A new report released this week by housing rights organizations says that Wells Fargo bank’s foreclosure policies could cost the California economy up to $3.3 billion in lost revenue. The report is the first in California to examine the economic impacts of the nation’s largest lender’s foreclosure policies on distressed homeowners, neighbors and investors.
The Center for Popular Democracy and the Alliance of Californians for Community Empowerment, or ACCE, wrote the report titled: California in Crisis, How Wells Fargo’ foreclosure pipeline is damaging local communities.
“Wells Fargo, which is one of the largest servicers in California, has 11,616 people in their foreclosure pipeline,” said Grace Martinez, an organizer with the Alliance of Californians for Community Empowerment.
Martinez says Wells Fargo holds about 20 percent of California’s pending foreclosed loans and if it makes good on its threat to foreclose on that many borrowers, the economic impact would be felt statewide.
“We’ve got members in Oakland, LA all the way down to San Diego and Sacramento who are impacted, not only by Wells Fargo practices, but also by the refusal to provide any kind of principal reduction,” said Martinez.
According to the report, Wells Fargo’s mortgage principal reduction policies are the stingiest of the major banks when renegotiating mortgages. For example, Wells Fargo spends about $74,000 per average principal reduction, while Bank of America spends nearly $200,000 per average principal reduction. But Wells Fargo disputes the report, saying its findings are misleading.
Wells Fargo declined to be interviewed for this story but released a statement saying that most of the more than $6 billion in principal forgiveness it’s given out during the mortgage crisis has gone to California borrowers. The bank also says its delinquency and foreclosure rates are 4 percent below the national average.
But Peter Fairfield has had a different experience. He and his wife took out a home equity loan four years ago to shore up their flagging photography business. They now face foreclosure on the San Francisco home they’ve been in for 34 years.
“Wells Fargo sold me a loan that I couldn’t afford,” Fairfield said. “They promised they would refinance it so we could make the payments, that never happened,”
Fairfield says his family was the victim of predatory lending and when the rent on their business went up $5,000 overnight they went to Wells Fargo to find a solution and was given the runaround.
“False promises, lost paperwork month after month after month of trustee sales hanging over my head never knowing what’s going on, not getting return phone calls,” Fairfield said. “It’s just enough t make you want to head to the bridge, but we’re not doing that. We’re fighting.”
Manuela Alvarez had a similar experience with Wells Fargo. She took out a home improvement loan with the bank a few years back. The loan payment skyrocketed after the mortgage meltdown. Her jobs at a San Francisco hair salon and at nursing homes doing hair for the elderly weren’t enough to make the payments so she rented out part of her home, but the bank wasn’t impressed.
“I sacrificed my kitchen and my living room in order to qualify and they told me that it wasn’t enough, in order for me to qualify, I had to make $11,000 per month,” said Alvarez.
Among other recommendations, the report suggests that Wells Fargo make principal reduction a core front-end strategy when considering loan modifications; release ethnicity and income data on borrowers facing foreclosure and put a moratorium on foreclosures until these steps are put into place. Wells Fargo says it has had an aggressive principal reduction policy in place since 2009.
Wells Fargo posted a record $19 billion profit last year.