Wells Fargo Workers Went on Appraisal-Fraud Bender

Wells Fargo Workers Went on Appraisal-Fraud Bender. 

Loan officers at Wells Fargo altered values in the bank’s database, so loans would qualify for so-called appraisal waivers…

It feels like Ground Hog Day all over again. Who can forget the Wells Fargo banker who, stressed from opening fraudulent accounts in the name of hapless depositors, had begun guzzling hand sanitizer? That was in 2016. New revelations from the nation’s second-largest mortgage lender will make the U.S. taxpayer want to take a good long pull on the nearest bottle of hand wash.

Dozens of loan officers at Wells Fargo altered values in the bank’s database, so loans would qualify for so-called appraisal waivers, according to recent reporting from Business Insider. In some cases, Wells Fargo employees slashed $1 million or more off home values, reported the publication. The mortgages, based on the chicanery, were then sold to Fannie Mae and Freddie Mac, both of which are in federal conservatorship.

Business Insider’s reporting indicates loan officers at the bank changed values, since waivers were available only to properties valued below $1 million. Reducing the value of a home in their system below that threshold triggered a waiver. In some high-cost areas where Wells Fargo does considerable business, like the San Francisco Bay Area, databased values – some questionable to begin with – may have been reduced from, say, $2 million to below $1 million.

The American Enterprise Institute warned of potential manipulation of appraisal waivers months earlier. Researchers Edward Pinto and Tobias Peter believed loan officers would rely on Zillow and Redfin and then play Freddie and Fannie against one another. This warning turned out to be prescient.

Some Wells Fargo loan officers – an unknown number of whom have since been terminated – protested the allegations, telling reporters that some of the occurrences dated back to the early days of the pandemic and that guidance from senior managers at the time was ambiguous. Less ambiguous were the commissions they received after altering the data. Fannie has since stepped up efforts to force loan buybacks on lenders who peddled these shaky loans and others to the mortgage giant.

Fraud and abuse appear to be part of the dog-eat-dog culture at Wells Fargo.

Astute observers recall the case of Angie Payden, the Wells Fargo banker in Hudson, Wisconsin, who recounted in 2016 how she’d been pressured by managers to defraud customers in various ways, among them informing them there’d been fraud on their accounts in order to keep closing and opening accounts to pocket bonuses for herself and her bosses. But the stress became too great.

“One morning, before meeting with a customer, in which I knew I was going to have to sell unneeded services, I had a severe panic attack,” Payden told the New York Times. “I went to the bathroom and took a drink of some hand sanitizer. From that point, I began drinking the hand sanitizer all over the bank.” The viscous substance, which she drank between 2011 and 2014, gave her the strength to continue ripping off hapless depositors.

During the fake-accounts era at Wells, managers actively trained branch personnel in how to defraud account holders at scale, pressuring employees like Payden to open redundant accounts and cross-sell products at all costs. The bank later said it had fired 5,300 employees it found responsible. The average was 377 fake accounts per fired employee.

The use of appraisal waivers – equally ripe for abuse — exploded during the pandemic, peaking in 2020 and early 2021, reported the Urban Institute.

The benefit to the lender of an appraisal waiver is that it bypasses the need for an appraisal of the collateral used to secure the loan. Instead, lenders use data generated by an automated valuation model – similar to a Zillow “Zestimate” – to determine the home’s value.

Five months after the Federal Housing Finance Agency required Freddie and Fannie to show more flexibility in purchasing mortgages based on the waivers, more than a third of total mortgage originations relied on one. In January 2021, 47.4% of all Freddie Mac loans and 44.5% of all Fannie Mae loans received a waiver.

As predicted by Pinto and Peter of the American Enterprise Institute, loan officers appear to have altered values using websites like Redfin or Zillow when they found it advantageous.

The duo identified another potential downside of waivers for purchase loans: When human appraisals conclude a value that is below contract price, they provide a consumer benefit by alerting the would-be buyer that he is overpaying. With a waiver, this benefit is erased.

Freddie and Fannie began accepting another variant – the so-called “hybrid appraisal” – as of March 19, 2022, reported the think tank. These are valuations in which the appraiser does not view the property collateralized in the loan, instead relying on photos and measurements that are provided by third parties. Pinto and Tobias have requested clarification as to how the hybrid valuations will be reported.

To appraisers, the situation on the ground has caused alarm.

“In two counties I cover, there are now 1,590 homes under contract within the prior two weeks,” said Fort Worth-based residential appraiser George Heredia in late September. “These are newly contracted homes. They need appraisals. Where are the appraisals? We are doing two to four per week.

“[We looked] at Tarrant and Denton counties, and there are many homes (last 30 days) under contract, yet few appraisal orders. A wider problem is that Fannie’s automated valuation model is based on prior months’ data. We are seeing some areas showing stable pricing and some price declines and longer days on market.”

Heredia believes that without new appraisals to scrub Fannie and Freddie’s data, the mortgage giants’ valuation model will become unreliable within the next three to six months.

“Banks got used to appraisal waivers,” said North Carolina appraiser Eric Kennedy. “After all, home prices were going up by double-digits every quarter in some regions. As values are now falling, common sense tells me that bankers wouldn’t want to rely on these waivers as they once did. Of course, that assumes the absence of fraud and that banks are acting responsibly.”

Kennedy wondered aloud where the original values were coming from in these cases of alleged fraud.

“The whole [appraisal waiver] thing is a mess, since it allows commissioned salespeople to game the value of collateral used to secure taxpayer-backed loans in mortgage transactions [from which] they personally benefit. That’s a recipe for disaster.”

Two loan officers with knowledge of the purported appraisal fraud told Business Insider that two mortgage retail sales senior managers in the San Francisco Bay area, Jim Lew and Jarod Johnson, had fired approximately five loan officers in their area. Another estimate suggests that 12 to 15 people were fired across that region.

The departed Wells Fargo employees, schooled in mortgage fraud and industrial-scale larceny, will showcase their talents elsewhere. No doubt, there are still more than a few sociopaths still at Wells, swilling hand sanitizer. As every midnight drinker knows, defrauding the public can be stressful.

Wells Fargo received a $25 billion federal bailout in 2008. That sum was eclipsed by the nearly $200 billion bailout Freddie and Fannie received the same year.

Jeremy Bagott
Image credit flickr - Daniel Arauz
Jeremy Bagott

Jeremy Bagott

Jeremy Bagott is a real estate appraiser and former newspaperman. His most recent book, “The Ichthyologist’s Guide to the Subprime Meltdown,” is a concise almanac that distills the cataclysmic financial crisis of 2007-2008 to its essence. This pithy guide to the upheaval includes essays, chronologies, roundups and key lists, weaving together the stories of the politics-infused Freddie and Fannie; the doomed Wall Street investment banks Lehman and Bear Stearns; the dereliction of duty by the Big Three credit-rating services; the mayhem caused by the shadowy nonbank lenders; and the massive government bailouts. It provides a rapid-fire succession of “ah-hah” moments as it lays out the meltdown, convulsion by convulsion.

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14 Responses

  1. Avatar JDGarth says:

    Thank you for this informative Article. Sadly, FHFA, Fannie-Freddie, etc. even the public we are to Protect “””do-not care”””. WHO didn’t know the EASEY Waivers would be easily abused.

    Even Hybrids, inspectors are blind to C5-C6 & beyond property conditions. Functional? Leaks? Rot? Decay? Interior Mold? Peeling paint (lead-based). WHO “trained the Inspectors” = cough an AMC? The careless Lender? Is training a 5 minute Zoom Meeting?

    Care (ansi). Don’t care (random 3rd party). WHY create more confusion through Form Use? IS the Master Plan to actually have an Appraiser Shortage, another lie.

    Hybrid: An example I received as a Potential Order: Subject had all of the above but the lender wanted/needed/demanded an “as is” and where they didn’t order a “HC type report”.

    WHO doesn’t know WELLS is as crooked as any scum Street Thief stealing your granny’s pocketbook, leaving her broken.

    In reality it is evident… Crooks no longer need to HIDE, we are drowning in Corruption at every level.

    Meanwhile, only the Appraiser is HELD accountable and for no less than 5 years.

  2. Avatar PJTMC says:

    Seems to me, lowering property values in their own best interest reeks of racism based on the current agenda in Washington? It appears, from limited information, the appraisers did their job so will the politicians go after the loan officer industry with the same vigor they are pursuing the appraisers? This, I believe is a legitimate question.

    • Avatar Bryan says:

      I emailed HUD and Fannie. Response “The DOJ will determine if there was wrong doing”!!! Is there any question? Mortgage fraud is still wrong I think – or is it? REMOVE WELLS MORTGAGE LICENSE! Period

  3. Avatar Jim Fike says:

    The HUD Home Ownership Center is knee deep in this process as they let Appraisal Fraud happen right in front of their eyes and they looked the other way. The Lenders are unfettered to do whatever they want without oversight, accountability or consequences. How bad is it within HOC? If you’ve dealt with them you’d swear they could barely read or write and certainly had no competency at all within the Real Estate industry. It is a hot out of control mess no question and the National Servicing Center stands by and knows full well that HOC is an incompetent bunch of featherbedders feeding at the Federal Trough. Even if they cared and wanted to do something about the Real Estate Fraud their hands are tied and they’d be railroaded if they tried to make a difference.

    • Baggins Baggins says:

      Oh yeah! Great post Jim. Get your mind around it; the fact government is involved just fuels the fire and facilitates more of this behavior. Regulatory capture with so many of these agencies happened before many of us were even born. As the revolving door keeps swinging.

      Midnight drinkers… Hey, that’s me! How many times will people go back? I remember Wells ripped me off when I was quite young. From all the stories I’ve read, it was actually good luck to get away from them at an early age.

      Related. Jim, posted this must watch video in a previous post, well worth the repost.

  4. Avatar PJTMC says:

    Personally I don’t do work for them but if the violated appraisers have made it clear the appraisal is their intellectual property and they’ve altered it any way the respective appraisers should have a law suite for copyright infringement at the least that, I believe, is a federal offense.

    • Baggins Baggins says:

      Didn’t they nullify, in part, that potential user argument years ago with the ‘clients and intended users’ guidance? I recall taking a CE class which talked about FNMA making a clear statement, that appraisers can not absolve themselves of all liability by claiming nobody is an intended user? I even copied the language into the generic intro disclaimer.


      The intended user of this appraisal report is the lender/client. The intended use is to evaluate the property that is the subject of this appraisal for a mortgage finance transaction, subject to the stated SOW, purpose of the appraisal, reporting requirements of this appraisal report form, & definition of MV. No additional intended users are identified by the appraiser.

      We’re still on the same page here though. The authors argument is that because no actual human sourced full service full detail appraisal from a licensed appraiser whom was involved, this created the space for the hucksters fraud to have occurred in the first place.

      (Thank you to Mr Ford for the years ago alert that this was a real possibility and carried a highly probable possibility of occurring if lenders moved to ‘alternative valuation products’. Turns out Mr Ford’s prognostications on the dangers of reduced service and outsourced service appraisals was dead on. Bulls eye Mike! Among the best in the businesses, Mike Ford for TAF & AI leadership, if only the appraisal industry was a real democracy and we had an actual say, a voice that could be heard, and a vote that mattered. Dare to dream.)

  5. Scott Taylor on Facebook Scott Taylor on Facebook says:

    Very slippery slope right now as properties could be appraised much higher than they should if comps are pulled from 6-12 months ago. Of course some of the impacted parties will manipulate the data for their best interest. We have good and bad bankers and mortgage brokers, just as we have have good and bad appraisers. The bad always give the lending industry such a bad name.

    • Baggins Baggins says:

      Mental note; Do your best to select comps from a climate of at least somewhat similar lending rates. The 15 years ago argument is coming back to me. Is an interest rate adjustment for the mortgage lending rate at the time of contract warranted? That’s slippery, because especially in higher end markets, although it can be true in any market segment, contrary to entry level laymen understanding, the sales price and subsequent lending rate does not necessarily have as much influence on purchaser decisions. aka; lower ltv’s if not outright cash. Unlike the majority of participators, well to do and fiscally responsible transplants often capitalize on a lower cost basis, otherwise known as trading up without additional expense, the rate is in many ways irregardless for those types whom trade up in scenarios where the lending amount is far less than the purchase price.

      That does after all substantiate the slogan; price is not the same thing as value. However, the generalized assumption is not universally true. I’m continuing to see rising price and value, albeit at a much slower pace, in luxury and higher end real property segments. Wherever they are moving here from, they’re playing for keeps and are not going back. The same can not be said for the lesser side of the price market segment. There we are observing jumps in county treasurer default notices, sell outs while there is still a positive margin left, some alarmingly steep price slashes, etc, etc. Spin the wheel, hope for the wild card or million, no bankrupt, no bankrupt, no lose a turn. Specifically Mr Taylor, this comment attempts to touch on allowable comparable sales ranges. It’s a moving target depending on local market conditions and the specific real property segment being reviewed. This is just the flux period, soon, the scales will most likely tip to one side or the other, but not quite yet. Still checking stable. For how long, consult the crystal ball.

  6. Richard Hahn on Facebook Richard Hahn on Facebook says:

    I guarantee it was not only wells. Every loan officer did what they need to make loans

    • Baggins Baggins says:

      In a rare effort, I actually suffered the appraisers forum for a day or so. This was a quite interesting link someone else posted. Your postulation has a very very high probability of being accurate. How long before the enforcement and regulatory appetite for pursuing mortgage lending violations will be, that depends on the stability of mortgage backed securities. Do not make the mistake of thinking because one appraiser completed risky products, appraisers whom did not accept those tasks are in any way better insulated. These sort of considerations play out in the aggregate. ‘What’s in your wallet?’ or in appraiser lingo, ‘who do you provide appraisal services for?’


  7. Kelly Rodriguez on Facebook Kelly Rodriguez on Facebook says:

    Give ‘em an inch…..

  8. The appraisal is 100% intellectual property and if they alter or change it in any way I would sue!!! It is soo crazy what they get away with in plain site!

  9. Avatar B B Estes says:

    Well well well! I hope no one changed developed values on my reports! I won’t hesitate to direct my state appraisal office’s bus right over them if they make a mockery of my professional and ethical efforts. WF – you are on my bad list.


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Wells Fargo Workers Went on Appraisal-Fraud Bender

by Jeremy Bagott time to read: 5 min