Wells Fargo Is Accused of Making Improper Changes to Mortgages
nytimes.com
nytimes.com
> Nah, it's just the nature of capitalism. Industries that require a large amount of startup capital lead to natural monopolies or duopolies.
But is that true of banking? The nation has a long history of small banks. While they've had their crises too, I don't think there's any natural motivation for bank consolidation besides using scale to eek out efficiencies and to gain power and influence.
Motivation has nothing to do with it. The development of power and influence through asymmetric growth in the industry is enough for this to emerge. There are still small banks today, but it's no coincidence that the largest (and thus overall best performing) banks cheat the system. The best performing become large and powerful on their own.
Capital is more than just money. It takes a lot to jump through the regulatory hoops, money requirements, and insurance costs while having competitive prices against other Banks and still make a profit.
Even if it was just a money issue, new banks do still require a fair amount of money for relatively little profit in an industry that is well established. If someone is going to put their capital on the line, why wouldn't they put it in a higher growth industry?
These don't make new bank creation impossible, just unlikely.
"It takes a lot to jump through the regulatory hoops, money requirements, and insurance costs while having competitive prices against other Banks and still make a profit."
And yet you still blame capitalism?
It happens. My parent's neighbor was involved in starting up a new small local bank a few years ago. Now they have three branches.
>I don't think there's any natural motivation for bank consolidation besides using scale to eek out efficiencies and to gain power and influence.
Are efficiencies and power-seeking somehow not enough? I mean let's look at Standard Oil. What did Rockefeller do other than eek out efficiencies and try to gain power and influence? Efficiences are what defines a natural monopoly, we can't just throw it out.
A good comparison might be shale oil companies, which largely are pretty small; Chesapeake, one of the most famous, has a market cap of 4.3B (so about the size of a tech unicorn). Shale oil companies, of course, are largely using oil and gas infrastructure built by years ago, so there isn't a competitive advantage keeping large companies afloat.
I think the parent is asking which of these examples banks are more like. Is there some sort of hidden infrastructure banks need to build before they're competitive—a total position database, or operating licenses in a bunch of markets, or an algorithmic trading platform—or can small banks largely compete with bigger banks? Like SO or CHK?
Another might be a "benefit corporation" which is a kind of entity that can be created in 30 states. I'm not aware of any state dissolution of corporations or shareholder lawsuits to enforce such articles of incorporation. But at least in theory, the reason why a corporation is "for profit" or "not for profit" is because it's in their articles of incorporation, so any other purpose for the corporation set out ought to be enforcible as long as it's not vague nonsense.
For example "make some people happy" might mean you can be an dick company, but if you make a really slick iphone app that people "like" then you've complied? This is something ethical startup founders would have to write into the articles of incorporation to bind future board of directors even once the founders aren't majority shareholders, is how I understand it.
Meanwhile, most people don't even have $15000 lying around with nothing else to do. My understanding from surveys done by various companies is that 60% of Americans don't even have $1000 in savings. And those with beaucoup money are negotiating their own loan rates, because there's better places to park their money for long-term interest.
Had I banked at Chase, they would've provided me an actual "cashier's check" in branch at a moment's notice.
Is it worth ~$200/year in interest to not be able to get to your savings at a moment's notice? Before, I would've said yes. Now that its cost me an $1800 IRS penalty, no longer.
[1] https://www.fdic.gov/regulations/laws/rules/6500-3222.html
This kind of thing doesn't normally happen, or shouldn't.
You should have a local bank account for the times you need local branch if you do most of your banking online.
If you're going to spend quite a bit of money soon, like within a month or so, you should move that money into a local branch beforehand, like I did when I was buying my house and I knew I'd need the funds on closing date.
Even if you fail to do that ahead of time you can wire the money for, maybe, $20 to the local bank, wire transfers are instant, and get the cashier's check there.
That's like saying "you shouldn't use brokerage accounts cause if you need the money you'd have to wait for the sale to settle before you can access your funds."
I have documentation to show I made a best effort attempt to repay the loan in time (official check, fedex tracking numbers, etc), but I won't know if its good enough until I file next year's tax returns and challenge the 401k provider's 1099-R.
$20s and credit cards are only accepted by machines on the outside of the faregates. It is not possible to load excess value onto your card while underpaid; you can only pay the card up to the minimum value to exit, in cash, subject to the change the machine is prepare to give.
If, like me, the only cash you carry is $20s from an ATM, the only way to get out of BART in this situation is to illegally walk through the emergency exit gate.
Being able to go to a bank teller who gives out $5s and $10s is a big deal.
This isn't something localized to banks.
(The quote is from Liar's Poker, a really enjoyable read IMO)
"Free Market" is a big hairy term. But, the definition of free market that includes (or expects) all the emergent benefits attributed to free market is limited to a certain realm. Markets with barriers to entry (emergent or regulated, high fixed/marginal costs, any structure that lends to oligopoly, financialization, and bunch of other market characteristics (including interventionist policy) result in markets that are not free in that sense. There is no creative destruction, highly competitive dyanamics and such.
The financial markets have never (and IMO will never) resemble the market for toiletries or music festivals. Neither will many other markets: transport infrastructure, for example, for different reasons.
The free market is an abstract concept, a model. It explains some markets better than others.
During the fallout from the housing bubble, it became apparent that many loans had not been properly transferred as they were sold from one investor to the next. The result of this was that many foreclosures were brought with essentially forged papers--servicers worked overtime trying to cover up broken paper trails. The courts in some states, esp. Florida, looked the other way as this bogus paper was passed in front of them.
I'm very supportive of regulating banks, both in theory and in reality. But we can't just wish away corruption and influence. Especially since so much financial activity is highly technical and the only people knowledgeable enough to create and enforce reasonable regulations are the same as the people conducting those activities that need to be regulated in the first place.
I'm not sure of the fix, here.
The more I follow politics, and the media in general, I am leaning towards describing the entire thing as a giant soap opera where the media only "comments" or "gossips" instead of reporting facts and assigning provable blame. Everyone just passes off blame, no one really can hold anyone else accountable, and the cycle just repeats constantly. This is a fault of the system in that it allows blame to be passed along like that. The problem never really being addressed, just half-assed by each batch of politicians so that they can simultaneously take some blame, take some credit for trying, and also not be held accountable in any way.
the interesting question is whether or not there ever really was a cycle where the citizenry were informed, and could collectively influence policy.
even if we were just being naive, the abandonment of that model doesn't seem to have empowered the populace - seemingly the opposite.
Essentially, yes. Everything is relative, and since we have no base-principles to infer complex laws/rules/behavior from, we're constantly bickering with one another about minute details.
>"the interesting question is whether or not there ever really was a cycle where the citizenry were informed, and could collectively influence policy."
That's an interesting question. I can't say I can think of such a time. But I guess as a seemingly-intelligent and connected society with all of humanity's knowledge available at our fingertips, we should be striving for such a thing. Not defending an already-broken system just because we've decided it's "good enough".
It's nigh-impossible to actually do any sort of "corrective" maintenance on the system we have in place. Just look at Trump, or Brexit. The much-touted "checks and balances" is actively hindering his policies from being enacted (the one that got him voted in). Additionally, with Brexit, it's exposing just how complicated and intertwined global "contracts" and laws are between nations. In both cases we have giant behemoths of laws and processes in place to simply stunt any sort of correction or movement in any direction (whether good or bad). At that glacial pace, I don't think our life-spans are enough to see things through, or see drastic change or experiments when it comes to the models of government we've already-defined and have available.
But we are seeing in US politics a world emerge where shame doesn't work, where players don't even try to appear honest, and where the very idea of consensus factual external reality is under attach.
In such a world, it will take a lot more than daylight to nudge good behavior from folks. It will take actual fear of being sent to jail.
The silver lining is that Trump was a wake up call. Many, many of my non-political friends contacted me and asked "What do we do? How do I start?" Our boring party meetings have triple the attendance. Any thing that needs doing now gets done.
For my part, I started a book study group, mentoring my friends how to be activists. For example, an upcoming homework assignment is testifying at a public hearing (local city or county council). Most of us have never even attended a meeting before.
Exciting times.
I'm not sure of the fix, here.
2. We need to teach humans how to manage their own money and not give it away willingly to corruptible humans.
Problems in complex systems with large numbers of variables, attractors, etc are not solvable by just doing a single thing (if it was, it's not a complex system :P)
This kind of "if only x" thinking, IMHO, does not lead to actual solutions. It usually just leads to some other gravity well of the system, where now someone else says "if only y".
If you want to give ammunition to anti-capitalist movements, I strongly endorse returning to this model.
Of course, if you want to give ammunition to anti-capitalist movements, I also recommend that we continue to bail out the people who did have a hand in the impropriety.
It is also an ideal; a status to be strived-for.
We're allowed to involve ourselves in the politics and push to update, modify, and otherwise "improve" the regulations.
There's too much of a "set and forget" mentality when it comes to government.
IMO, that's due to all the fear mongering over governments being bad. People feel obligated to then fight for private corporate power.
These things don't just "happen". They're planned and documented in government record. We often call them laws. They are specifically tilting the playing field.
Get involved and tilt them back.
Kind of easy to say when you're part of a majority. I'm part of an actually-oppressed-by-law minority. By virtue of Democracy, my minority's say has very little effect unless it's shared by the majority.
>"We're allowed to involve ourselves in the politics and push to update, modify, and otherwise "improve" the regulations."
It's always a game of compromise based on who has more numbers. Until such a time as arbitrarily small groups can self-aggregate within an area and split-off from a larger governing entity, it'll never be any better for minorities.
I'm 1/4 native american, though I look white. I knew my 100% native american relatives. I heard the stories, passed down. I literally smashed some racist a-hole in the face while hassling my obviously native american grandmother, among numerous other encounters. I mean it's easy to say you know what I am, and not have a clue.
Don't stand up to the machine itself then. Stand up to your family, friends, and neighbors. Challenge them to find ways to get off these services and avoid mindless consumption.
I've been helping people setup Raspberry Pi's with Syncthing to share their private files (mostly pictures). Fuck Facebook and Snap. Undermine them.
I am seriously weirded out by the tech scene, with all these smart folks that mindlessly go work for these companies rather than using their knowledge to simply help their neighbors solve problems. Narcissists and sycophants the lot of them.
Our time and effort are the means of production. Point them at alternative solutions. It's actually easier than you think
And it's not just an issue of quantity: we aren't the people who control the mass media and thusly the opinions of the majority.
Since I like the idea of free market, I wish the market size of any company was limited to 15%, to truly allow competition and diversity of players. However, our economy is now global, and unless all the other countries play by these same rules (which I find highly unlikely), it will be a race converging to a few giant players and the occasional disrupters.
And the only way to manage that is to make sure the expected value of the fraud is significantly lower (ideally greatly negative) than the gains from the fraud.
That means that the chances of getting caught times the costs of getting caught need to be quite high.
A market which recognizes the legitimacy of government to regulate it must restrict competition to whatever that government declares legal, and as such any such market cannot be considered free.
A free market, like free speech, must be anarchist, or in the weak case, must tend towards anarchy.
Whereas free market means might makes right. AKA feudalism, corporatism, kleptocracy, neo-reactionary, fantasy land, etc. Basically whatever nonsense the Heritage Foundation stooges are paid to peddle.
Even though I grew up listening to the Sex Pistols, I still have no idea what anarchy is, idealized or not. I just assume its more Lord of the Flies than some hippy free love commune.
Beyond that, anarchists seem to disagree about everything except whether or not taxes are theft or weed should be legal, and probably not even that.
Personally, I suspect anarchy simply resets the evolutionary curve of society to clan-based power structures, and that tribalism, mafias, serfdom and states proper will inevitably be reinvented.
The problem is not that banks mismanaged and failed, but that the consequences of it were too grave to allow failure.
First, some enterprising fraudster will call/mail that they've acquired the loan and demand payment. Given how often loans are sold, it wouldn't take much conning to convince retirees that a payment is due and a check needs to be mailed to some P.O. Box.
Second, these companies that buy up loans don't seem all that technically capable. I fear that, one day, my parents' loan will be bought by one without an automatic monthly payment system. Again, someone with shady morals could start a company that looks to buy mortgages on properties where the mortgage is a fraction of the cost of the home and then not offer a auto-pay feature. When people inevitably miss a couple of manual payments, they could aggressively try to foreclose.
Both of these opportunities for abuse are made possible by banks with mostly positive reputations doing something that shouldn't be allowed. If a bank wants to offload debt that they've initiated, we should require them to continue to process customer payments on that debt and forward the money to whomever they sold to. Consumers should have the right to choose which companies they have business relationships with and we shouldn't have that relationship changed without our permission.
https://www.propublica.org/article/bank-errors-continue-to-c...
"Bank Errors Continue to Cause Wrongful Foreclosures"
My issue is with banks, landlords, and utilities where you send payment and they act like you didn't. Then threaten you with all types of legalese. This happens all the time for long term, rent-controlled, and rent-stabilised tenants. The landlord is trying to find any reason to throw you out. I've spoken with housing advocates and legal aid on this. If the owner starts acting up, i.e. not cashing checks while simultaneously sending you eviction notices, document everything. Spend the extra dollars to send a certified letter and keep the receipts.
Entirely agree.
Since I paid with a credit card I could make the case that I was charged before their deadline and they let it go.
Bill pay services usually deduct the amount of the check to be sent from your account and put it into a holding account before sending the check. The check sent acts more like a certified check than a personal check (because in a personal check, funds aren't withdrawn until the check is cashed).
I have always thought this is a little fishy - why the bank can't issue a personal check for me without withdrawing the funds from my account... but there may be regulatory or liability issues involved for the bank.
Bottom line, if you count on the bank to send a paper check for you, it's not EXACTLY the same as if you send a personal check yourself.
I've had a mortgage with my credit union for about ten years now, and they still have it. And no, it wasn't just resold out from under me without my noticing it; I actually asked one of their reps once and they outright told me that they don't resell their mortgages.
The downside is that as far as I know, I don't have a promise from them that they won't sell it, just a track record of not selling it. Still, if you're worried enough it may be worth considering. I recognize this is not a free option; you'd have to consider it as a form of insurance and consider whether you're willing to pay for it.
Don't most consumer banks and credit unions these days have automatic bill payment systems that, if the recipient is incapable of recieving payment otherwise, fallback to mailing computer-printed checks, so that consumers get automatic payments even if the payees don't have their own system?
If that's true then ROI on corporate law-breaking is great right now, as long as you're not one of the one or two most egregious cases any given year.
There was a study recommendation to regulate unregulated securities and take them away from investment banks..Guess what Goldman Sacs in Trump admin is thee to do?
Resist that recommendation
In a situation like in the article, continue paying the original, higher, correct loan payment. Make sure that the 'extra' (and indeed, any extra you intentionally pay any other time) goes toward the principal balance and not into your property tax escrow account. You've got to watch any bank you do business with, even to correct their honest mistakes. If your payment changes, find out why. If your extra principal payments aren't applied correctly, get it fixed. And when you have evidence of a pattern of wrongdoing, get the law involved.
> But who's going to investigate Wells Fargo over a $15 "mistake" that they fix as soon as you ask them to?
The bureaucracy to file charges for something so small is a non-starter. It's probably happening to tens of thousands of other customers, but then you have to do the leg-work to get other people on board. There's nothing you can do involving the law that doesn't require a significant time investment. And as you've said, the punishment is such a pittance that all the hard work didn't matter in the end.
I've successfully gotten the law involved with Citibank with a time investment of around 10, maybe 15 minutes. All I did was filled out this form: https://www.consumerfinance.gov/complaint/ and they handled it from there. However, the CFBP has only been around for less than a decade.
Where do you go exactly? I left Wells Fargo because (among similar "errors"), the charged me $15 monthly for "Fees" which they would reverse when I asked them what the fee was for. I had documentation of them insisting it was just a one-time mistake for several consecutive months and then charging the fees again every month for months. But who's going to investigate Wells Fargo over a $15 "mistake" that they fix as soon as you ask them to?
You file a CFPB complaint here:
https://www.consumerfinance.gov/complaint/
I've done this successfully against Citibank.
Even though you aren't a Wells Fargo customer anymore you can probably still file a complaint as long as you still have the documentation. Letting them know let's them undercover systemic problems.
Huh...how often does that happen? If you don't mind me asking, does that happen even if the account in question isn't close to zero?
And they always start off with the "be more responsible" spiel, until I get them to do the math themselves. Then they look confused, reverse the fee, and promptly forget about it. Until it happens again.
Part of the problem in these cases is factoring in those non-settled charges - money doesn't actually move until the settlement comes through. Sure, auths should affect available balance (and then refuse to accept more transactions if there's not enough available), but shouldn't be affecting the balance calculation for NSF fees.
http://www.rollingstone.com/politics/news/u-s-sues-wells-far...
I am incredibly saddened by the fact that this association is weak enough that people could even entertain the idea that they are misremembering.
Wells Fargo should be forever branded, and if you are doing business with them you really should stop.
They protect themselves by hiring politicians and people from regulating agencies for a lot of money. If they stopped doing that they would be in trouble.
I get that generally changing the terms of a loan after everything is signed is sketchy. But in this case it looks like they were trying to do the customers a service:
>The changes, which surprised the customers, typically lowered their monthly loan payments, which would seem to benefit borrowers, particularly those in bankruptcy. But deep in the details was this fact: Wells Fargo’s changes would extend the terms of borrowers’ loans by decades, meaning they would have monthly payments for far longer and would ultimately owe the bank much more.
I guess the devil is in the details, but if they just lowered the minimum payment what's the harm to the consumer? AFAIK the vast majority of loans in the US are simply calculated. If you make your payments as expected on time you wouldn't be effected. If you aren't able to do that, then of course you're not paying off the principle as quickly and the term would be extended. Just like making extra payments will shorten the term.
To be clear: changing the rate? Adding fees? Sure, that's really bad; rake them over the coals. But if it's just changing the minimum payment amount I'm missing the problem.
In this case, I'd wager by lowering the payments, less loans were "risky" and therefore their assets look better. That probably was for the benefit of repackaging those "assets" and/or better guarantees from the Fed.
Read up on this important court case: https://en.wikipedia.org/wiki/Williams_v._Walker-Thomas_Furn....
One customer had nine years left on their mortgage. Wells Fargo extended that to forty years, giving Wells Fargo an extra $40,000 in interest.
Another customer had fourteen years left on their mortgage, it was extended to forty years, giving Wells Fargo an extra $85,000 in interest.
If you're expecting to retire with your house paid off, the additional 31 or 26 years of payments could ruin your life.
Even while you're filing for bankruptcy, you would want to structure the mortgage so that you are paying it off as quickly as you can specifically because compounding interest really hurts.
Use a local bank or credit union. I've always had much better service and respect for me as a customer that way.
The one thing that will put the brakes on such.
P.S. Also worth mentioning, various governments have various laws and regulations prohibiting doing business with agents convicted of criminal activity. It would also be worth actually adhering to and enforcing those.
A bigger threat than a fine that often represents a fraction of the profits already gained.
But seriously, pierce the corporate veil and lock them up. Long past due. And experience has now shown, the only way to substantially reduce such activity (e.g. Savings and Loan Scandal of the '80's).
P.P.S. Regarding this, and all the Federal agents/roles that have been reassigned from domestic and financial crime to "terrorism". More Americans face greater terror today from the prospect of being screwed over by fraudulant big business, than face real (as opposed to manufactured) terror over a terrorist attact. Or, a "terrorist" attack, looking at how broadly that label gets applied, today. (I was going to say, how broadly it gets "thrown around", only it isn't really being "thrown around", it's being used quite deliberately to foster self-serving agendas.)
I keep most of my savings in cash and never take out loans. The result: a blank credit report (which HR at most companies seems to like when I'm getting hired) and few late penalties, and never being told I can't have access to my money because of "XYZ." Not to mention, avoiding all the crappy online banking web GUIs.
I recently got my first credit card, and my loan discrimination gave me some complications. I couldn't get automatically approved for any credit limit since all my loans are paid and closed, giving me an effective credit score of zero (in the loan officer's words).
I stick to credit unions, where you are a shareholder by virtue of being a depositor.
From groceries, with cashiers not ringing up specials or coupons correctly, sometimes the wrong UPC/wrong price and they aren't even paying attention.
Everyone else is trying to charge extra hidden fees, and sometimes they are illegal, like these.
But honestly, most people are so out of it, so clueless, they don't notice if they have the paperwork in hand.
Now we've really jumped the shark and are forging people's paperwork (account scandal) and submitting false documents.
I was shocked, SHOCKED, to find out that our CEO isn't even a tiny bit of a lying, cheating sociopath. I started working here for the benefits and culture in the IT department, and assumed that the people responsible for paying for all the cool stuff we got were doing the same thing I assume all the other big banks do (Wells, JPMorgan Chase, Citi).
I've only been here a little while, and not seen anything nefarious, though I only have visibility into the IT infrastructure mostly, and some development work. But I'm still wondering how a company can become this large and successful in this sector without griminess from the top.
It's restored my faith in stuff a little bit. Also note, if you look at the top 10 banks in the USA, the bottom half are a small fraction of the size of the top 3, and we're in the bottom half.
How would you possibly know?
The rest of management/leadership could still be rotten to the core.
Will they do that? Probably not. After all, no organization in the 21st century is conceivably more valuable than the people who are lootingxxxxx running it.