Wells Fargo Is Sanctioned for Role in Mortgage Woes

Wall Street Journal (04/30/08) P. C5; Efrati, Amir
A number of federal bankruptcy judges have recently called mortgage companies to task for their treatment of consumers in danger of losing their homes, but have generally ignored the "trustees" in the mortgage chain--typically large financial institutions. That was until last week when Judge Joel Rosenthal imposed a $250,000 sanction against Wells Fargo & Co. for failing to monitor a mortgage-servicing company that took improper actions in a consumer-bankruptcy case and subsequently made misrepresentations to the court. Wells Fargo is one of numerous banks that often acts as a trustee for trusts that hold mortgages pooled together, bundled into securities and sold to investors. Rosenthal, a Massachusetts federal bankruptcy judge, wrote in his decision that Wells Fargo "turned all responsibilities over" to the servicer but "turn[ed] a blind eye" to the servicer's mistakes. Had the company "shown even a modicum of oversight or review" of the servicer's behavior, he went on, "it should have been able to correct the misrepresentations."