Consumer complaint received 2017-05-17
Company: WELLS FARGO & COMPANY
State: OR
Product: Mortgage
Sub-product: Conventional home mortgage
Issue: Trouble during payment process

Complaint:
Wells Fargo owns and services my Pay Option Arm 1st Mortgage. Wells Fargo is changing my Index for a second time, and again, NOT choosing an Index similar to my original, CODI. Nor are they choosing COSI, which was the alternative Index choice at the time of origination. I made several attempts to get an explanation as to why the 1 Month LIBOR Index was  chosen over COSI or one which best replicates my original Index. After several weeks of effort, XXXX XXXX of Wells Fargo, got back to me with the explanation, " The 1 Month LIBOR Index is a well used Index and that 's why chose it. '' The CODI Index represents the Cost of Deposits, in the form of Certificates of Deposits. The COSI Index is reflective of the rate Wells Fargo is currently paying to individuals for their Certificates of Deposits. So they both represent what a Bank is willing to pay a CONSUMER for depositing money. LIBOR is a rate at which a fellow XXXX Bank can borrow money from other BANKS. Rate calculations are complex as they incorporate variables such as time, maturity, and currency rates. It 's clear that LIBOR and CODI/COSI are very different Index types. I chose my mortgage product based on the INDEX. I had two good choices between CODI and COSI. Both have historically low rates and are less volatile than many other Indices, like the 1 Month LIBOR. As an ARM is put together for performance and pricing, the Margin is a key component. Lower volatile Indices typically receive a higher margin. Conversely, a higher volatile Index will receive a lower Margin. Wells Fargo is now putting the historically volatile 1 Month LIBOR Index together with my original Margin that was " designed '' to go with CODI, a less volatile Index. Not only does LIBOR have a higher current value, it is guaranteed to have an immediate and significant increases month over month based on the 12 month averaging of the Index. My rate will increase EVERY MONTH for a minimum of 24 months. It 's simple math and a fact! It 's quite clear, truly undisputable, that choosing the 1 Month LIBOR Index, Wells Fargo immediately improve the cash flow and performance of my mortgage, and all others held by them, from the first month of the Index change throughout the life of the loans. It is also quite clear that Wells Fargo has no intention of attempting to keep the mortgage characteristics as similar to original as possible. Are they going to change a FIXED RATE next?? They are using this opportunity to take advantage of the consumer. Wells Fargo currently offers mortgage products using the COSI Index. So, it 's clearly an Index which they believe will continue to be available for future adjustments and servicing purposes. Again, why was COSI not chosen as the replacement Index? Wells Fargo, DO NOT SKIRT THIS QUESTION. YOU NEED TO JUSTIFY YOUR DECISION AS TO WHY COSI OR ANOTHER SIMILAR INDEX WAS NOT CHOSEN TO BEST REPLICATE MY ORIGINAL INDEX, CODI. You know COSI was an Index choice at the time of origination. You know LIBOR does NOT represent rates paid on Certificates of Deposits. There are several Indices which represent rates of return on CD 's. XXXX and XXXX are XXXX, and reported by the FDIC. So to summarize, why did Wells Fargo choose the 1 Month LIBOR Index over COSI or another Index which best represents my original one, CODI??? Answer : They make more money!! Wells Fargo has changed the basic mortgage loan structure and profit profile to their advantage. This RESTRUCTURING will cost me, and all others with this mortgage product, a significant amount of money, immediately and over the life of the loan. I believe this is UNETHICAL and shows intent to take advantage of this opportunity to improve their cash flow and rate of return on these mortgage products. I believe the " INDEX TYPE '' should be protected as a " FIXED RATE '' is protected! As a consumer, I BOUGHT THE INDEX. I chose this mortgage product because of the INDEX. An Index which represents RATES PAID TO CONSUMERS FOR MONIES DEPOSITED INTO FINANCIAL INSTITUTIONS. An Index which represents the " FOR PROFIT '' business model of the Banks, which does NOT include paying out a high rate of return for consumer deposits!!! It 's simple, logical, and the INDEX, at least the INDEX TYPE, which I bought. And there COSI sits, readily available and an Index which is widely used by Wells Fargo for current mortgage loan origination. So, not only do I want to understand the decision process, I believe it 's important to know what Regulatory Authority approved this Index choice and why keeping the " INDEX TYPE '' was not a priority??? Wells Fargo, you have two questions to answer. 1. Explain the rational for not choosing COSI or another Index which best represents my original one, CODI. 2. Who authorized your choice to use the 1 Month LIBOR Index, and was keeping the integrity of the original loan product discussed??

Company public response: Company has responded to the consumer and the CFPB and chooses not to provide a public response
Company response to consumer: Closed with explanation