In brief: September 13, 2021

Feds fine Wells Fargo for ‘unsafe or unsound’ home lending practices

Wells Fargo has been fined $250 million by the Office of the Comptroller of the Currency for “unsafe or unsound practices” related to the bank’s home lending business, according to the bank and the agency Thursday.

The OCC, Wells Fargo’s top federal banking regulator, imposed the penalty on the bank for misconduct “related to material deficiencies regarding the bank’s loss mitigation activities” and violations of a 2018 consent order issued by the agency, according to OCC documents.

The 2018 order required the bank to take a variety of actions to account for deficiencies in its risk management program, including creating a new risk management plan and forming an independent committee to evaluate its progress. The order addressed misconduct related to mortgage and auto loans, among other violations.

“Building an appropriate risk and control infrastructure has been and remains Wells Fargo’s top priority,” Charlie Scharf, Wells Fargo’s CEO, said in a statement. “The OCC’s actions today point to work we must continue to do to address significant, longstanding deficiencies.”

The OCC also issued a cease and desist order against Wells Fargo on Thursday. The order restricts the bank from acquiring certain third-party residential mortgage servicing and requires the bank to ensure that borrowers are not transferred out of the bank’s loan portfolio until remediation is provided, according to an OCC press release.

The agency said it issued the order based on the bank’s failure to establish an effective home lending loss mitigation program. Loss mitigation refers to the process in which mortgage lenders and borrowers seek alternatives or work together to avoid foreclosure.

The fine comes nearly five years to the day after the discovery of Wells Fargo’s 2016 fake accounts scandal. The bank is still operating under a $1.95 trillion asset cap imposed by the Federal Reserve in the aftermath of the violations.

Initial jobless claims fall

Applications for U.S. state unemployment benefits fell last week by the most since late June as the labor market continues toward a full recovery.

Initial unemployment claims in regular state programs decreased to 310,000 in the week ended Sept. 4, Labor Department data showed Thursday. The median estimate in a Bloomberg survey of economists called for a slight decrease to 335,000 new applications.

Continuing claims for state benefits fell to 2.78 million in the week ended Aug. 28.

Initial claims have declined steadily as vaccination progress and reopenings have increased demand for workers. Still, claims are higher than pre-pandemic levels, and economists expect economic growth to slow in the third quarter as stimulus spending moderates.

Federal pandemic unemployment benefits ended by Sept. 6 in all states. The White House has said it will not extend jobless aid further, but states can use pandemic relief funds to provide additional assistance to unemployed workers.

Claims for pandemic unemployment assistance fell by more than 6,000 as the program is phased out.

The data follow last week’s employment report, which showed U.S. hiring downshifted abruptly in August with the smallest jobs gain in seven months.

By wire sources