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June 24, 2003
ACORN Housing Releases Couple from Wells Fargo Trap

“We had a great loan with good service on our loan with TCF,” says Lynn Moreau of Minneapolis. “What happened next was just unreal.”

In September of 2001, Richard and Lynn Morneau wanted to pay off some credit cards and went down to their local lender, which had been purchased by Wells Fargo. The $25,598 second mortgage they got with Wells Fargo had a 14.1% interest rate, a 16.9% APR, and a monthly payment of $399. The loan included $3,021 in fees and closing costs and $4,225 in credit insurance.

“Then in March,” Lynn recalls, “our car was on its last legs and we found this great used Chevy Blazer, and we asked Wells Fargo for a $3,000 loan to pay for it. It was in perfect condition, but they wouldn’t qualify us for it. Instead they said we could qualify for this newer Blazer they had just repossessed from someone, which cost $16,000.”

“They started bugging us all the time to get my husband to trade in his pick up for this other repo vehicle, a Chevy Silverado. He said no many times, but they wouldn’t stop. ‘Come on down, check it out,’ they’d say. Finally he agreed.”

“We thought we were getting a car loan on this Silverado but when we got down to Wells Fargo, the woman said, ‘to make these payments easier, we’ve paid off your mortgage with TCF.’ We looked at her with our mouths open, like how could you do this without discussing it with us. I was so upset I couldn’t even think about it. I was just sick.”

The Morneau’s new mortgage with Wells was for $162,651. It paid off their first mortgage (which was at 7.875%) and second mortgages and paid $15,395 for the Silverado. In addition, the loan also included $8,577 in closing costs.

This loan was secured by the Moreau’s house, as well as the 1998 Chevy Blazer and 2000 Chevy Silverado. The Morneaus were shocked as they had previously told Wells Fargo loan officers that they didn’t want to pay off TCF because they had such a good interest rate (7%) on that loan. They didn’t realize they that had the right to cancel. “She made it seem like it was all already done and over,” said Lynn.

This new Wells Fargo loan had a very high interest rate, 14.69%. Their payments jumped to about $2000, and the Morneaus were not told that the loan did not include taxes and insurance as their TCF mortgage had.

While the Morneaus were struggling to make the hefty payments to Wells Fargo, as well as their tax and insurance payments, they received a pamphlet in the mail from ACORN Housing about the warning signs of predatory lending. “All the signs were there,” Lynn remembers, “ but I was so embarrassed, I couldn’t go in. I didn’t have the courage. I kept emailing ACORN Housing instead.” Finally Lynn and Richard came in and met with the manager of the St. Paul office, Jordan Ash.

“Jordan’s just super,” Lynn says. “Just great, told us what had happened, went through our credit report and taught us how to clean up misunderstandings. Now our credit record is so much better.”

“Last night, we got a refinance with Ameriquest through ACORN Housing,” Said Lynn. “It’s awesome, such a relief.” The Morneau’s new loan has a 7% interest rate and they pay $700 less each month.

Wells Fargo continues to call Richard and Lynn to solicit new loans. “They’re so tacky, so unprofessional,” says Lynn. “When I went to ACORN Housing, there were so many people with excellent credit who had been screwed by Wells Fargo. Jordan explained the whole process and helped us to get this new loan. Now we know what to look for.”

The details change but predatory lending essentially remains the same--homeowners sign a contract with a finance company for a refinanced mortgage or home equity loan, usually to consolidate bills or pay for remodeling. They soon discover that the loan is not what they were told they would be getting—often the interest rate is much higher than promised and the loan includes thousands of dollars in unexpected fees or useless insurance products. The result is a monthly payment that's higher than before - sometimes twice as high. If you feel you have a predatory loan, contact your local ACORN Housing office for assistance.