Wells Fargo Unveils New Bad Credit Mortgage Program
Wells Fargo is launching a new program to help mortgage borrowers with bad credit records improve their plight - and help the bank shake accusations depicting it as a predatory lender, the Washington Post reports.
The initiative, dubbed “Steps To Success,” promises to provide free credit records, personal credit scores and more financial advice to customers who can’t qualify for the best home loan rates.
Wells Fargo plans to unveil the program Tuesday. The new campaign continues the mortgage company’s recent efforts to polish its image in the so-called subprime mortgage market that caters to downtrodden consumers with blemished borrowing histories. Critics say Wells Fargo has been unfairly gouging subprime borrowers for years - allegations the bank denies.
Wells Fargo ranks as the nation’s fourth largest sub-prime mortgage lender with a 2005 volume of $42 billion. Only Ameriquest, New Century Financial and Countrywide Home Mortgage outranked Wells Fargo in last year’s $625 billion market for sub-prime home loans.
With its sub-prime lending practices coming under attack, Wells Fargo last year made a series of changes that capped some fees and reduced prepayment fees. But Wells Fargo still hasn’t been able to satisfy some consumer activists who want the bank to make amends for the past.
“I believe in the power of redemption and if (Wells Fargo) is willing to sin no more, I welcome that. But more still needs to be done to protect consumers from hidden fees and other abuses,” said Rep. Brad Miller, a North Carolina Democrat who has introduced legislation proposing tougher limits on sub-prime lenders.
Miller’s reform bill never made it out of the House Committee on Financial Services last year, but the legislator expects the bill to become a higher priority next year after the Democrats take control of Congress. Wells Fargo declined to comment on the bill’s merits.
The backlash against the bad credit mortgage loan provider has risen in recent years as the number of borrowers with bad credit grows. Such loans accounted for about 20 percent of the $3.12 trillion market last year.
Spurred by borrowers’ complaints, attorneys general in 49 states reached a $325 million settlement with Ameriquest earlier this year to settle claims that the lender had been engaging in abusive practices.
Wells Fargo staunchly defends its subprime lending practices, attributing last year’s decision to lower its fees to changing market conditions.
The new subprime lending program is meant as a goodwill gesture aimed at creating more responsible borrowing habits and drumming up more future business from grateful customers, said Stephanie Christie, a Wells Fargo senior vice president overseeing the new initiative.
“We are very proud and excited about this,” Christie said.
The Association of Community Organizations for Reform Now (ACORN), a longtime critic of subprime lending practices, as well as other consumer-unfriendly products such as payday loans, isn’t impressed.
“We think they have been taking some steps in the right direction, and this could be good if they were doing something about the people who already got subprime loans from the bank,” said Jordan Ash, director of ACORN’s financial justice center. “It’s less expensive to give away free credit reports and credit scores than to compensate people for the excessive interest rates that they charged in the past.”