Wells Fargo dismisses foreclosure doubts
Banking giant Wells Fargo said Wednesday that its business shows no signs of the looming crisis some analysts fear the industry faces from shoddy lending and foreclosure practices.
"We are confident that our practices, procedures and documentation for both foreclosures and mortgage securitizations are sound and accurate," chairman and chief executive John Stumpf said in a news release as the bank announced a third-quarter profit of $3.3 billion.
Stumpf's assertion appeared at odds with a March deposition in which a Wells Fargo vice president of loan documentation described engaging in the sort of "robo-signing" that has raised widespread questions about the legitimacy of foreclosures.
The vice president, Xee Moua, said she signed as many as 500 documents in the span of two hours attesting to the accuracy of foreclosure paperwork. Moua said she neither verified the information nor understood the statements she was signing.
Checking the numbers was "not part of my job description," she said.
Some analysts and investors say slipshod or fraudulent processing of foreclosures could expose banks to costly litigation, hurt their ability to get delinquent loans off their books and paralyze real estate markets still struggling to recover from the housing collapse.
In addition, some analysts predict that Bank of America and other big banks could be forced to issue huge refunds to investors because the banks misrepresented the quality of loans or bungled the paperwork when they pooled the loans into securities and sold them to investors.
On Tuesday, the Federal Reserve Bank of New York said it had joined a group of investors calling on Bank of America to buy back billions of dollars worth of mortgage securities because of paperwork issues.
Wells Fargo reaffirmed its recent assurances, saying it is not threatened by those problems.
"We ensure appropriate documents for loans in foreclosure are assigned in compliance with local laws and investor requirements," the bank said in a slide presentation for investors and analysts.
"Legal documents related to securitizations appropriately transferred ownership," the bank added.
On a conference call with Wells Fargo executives Wednesday, one analyst noted allegations that the bank engaged in robo-signing and said "there is a great deal of speculation that at some point you guys are going to cave and we're going to find out all this bad stuff about your foreclosure procedures."
In response, Wells Fargo's chief executive said that "humans do make errors" and that "if you find an error, we'll fix it." In one contested foreclosure, Stumpf said, a judge sided with Wells Fargo.
As for any demands that Wells Fargo buy back mortgages from investors, the bank said its exposure is manageable and its reserve of $1.3 billion to cover such claims is adequate.
During the quarter that ended Sept. 30, Wells Fargo set aside $370 million for mortgage loan repurchase losses, compared with $382 million in the second quarter.
The company said that at the end of the third quarter it faced demands that it repurchase loans with an original balance of $3.8 billion, down from $4.3 billion at the end of the second quarter. The bank did not say which institution had demanded the repurchase.
In the telephone briefing, Stumpf told investors and analysts that the third quarter was "the best quarter in our company's history."