Wells Fargo Accused of Misrepresentation and Price Gouging
A lawsuit has been filed against Wells Fargo accusing the lending company of colluding with an appraiser service, Rels Valuation. Both Wells Fargo and Rels Valuation are owned by the same parent company. Wells Fargo is accused of requiring that borrowers use Rels Valuation for appraisals. Rels Valuation would then use third-party appraisers and require that these appraisers make valuations that fell in line with the demands of Wells Fargo. Rels Valuation is also accused of paying licensed appraisers well below the standard. Even though Wells Fargo was obtaining these appraisals at a discounted rate from Rels Valuation, they charged their customers the full amount and pocketed the difference.
According to the lawsuit, Well Fargo pressures appraisers to assess properties for a value that will enable Wells Fargo to underwrite loans, even if the assessed value is inaccurate. If the appraisers refuse to report back with an inaccurate property value, or will not accept the significantly diminished fee for their services, they are placed on an ‘exclusion list’ and are not hired for future projects. Wells Fargo is currently the leading mortgage lender in the country. Therefore, if an appraiser will not comply with their demands, the likely result is a dramatic loss of business and reputation.
According to the Real Estate Settlement Procedures Act (RESPA) a company is not permitted to require their customers to use a specific company for services. This is to avoid the type of behaviors that Wells Fargo is being accused of. RESPA does make an exception for lenders, with the intent of allowing lenders to choose an appraisal service that they trust in order to protect themselves. However, when a lender does require the use of a specific appraisal company, they must tell their customers how much the appraiser charged and what their relationship is with the appraiser. The lawsuit stipulates that Wells Fargo reported their relationship with Rels Valuation only sporadically and they never informed their customers how much the appraisals cost. Customers of Wells Fargo never knew that they were paying up to double what Wells Fargo had paid for the appraisals.
It has been estimated that Wells Fargo has wronged tens, perhaps even hundreds, of thousands of customers with this scam. It is alleged that the scam was carried out across state lines through the mail and wire facilities. If this is the case, Wells Fargo will also be in violation of the Racketeer Influenced and Corrupt Organizations Act (RICO).
