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Wells Fargo faces tax credit probes, new problems with mortgage borrowers

August 7, 2018 / Source: Reuters

Wells Fargo faces tax credit probes, new problems with mortgage borrowers

NEW YORK (Reuters) – Wells Fargo & Co (WFC.N) is facing government probes into its use of low-income housing tax credits, and has also set aside $8 million to compensate borrowers who were incorrectly denied mortgage modifications under a federal assistance program, the bank said in a regulatory filing on Friday.

The new disclosures add to Wells Fargo’s numerous regulatory penalties, private lawsuits and remediation efforts. Most stem from a sales practices scandal that has touched on all of the bank’s major business units.

The tax inquiries are being conducted by multiple agencies, which Wells Fargo did not name in its 10-Q filing with the U.S. Securities and Exchange Commission. They focus on how the bank purchased or negotiated the purchase of the credits in connection with financing of low-income housing developments.

Representatives for the Internal Revenue Service, the Federal Housing Finance Agency and the U.S. Department of Housing and Urban Development did not immediately respond to requests for comment.

The $8 million accrual is intended for roughly 625 borrowers who should have qualified for a loan modification under a program the Treasury Department set up in 2009 to help Americans who were struggling to make mortgage payments.

An error in Wells Fargo’s underwriting tool improperly excluded those borrowers, 400 of whom eventually had their homes foreclosed upon, the bank said.

The bank also updated disclosures on issues it has discovered in auto lending, wealth management, fiduciary and custody accounts, foreign exchange trading, mortgage rate-lock extensions, “add-on” products like identity theft protection, and frozen or closed bank accounts.