Consumer Action wants to alert homeowners that the Federal Reserve has finedWells Fargo $85 million for allegedly steering homeowners into subprime loans when they would have qualified for prime loans at lower interest rates.
The Fed also accuses Wells Fargo Financial of falsifying income information on mortgage applications to qualify borrowers for loans that they could not afford.
Homeowners who refinanced their homes and received cash back (also called a “cash-out” mortgage) between January 2006 and June 2008 will be re-evaluated by the bank to see if they were steered into higher priced loans.
Borrowers with “cash-out” refinanced mortgages between January 2004 and June 2008 will receive notice from Wells Fargo if there is evidence that a homeowner’s income was falsified without their knowledge.
Estimates are that each eligible borrower will receive between $1,000 and $20,000 in compensation. The Federal Reserve believes that more than 10,000 homeowners may be eligible for settlement funds.
The $85 million penalty is the largest fine the Federal Reserve has issued in a consumer protection case. The bank must change its oversight and employee compensation policies. Wells Fargo closed Wells Fargo Financial in July 2010.
For more information consumers should call Wells Fargo at 877-546-0090.