Hundreds of foreclosures resulted from Wells Fargo glitch
Democratic lawmakers in Sacramento are hoping to overturn a court ruling that would order California to use $331 million in helping homeowners hit with foreclosures. The sum came out of a 2012 nationwide financial protection settlement involving banks accused of improper foreclosure practices.
California received over $400 million as part of the National Mortgage Settlement Fund in 2012, but was accused of using most of it to offset state deficits.
The Third District Court of Appeal in Sacramento last month ordered the money be used for the original purpose of assisting owners hit hard by foreclosures, saying the money was “unlawfully diverted” from the settlement fund.
A California judge in 2015 gave a similar ruling, but ultimately said it was up to California Governor Jerry Brown and lawmakers to create a plan to return the $331 million when the state had the money to do so.
But legislative Democrats this week, rewrote two budget-related bills which moved through fiscal committees in both houses. The bills state that Brown had appropriately made apparent his funding decisions with Legislature. They further state that Brown had used the money in bailing out housing agencies and consumer services in the state, thus adhering to the 2012 state law.
In a hearing on Thursday, August 23 for one of the bills, a budget analyst with Brown’s Finance Department told the Senate Budget and Fiscal Review Committee that the bill — AB 1829 — had the intention of “clarifying that Finance operated within the intent of the original (2012) legislation.”
“In the heart of the recession, the state did the best it could in allocating money toward housing measures,” said budget analyst for the governor, Joshua Gauger.
The National Asian American Coalition (NAAC), which led the case against Brown and state finance officials in 2014, maintained that the latest moves were still illegal.
“It’s disappointing that Governor Brown’s allies in the Legislature are now trying to deprive struggling homeowners of money that is rightfully theirs and that they have fought long and hard to recover through the courts,” said Faith Bautista, president and chief executive officer of the NAAC.
She added that if passed, struggling California homeowners would be further vulnerable to the state’s already severe housing crisis.
“$331 million is badly needed by Californians to get the housing services they need to buy their homes or modify their mortgages to keep their homes,” said Bautista.
A lawyer for the NAAC and other organizations that challenged the state’s fund usage, said they would pursue another legal battle if the legislation were to pass.
“Those actions were still illegal, and the governor remains under an obligation to use the National Mortgage Settlement Funds as the appellate court found they were intended — to help struggling homeowners,” said attorney Neil Barofsky.
Wells Fargo glitch led to hundreds of home foreclosures
Among the five mortgage services that were ordered to pay into the National Mortgage Settlement Fund in 2012 was Wells Fargo, which recently revealed that hundreds of people experienced foreclosures due to a computer glitch on the bank’s behalf.
Through a regulatory filing last week, Wells Fargo said that up to 625 clients were “incorrectly denied a loan modification” that they would have otherwise received because the glitch miscalculated the client’s’ eligibility requirements for mortgage modifications. Roughly 400 of the cases resulted in foreclosures.
Homeowners affected by the glitch were undergoing foreclosure processes between April 13, 2010, and October 20, 2015.
For remediation, Wells Fargo said it would put aside $8 million for “customers whose modification decisions may have been affected by the calculation error.” Based on the approximately 600 affected, that would amount to roughly $13,000 per customer. (Rae Ann Varona/AJPress)