blame mortgage-processing holdups on borrowers — and that it fired him for trying to report the practice.

The mortgage fee matter also has been the subject of a class-action lawsuit, and the bank reported in August that the Consumer Financial Protection Bureau was investigating the matter. Wells Fargo has acknowledged that the controversy was a factor in a shake-up of bank’s mortgage division.

Rate-lock fees can be significant, typically ranging from 0.125% to 0.25% of the total amount of a mortgage, depending on the size of the loan and other factors. For a home buyer looking to borrow $400,000, a 0.25% fee is $1,000.

Wells Fargo is by far the nation’s largest mortgage lender, originating $244 billion in home loans last year, or about 12% of all U.S. mortgages.

The bank said Wednesday that an internal review “determined a rate-lock extension policy implemented in September 2013 was, at times, not consistently applied, resulting in some borrowers being charged fees in cases where the company was primarily responsible for the delays that made the extensions necessary.”


As of March 1 of this year, the bank said, a centralized review team is making sure the policy is applied consistently. The refunds will start to go out this quarter, it said.

Wednesday’s announcement comes the day after Wells Fargo Chief Executive Timothy Sloan was grilled by Senate Banking Committee members about reforms put in place by the bank since it admitted that employees created millions of customer accounts without those customers’ knowledge or permission.

The bank has acknowledged that onerous sales goals and a focus on selling multiple products to consumers were at the heart of the scandal. That pressure-cooker sales culture was first described in a 2013 Los Angeles Times investigation.

In October 2016, then-CEO John Stumpf was ousted after two brutal Capitol Hill hearings that were held just weeks after the scandal broke.

Since then, there has been a stream of new disclosures about wrongdoing in other business units.

The issue of erroneous rate-lock extension fees was first reported by ProPublica in January.

To read the article in Spanish, click here

Times staff writer James Rufus Koren contributed to this report.

The Associated Press was used in compiling this report.


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9:40 a.m.: This article was updated with additional background information.

8:45 a.m.: This article was updated throughout with Times staff reporting.

This article was originally published at 6:45 a.m.