Monday, November 12, 2012

Wells Fargo Issues Refund Checks to Borrowers

A whole lot of Wells Fargo FHA borrowers have gotten refund checks in the mail from the mega bank with a letter stating that they’d been overcharged for their loans.

The checks were generally for several thousand dollars (nothing to sneeze at) but the caveat was that if they cashed the checks, they give up the right to sue the bank for damages. Apparently the borrowers were placed in more costly loans when they were qualified for less expensive ones…

The letters and checks were supposedly sent to up to 10,000 customers. Since the government has previously been looking into Wells Fargo’s actions, it seems they’re trying to do damage control and prevent further problems.

The refunds sent out involve FHA mortgages done from 2009 through 2011. The FHA loan is a viable and reasonable product. Borrowers with lower credit scores and down payments needed for conventional loans are able to be a part of the American Dream.

With a minimum down payment of 3.5%, the FHA loans have more costly up front fees and mortgage insurance to offset the risk of default. BUT with the loans in question, the customers actually had enough down payment required to get a conventional loan, bank officials said.

Wells Fargo hasn't admitted to any wrongdoing. However, the letter enclosed with the refunds stated  "You should understand that by cashing the enclosed check, you agree to release Wells Fargo … from any and all claims relating to Wells Fargo's origination of a more expensive mortgage loan than the loan for which you may have qualified”

The refunds only came to light when The Los Angeles Times acquired a copy of one of the letters. Not surprisingly, the bank never announced them publicly.

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