The ten-digit penalty marks an important milestone for the bank, but individual ex-bankers may still be at risk and grueling hearings lie ahead for current leadership.
Source: American Banker

Freddie Mac has announced that Mark B. Grier has been elected to its board of directors.

Prior to joining Freddie Mac, Grier served as the vice-chairman and a member of the board of directors of Prudential Financial, leading up to his retirement in 2019.

Grier joined Prudential in 1995 as chief financial officer before being named office of the chairman in 2002 and as vice-chairman in 2007.

In late 2011, Grier led the $3 billion initial public offering of Prudential Financial, which was one of the largest IPOs in history at the time.

“Mark Grier brings more than 40 years of finance, risk, and market experience to Freddie Mac,” said Sara Mathew, non-executive chair of Freddie Mac’s board of directors. “His deep expertise in capital management will benefit the Board as we guide Freddie Mac through the next chapter of its corporate life.”

Other positions Grier has held include various positions at Chase Manhattan Corporation and its predecessor from 1978 to 1995, including executive vice president, global risk management and executive vice president, co-head of global markets.

Grier is also chair of Achieve and the Global Impact Investing Network and is a Trustee of Eisenhower Fellow and the Tragedy Assistance Program for Survivors.

Grier received his bachelor’s degree and a master’s in economics from Eastern Illinois University, and another MBA in finance and corporate accounting from the University of Rochester.

This announcement comes after the GSE named Donna Corley its head of single-family business, as David Lowman stepped down in October.

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Source: HousingWire Magazine

Earlier this year, Wells Fargo revealed that it had set aside more than $3 billion to pay for a looming settlement over the bank’s fake account scandal, and now, the other shoe has dropped.

The Department of Justice and Securities Exchange Commission announced Friday afternoon that Wells Fargo will pay $3 billion to settle three separate investigations into the bank’s practices that led to 5,000 Wells Fargo employees opening two million fake accounts in order to receive sales bonuses.

The settlements cover criminal and civil investigations by the DOJ and separate allegations from the SEC that the bank misled its investors by claiming the success of its cross-selling strategy, wherein employees were incentivized to open multiple accounts for the same customer.

But the scheme blew up back in 2014 when the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency and the city and county of Los Angeles fined the bank $185 million for the bank’s employees opening up fake accounts in customers’ names.

The bank later inked a $142 million settlement with the affected customers, and a $480 million settlement with a group of shareholders who accused the bank of making “certain misstatements and omissions” in the company’s disclosures about its sales practices.

But now, the bank is set to pay out another $3 billion to settle the DOJ and SEC investigations.

“This case illustrates a complete failure of leadership at multiple levels within the bank. Simply put, Wells Fargo traded its hard-earned reputation for short-term profits, and harmed untold numbers of customers along the way,” said United States Attorney Nick Hanna. “We are hopeful that this $3 billion penalty, along with the personnel and structural changes at the bank, will ensure that such conduct will not reoccur.”

The DOJ lays out the depth of the problem at Wells Fargo and how long the company was aware of the issue before it became public knowledge.

“The Community Bank implemented a volume-based sales model in which employees were directed and pressured to sell large volumes of products to existing customers, often with little regard to actual customer need or expected use,” the DOJ said in a statement. “The Community Bank’s onerous sales goals and accompanying management pressure led thousands of its employees to engage in unlawful conduct – including fraud, identity theft and the falsification of bank records – and unethical practices to sell products of no or little value to the customer.”

That conduct included opening “open checking and savings, debit card, credit card, bill pay and global remittance accounts,” all without customers’ consent.

According to the DOJ, the “top managers” of the community bank were aware of the “unlawful and unethical gaming practices as early as 2002, and they knew that the conduct was increasing due to onerous sales goals and pressure from management to meet these goals.”

But despite knowing that the fake account creation was a growing problem, the community bank’s senior leaders “failed to take sufficient action to prevent and reduce the incidence of such practices.”

In the wake of the scheme first being uncovered, the bank’s CEO and chairman, John Stumpf, promptly resigned from his positions. From there, the bank took additional action to address the issues that led to the fines, including revoking 2016 bonuses for its top executives, firing four senior managers, outing another two executives, and splitting the role of chairman and CEO. 

Beyond that, the bank clawed back more than $100 million in bonuses from Stumpf and former head of community banking Carrie Tolstedt, both of whom could have put a stop to the fake account creation pipeline.

But Stumpf was recently fined $17.5 million by the OCC for his role in the scandal, while Tolstedt was charged by the OCC for her actions. According to the OCC, it is seeking a fine of $25 million against Tolstedt for her actions, or lack thereof, to prevent the fake account scandal from spreading.

The bank later prepared a new pay plan where employee compensation was no longer tied to sales.

And now, the scandal has led to a $3 billion settlement with the government.

According to the DOJ, the government’s decision to enter into the deferred prosecution agreement and civil settlement was based on a number of factors, including “Wells Fargo’s extensive cooperation and substantial assistance with the government’s investigations; Wells Fargo’s admission of wrongdoing; its continued cooperation with investigators; its prior settlements in a series of regulatory and civil actions; and remedial actions, including significant changes in Wells Fargo’s management and its board of directors, an enhanced compliance program, and significant work to identify and compensate customers who may have been victims.”

Meanwhile, the SEC section of the settlement is $500 million, all of which will be returned to investors in the bank who were misled by Wells Fargo.

“Wells Fargo repeatedly misled investors, including through a misleading performance metric, about what it claimed to be the cornerstone of its Community Bank business model and its ability to grow revenue and earnings,” said Stephanie Avakian, Co-Director of the SEC’s Division of Enforcement. “This settlement holds Wells Fargo responsible for its fraud and furthers the SEC’s goal of returning funds to harmed investors.”

The SEC’s order finds that Wells Fargo violated the antifraud provisions of the Securities Exchange Act of 1934. As part of the settlement, Wells Fargo has “agreed to cease and desist from committing or causing any future violations of these provisions” and to pay a civil penalty of $500 million, which will be distributed to investors.

That’s in addition to the $480 million settlement the bank reached with investors back in 2018.

“The conduct at the core of today’s settlements — and the past culture that gave rise to it — are reprehensible and wholly inconsistent with the values on which Wells Fargo was built,” Wells Fargo CEO Charlie Scharf said in a statement.

“Our customers, shareholders and employees deserved more from the leadership of this company. Over the past three years, we’ve made fundamental changes to our business model, compensation programs, leadership and governance,” Scharf continued. “While today’s announcement is a significant step in bringing this chapter to a close, there’s still more work we must do to rebuild the trust we lost. We are committing all necessary resources to ensure that nothing like this happens again, while also driving Wells Fargo forward.”

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Source: HousingWire Magazine

A deferred-prosecution agreement with the Justice Department spares the bank a potential criminal conviction — provided it cooperates with continuing probes and abides by other conditions.
Source: American Banker

Quicken Loans has become the largest mortgage lender in the country over the last few years due in large part to the growth of Rocket Mortgage, the company’s digital mortgage platform.

As it turns out, Rocket Mortgage is becoming so big that it’s now consuming other parts of the Quicken Loans family of companies too, namely the company’s reverse mortgage lender.

Earlier this week, Quicken Loans moved to “pause” the operations of One Reverse Mortgage, one of the biggest reverse mortgage companies in the nation, and is shifting all of the company’s employees over to Rocket Mortgage.

According to a statement provided to HousingWire, One Reverse Mortgage will cease originating new reverse mortgages and all of the company’s employees will move to Rocket Mortgage.

The company said the decision comes as the result of both the growth of Rocket Mortgage and “shifting demand” for reverse mortgages.

“As the nation’s largest lender, we are constantly evaluating our portfolio to make sure we are delivering the most sought after financial solutions to our clients at all times,” Quicken Loans said in a statement.

“As the Rocket Mortgage brand continues to grow, and we see demand shifting from the reverse mortgage market, we have made the decision to pause reverse mortgage originations and transition all current One Reverse Mortgage team members to positions with Rocket Mortgage,” the company continued.

“This move will allow us to leverage the skill and expertise of our ORM team members to quickly scale and meet the unprecedented demand Rocket Mortgage is experiencing as it grows its position as America’s largest mortgage lender.”

It was just over a year ago that One Reverse Mortgage was growing, introducing its first proprietary reverse mortgage, which it called the Home Equity Loan Optimizer.

But now, the company’s workforce is shifting to forward mortgages instead.

The exact number of people employed by One Reverse Mortgage is not currently available. The company’s LinkedIn page lists the company’s size as between 201-500 employees.

Quicken Loans did not respond to repeated questions about an exact number of employees that would be making the shift to Rocket Mortgage.

Regardless, all of the company’s unknown number of employees are now moving to Rocket Mortgage.

The news of the changes at One Reverse Mortgage was first reported by Reverse Mortgage Daily.

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Source: HousingWire Magazine