Cheat sheet: Inside the $3B Wells Fargo settlement

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

Hot Seat: Ted Manley of Manley Deas Kochalski

Declining foreclosure volume has created a “new normal” in default levels, but servicers can’t get complacent. Ted Manley, co-founder and principal at Manley Deas Kochalski, explains why now is the perfect time to optimize processes with talent and technology to prepare for the inevitable volume increase.  

HousingWire: What are some of the pressing issues facing servicers right now from a regulatory standpoint?

Ted Manley: Interestingly, the most pressing issues aren’t regulatory in nature. Instead, they relate to foreclosure volume now and later. The key issue is how servicers are going to adapt to “the new normal” created by declining volume. We all know that the default rate remains at a pre-crisis level. The data indicates – and experts say – that foreclosures won’t adjust upward from current levels for approximately 12 to 18 months.

However, FHA delinquencies are trending higher than expected, while modified mortgages are experiencing higher failure levels. It’s hard to predict the impact these two factors will have on the forecast, but we need to remain prepared for volume to increase. Managing a low-volume business while staying flexible and prepared for the inevitable increase is one of the most pressing challenges right now.

HW: How are you seeing companies adapt to these challenges?

TM: Many organizations are using this time to create even leaner and more effective processes to ensure procedures are optimized. This advance work will make sure they can handle future volume expeditiously within the highly regulated default landscape.

On our side of the business, in addition to optimizing our processes, we’re offering a wider range of services to existing clients and using our expanded offerings to attract additional clients. For example, two relatively new areas we’ve embarked upon with great success are timeshare mortgage defaults and a nationwide bankruptcy practice. Implementing this strategy while foreclosure levels are manageable allows us to provide even greater support to our long-time clients while expanding our client base.

We couldn’t do that, of course, without maintaining our ability to attract top talent and exceed client expectations, so both remain priorities. In addition, we continue to innovate, automate, and streamline our processes to provide the best client service in the industry.

HW: Law firms aren’t always associated with tech innovation, but MDK seems to be the exception. How does your proprietary technology distinguish your firm?

TM: Great question. Our clients regard MDK as one of the most sophisticated law firms in the industry. As the environment changes, we continue to improve our proprietary system, Casee. For example, we’ve added flexibility and additional customization features to ensure we can quickly adapt to industry challenges and at a significant scale.

We are developing systems that allow us to launch new lines of business and services. As we research, experiment, and analyze technology in new-to-us service areas, we share these efficiencies and improvements with our core clients in the residential mortgage industry.

One example is the auction management system we built to support the private-selling officer option created by Ohio’s foreclosure reform bill. This platform’s back-end workflow capabilities stand to provide additional value in default servicing beyond its original design.

HW: Looking forward, what should servicers keep an eye on for the second part of the year?

TM: We strongly encourage our clients and colleagues to embrace the new normal while preparing for a foreclosure volume increase in the not-too-distant future. Rather than merely accepting and managing current levels, look for ways to streamline and optimize processes with both talent and technology. It’s the best way to prepare for change, and change is a constant for all of us.

*This article has been updated with correct information on Ted Manley and Manley Deas Kochalski LLC

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Source: HousingWire Magazine

Freddie Mac adds Mark Grier to its board of directors

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.

The post Freddie Mac adds Mark Grier to its board of directors appeared first on HousingWire.

Source: HousingWire Magazine

Wells Fargo CEO to testify before House lawmakers in March

The hearing will be one of three held by the House Financial Services Committee to scrutinize the bank next month.
Source: American Banker

Wells Fargo agrees to pay $3 billion to settle DOJ, SEC investigations over fake accounts

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

Data is great, but housing professionals need to look a step further

Today, we live in a world of instant access to information and technology that has empowered us to have more freedom and control in nearly every aspect of our lives. 

At the risk of sounding like a “lazy millennial,” I’ll admit I order everything I need from an app: cars, flights, cleaners, groceries, stocks, healthcare and the list goes on. And I use an app to track everything in my life from my budget to my menstrual cycle. (TMI? Information is never “too much” for this data-hungry generation). 

Kristin Messerli,

When every other purchase is at our fingertips, why would buying a home, the biggest purchase of our lives, be any different? If anything, today’s homebuyers expect the most transparency, the most personalized information and on-demand service.  

While the world around us evolves toward consumer empowerment, when it comes to home buying, today’s consumers often feel powerless. In part, this is because buying a home can be one of the most anxiety-inducing purchasing experiences of a consumer’s life. 

While the industry is far from being completely “Uberized,” it is making big strides to meet these demands for a more on-demand experience, as Julian Hebron described earlier this week on the evolution of the digital mortgage. 

But for an especially anxious consumer, digitization is only part of the solution. 

As I discussed in my last article, it is crucial for today’s housing and finance professionals to understand the emotional context of their consumers in order to effectively build trust with them. For a generation of quasi-traumatized consumers who are distrustful of financial institutions in a post-crisis era, connections must go deeper than the data. 

To empower this generation of consumers, the future of mortgage should be both a personalized and humanized experience, always on-demand

The human touch

In a high-anxiety service such as home buying, professionals cannot simply funnel someone to an app. They also can’t tell them to stop trying to research everything and trust them. Remember the last time you were freaking out about something and someone told you to “calm down?” I can assume it didn’t go well for either of you.

Research by Harvard Business School found that consumers with access to a human being in an online setting were significantly more likely to be satisfied with their experience, even if they never reached out to the person. 

Again, exposing my addiction to the on-demand economy, I’ll compare my experience with two meal delivery apps. I have a vehement hatred for Postmates and a true love affair with UberEats. 

As I was writing this article, I realized the only difference between these two apps is my ability to talk to a human being.

When I ordered something incorrectly once on UberEats, I easily found the customer service line and a nice man helped me adjust my order. However, when my Postmates delivery was lost and I could only leave them hangry emails, I became determined to put them out of business (you can listen to the happy ending to my Postmates chicken sandwich story here).  

Paired with Personalized Information

The human element is critical but only as it pairs with the personalized information. 

While not necessarily shared by previous generations, Millennials have grown to expect that companies optimize the use of their data to deliver a better experience. A recent study by SalesForce found that 67% of Millennials and Gen Z expect offers to be personalized, in contrast with only 35% of Baby Boomers.

As consumers, we are learning that knowledge is power and personalized knowledge is the most powerful. 

Everyone who spends longer than a day with me knows that right now my favorite app in the world is Oscar Health Insurance. They have on-call doctors who can talk through any questions or prescriptions as needed, (and of course I love their trendy branding). For someone who finds herself frequently in a dark internet hole of WebMD searches about why I’m suddenly getting so many hangnails (spoiler alert: the answer is always cancer), this is a real asset to my life. 

When we feel anxiety, it is human nature to want to talk to someone and access more information.

As I wrote about in my last column, that “someone” is harder to come by for a generation who is extremely skeptical of financial institutions. However, when paired with access to personalized information, trust is less of a necessity. Or rather, trust is more easily built.

For example, when my doctor called me to tell me I had high cholesterol, I was extremely unsatisfied with her explanation to “eat better.” Thankfully, with my pal Oscar (the app), I was able to look at the labs and call one of their doctors to review them with me. No, I don’t trust the doctor I just met on the other end of the line, but when they are empowering me with information to understand the data for myself, I am happy.  

The Power of On-Demand

Personalized information and human support is only beneficial when it is easily accessible. For the consumer who has been groomed for instant gratification, waiting on a response or a loan update in a “high cholesterol” type of moment in the mortgage process is pretty excruciating. 

According to SalesForce, 75% of Gen Z/Millennials say they want to work with businesses that have instant on-demand engagement. And Google mobile searches for “near me today/tonight” (such as “open houses near me today”) grew 900% over the last two years.

When homebuyers reach out with an initial inquiry to a Realtor or loan officer, they don’t wait long before moving on to another professional if they don’t receive a response. Many professionals find that even an hour makes a difference as to whether or not they retain that lead. That’s why many sales professionals are finding virtual assistants or other on-demand service professionals well worth the investment to provide quick responses to all inquiries. 

Making the Shift

This shift from being a passive consumer to an empowered one is difficult for an industry with an entirely different vocabulary and fee sheets that make you question your intelligence. 

The economy is shifting power away from businesses and creating the expectation that consumers will receive it, but the most important ingredients are often overlooked by industry innovators in the chaotic quest to modernize.  

To compete in an on-demand economy, companies need to rethink their roadmap and prioritize instant access to personalized data and humanized support.

The post Data is great, but housing professionals need to look a step further appeared first on HousingWire.

Source: HousingWire Magazine

Wells Fargo pays $3 billion, avoids prosecution for sales abuses

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

CFPB proposes making debt collectors disclose statute of limitations

Debt collectors would have to tell consumers upfront that they cannot sue to recover “time-barred” debt under a proposal issued Friday by the Consumer Financial Protection Bureau.
Source: American Banker

Quicken Loans hits “pause” on One Reverse Mortgage, moves all employees to Rocket Mortgage

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

PNC gets sued, LendingClub buys bank, regulators spar: Top stories of the week

Tech firm accuses PNC of stealing trade secrets; online lender LendingClub agrees to acquire Radius Bank; questions arise whether regulators are turning more partisan; and more from this week’s most-read stories.
Source: American Banker