A former Wells Fargo mortgage banker in Beverly Hills who was fired and later fined by federal regulators has sued the bank, saying he was used as a scapegoat and that regulators ignored his attempts to report bad practices.
David Eghbali, who had been one of the bank’s top mortgage bankers, said the bank fired him improperly as part of a scheme to focus investigators “on David’s possible minor violations … and away from Wells Fargo’s own predatory mortgage pricing policies.”
Specifically, Eghbali said the actions that led to his firing and to a fine levied by the Consumer Financial Protection Bureau were part of his attempt to shield customers from fees demanded by the bank, including ones that Wells Fargo has since acknowledged were charged improperly.
Eghbali’s case was filed in U.S. District Court in Los Angeles this week. He’s seeking damages of at least $25 million from the bank.
Wells Fargo spokesman Tom Goyda said the bank disagrees with Eghbali’s allegations.
Though the Consumer Finance Protection Bureau is not a defendant in the lawsuit, Eghbali’s case suggests the agency, which investigated and later fined him, did not follow up on information that could have led to discovery of the bank’s improper fees.
A CFPB spokesman said acting bureau Director Mick Mulvaney is “interested in getting to the bottom of what happened in this matter.”
In 2016, the bureau announced that it had reached a settlement with Eghbali over allegations that he manipulated mortgage fees for borrowers between late 2013 and early 2015. Eghbali agreed to an $85,000 fine and a one-year ban from the mortgage industry.
The bureau said Eghbali worked with an escrow company to shift fees between customers so that some paid more and some paid less. The idea, the agency said, was that by cutting fees for cost-conscious borrowers and passing fees on to others, Eghbali could close more loans.
Eghbali acknowledges shifting fees, but said mortgage borrowers themselves never paid more than they were supposed to. Rather, he said his scheme was a way to get around bad practices at Wells Fargo.
The bank would offer customers a no-fee loan, then later start adding fees, including ones that extend a promised interest rate if a mortgage approval is delayed, Eghbali alleged.
Banks typically charge those fees only when delays are caused by borrowers, but Wells Fargo acknowledged last year that it sometimes charged the fees when the bank was at fault.
Eghbali alleged he was shielding customers from those fees. When customers who had been promised a no-fee loan were later expected to pay, Eghbali would get an escrow company to provide a discount on its own fees, resulting in the borrower paying nothing. To make up for those discounts, the escrow company would charge more in cases where Wells Fargo — not the borrower — was willing to pay more.
“These transactions had the effect of reducing borrower-paid fees,” the lawsuit says.
The bank fired Eghbali over that practice in 2015. When the CFPB started to investigate him, Eghbali alleged he tried to tell the bureau about Wells Fargo’s improper fees but that the regulator refused to listen and was “misled by Wells Fargo’s one-sided account.”
Wells Fargo reported in August that the CFPB had opened an investigation into its rate-lock fees. That was a month after another former mortgage banker filed a wrongful termination suit related to the fees, and several months after ProPublica first reported problems with the fees.
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