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Wells Fargo fined $85 million for abusive practices of thousands

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$85 million to borrowers

The Federal Reserve Board has alleged that Wells Fargo employed deceptive mortgage practices, fraud and unsafe banking practices against thousands of borrowers and is issuing an $85 million fine, their largest ever consumer protection fine in Fed history.

The Fed says that “possibly more than 10,000” mortgage borrowers between 2004 and 2008 were pushed into higher cost loans when they would have qualified for lower rates and less expensive loans.

The fine for each individual case looks to be upward of $20,000 each as the Fed demanded that Wells Fargo fully compensate all customers that were cheated.

Where it all began

At the root of this major fine is “Wells Fargo Financial,” the subprime loan arm of Wells Fargo that was closed last year, with the Fed pointing to salespeople in this division as overly aggressive and commission driven. The group “altered or falsified income documents and inflated prospective borrowers’ incomes to qualify those borrowers for loans that they would not otherwise have been qualified to receive,” according to the Federal Reserve.

The Wells Fargo Financial division sold high cost loans to those who easily qualified for lower cost loans.

Wells Fargo blames “small number of people” at bank

Because Wells Fargo estimates that of the 300,000 loans they made during that period, only an estimated 4% were abusive, the bank claims it was a small number of people that committed these abuses and the group doesn’t represent what Wells Fargo stands for.

Nonetheless, they will now be forced to work with the Fed to determine who the borrowers that were wronged are and appropriate compensation given.

Wells Fargo required to improve oversight

In a statement, the Fed said, “In addition to the monetary components of the settlement, Wells Fargo is required to improve oversight of its anti-fraud and compliance programs and incentive compensation and performance management policies for personnel who sell and underwrite home mortgage loans.”

16 employees banned from banking

The Fed noted that they have issued consent orders against 16 former Wells Fargo Financial sales personnel prohibiting them from becoming employed in the banking industry. The Fed said that they have “also issued a consent cease and desist order against another former Wells Fargo Financial sales person prohibiting future improper conduct.”

Tara Steele is the News Director at The American Genius, covering entrepreneur, real estate, technology news and everything in between. If you'd like to reach Tara with a question, comment, press release or hot news tip, simply click the link below.

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40 Comments

40 Comments

  1. Lynda

    July 27, 2011 at 7:14 am

    This was way over due…it goes back past 2000 and all should get rights to money..at least those who lost the home that was due to fraud..Audit all who were left with out a voice when they should of been heard! Justice!

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Austin

Austin tops the list of best places to buy a home

When looking to buy a home, taking the long view is important before making such a huge investment – where are the best places to make that commitment?

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Looking at the bigger picture

(REALUOSO.COM) – Let us first express that although we are completely biased about Texas (we’re headquartered here, I personally grew up here), the data is not – Texas is the best. That’s a scientific fact. There’s a running joke in Austin that if there is a list of “best places to [anything],” we’re on it, and the joke causes eye rolls instead of humility (we’re sore winners and sore losers in this town).

That said, SelfStorage.com dug into the data and determined that the top 12 places to buy a home are currently Texas and North Carolina (and Portland, I guess you’re okay too or whatever).

They examined the nerdiest of numbers from the compound annual growth rate in inflation-adjusted GDP to cost premium, affordability, taxes, job growth, and housing availability.

“Buying a house is a big decision and a big commitment,” the company notes. “Although U.S. home prices have risen in the long term, the last decade has shown that path is sometimes full of twists, turns, dizzying heights and steep, abrupt falls. Today, home prices are stabilizing and increasing in most areas of the U.S.”

Click here to continue reading the list of the 12 best places to buy a home…

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Housing News

Average age of houses on the rise, so is it now better or worse to buy new?

With aging housing in America, are first-time buyers better off buying new or existing homes? The average age of a home is rising, as is the price of new housing, so a shift could be upon us.

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aging housing inventory

The average home age is higher than ever

(REALUOSO.COM) – In a survey from the Department of Housing and Urban Development American Housing Survey (AHS), the median age of homes in the United States was 35 years old. In Texas, homes are a bit younger with the median age between 19 – 29 years. The northeast has the oldest homes, with the median age between 50 – 61 years. In 1985, the median age of a home was only 23 years.

With more houses around 40 years old, the National Association of Realtors asserts that homeowners will have to undertake remodeling and renovation projects before selling unless the home is sold as-is, in which case the buyer will be responsible to update their new residence. Even homeowners who aren’t selling will need to consider remodeling for structural and aesthetic reasons.

Prices of new homes on the rise

Newer homes cost more than they used to. The price differential between new homes and older homes has increased from 10 percent traditionally to around 37 percent in 2014. This is due to rising construction costs, scarcity of lots, and a low inventory of new homes that doesn’t meet the demand.

Click here to continue reading this story…

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Housing News

Are Realtors the real loser in the fight between Zillow Group and Move, Inc.?

The last year has been one of dramatic and rapid change in the real estate tech sector, but Realtors are vulnerable, and we’re worried.

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zillow move

Why Realtors are vulnerable to these rapid changes

(REALUOSO.COM) – Corporate warfare demands headlines in every industry, but in the real estate tech sector, a storm has been brewing for years, which in the last year has come to a head. Zillow Group and Move, Inc. (which is owned by News Corp. and operates ListHub, Realtor.com, TopProducer, and other brands) have been competing for a decade now, and the race has appeared to be an aggressive yet polite boxing match. Last year, the gloves came off, and now, they’ve drawn swords and appear to want blood.

Note: We’ll let you decide which company plays which role in the image above.

So how then, does any of this make Realtors the victims of this sword fight? Let’s get everyone up to speed, and then we’ll discuss.

1. Zillow poaches top talent, Move/NAR sues

It all started last year when the gloves came off – Move’s Chief Strategy Officer (who was also Realtor.com’s President), Errol Samuelson jumped ship and joined Zillow on the same day he phoned in his resignation without notice. He left under questionable circumstances, which has led to a lengthy legal battle (wherein Move and NAR have sued Zillow and Samuelson over allegations of breach of contract, breach of fiduciary duty, and misappropriation of trade secrets), with the most recent motion being for contempt, which a judge granted to Move/NAR after the mysterious “Samuelson Memo” surfaced.

Salt was added to the wound when Move awarded Samuelson’s job to Move veteran, Curt Beardsley, who days after Samuelson left, also defected to Zillow. This too led to a lawsuit, with allegations including breach of contract, violation of corporations code, illegal dumping of stocks, and Move has sought restitution. These charges are extremely serious, but demanded slightly less attention than the ongoing lawsuit against Samuelson.

2. Two major media brands emerge

Last fall, the News Corp. acquisition of Move, Inc. was given the green light by the feds, and this month, Zillow finalized their acquisition of Trulia.

…Click here to continue reading this story…

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