Wells Fargo discloses foreclosure mistakes, use of 'robo-signers'
Wells Fargo, which has stood by its foreclosure paperwork for weeks as other major lenders discovered errors and halted sales, conceded Wednesday it had discovered some flaws in its documents as well.
The Washington Post
NEW YORK — Wells Fargo, which has stood by its foreclosure paperwork for weeks as other major lenders discovered errors and halted sales, conceded Wednesday it had discovered some flaws in its documents as well.
The latest acknowledgment of problems from one of the nation's biggest lenders points out that the failure to scrupulously check legal documents before foreclosing on delinquent homeowners has been widespread in the industry.
Wells Fargo said it is submitting additional affidavits for roughly 55,000 foreclosures pending in 23 states, but said it does not have any plans to halt foreclosure sales.
The bank does not "believe that any of these instances led to foreclosures which should not have otherwise occurred," it said in a statement.
Wells said the problems related to the "final step" in filing foreclosure affidavits, including the final review and notarization of documents. A spokesman for the bank would not comment on whether Wells, like other banks, had used "robo-signers," who signed off on mountains of legal documents without checking them for accuracy.
The problems have not only slowed foreclosures and provoked homeowner lawsuits across the country, they have also stoked an effort by mortgage investors to craft a legal strategy to recoup some of their losses.
Analysts have warned that banks could lose billions of dollars if investors take firms such as Bank of America to court. But attorneys representing money managers warned at a conference in New York on Wednesday that investors who want banks to buy back faulty loans should brace themselves for an ugly legal fight that could last for years.
"None of these avenues of litigation is for either the faint of heart or for those with short attention spans," David Grais, an attorney representing investors, said at the conference, which focused on allegations that banks have not acted in the best interests of the investors.
The foreclosure debacle has raised questions about whether banks properly handled loans that were sold to investors during the housing boom. Many of those investors are seeking to band together, but with banks vowing to fight lawsuits — and holding the upper hand because they are not sharing detailed loan information that could be used against them in court — attorneys concede that their clients might not see a cent until 2013.
Any uncertainty associated with the lawsuits could also act as a drag on bank stocks, making it harder for the industry to move quickly past the foreclosure controversy.
Nearly 90 money managers and other investors attended Wednesday's conference, but the list of attendees was closely guarded, with some refusing to give their names. CNBC reported that the guest list included some of the major names in hedge funds and insurance.
In the past, such legal actions against banks have had difficulty gaining traction because investors have been reluctant to collaborate and reveal their mortgage holdings. Bill Frey, chief executive of the fund Greenwich Financial, said they've also been wary of antagonizing the banks.
Some of the relationships can be complicated. Merrill Lynch, a wholly owned subsidiary of Bank of America, holds a 34.1 percent interest in giant hedge-fund manager BlackRock. The hedge fund, along with the Federal Reserve Bank of New York and others, sent a letter this month to Bank of America seeking a repurchase of mortgages it said were faulty.
On Wednesday, Tal Franklin, another attorney representing investors, sent a letter to firms handling his clients' securities, known as trustees, arguing that bondholders should not be responsible for any costs associated with foreclosure paperwork problems. Franklin has organized investors holding more than 6,000 private mortgage-backed securities.
"We don't want anyone thinking we agreed to this," Franklin said.