Wells Fargo hit with new class action lawsuit on claims it made improper changes to mortgages

Wells Fargo & Co. (NYSE:WFC) has been dealt a fresh blow following a scandal in its consumer bank last year as a new class action lawsuit accused the lender of making improper changes to mortgages.

Officials in the company’s mortgage businesses allegedly put through unauthorised changes to home loans held by customers in bankruptcy, the class action and other lawsuits claim.

The changes tended to lower monthly loan payments but extended the length of the loans by decades, meaning customers ultimately owed the bank significantly more.

Lenders are required to seek the approval of courts and the parties involved when making any changes to loans for a person in bankruptcy, which Wells Fargo failed to do, according the lawsuits.

While the modifications to the loans were meant to be on trial basis, they put borrowers in bankruptcy at risk of defaulting on their commitments to courts.

Wells Fargo strongly denied the claims made in the lawsuits and insisted borrowers and bankruptcy courts were notified of any changes.

“Modifications help customers stay in their homes when they encounter financial challenges,” Wells Fargo spokesman, Tom Goyda, was quoted by The New York Times as saying.

He added that changes have been used to help more than one million families since the beginning of 2009.

Last year the bank was fined US$185mln after admitting to opening unwanted bank and credit card accounts for customers to meet sales quotas. The scandal cost former chief executive, John G. Sumpft, his job and hurt the company’s reputation.

Shares fell 0.48% to US$54.27 in early US trading. 

Story by ProactiveInvestors