Consumer complaint received 2022-05-23
Company: WELLS FARGO & COMPANY
State: VA
Product: Mortgage
Sub-product: Conventional home mortgage
Issue: Trouble during payment process

Complaint:
I have an adjustable rate mortgage ( ARM ) with Wells Fargo Bank that adjusts yearly depending on the interest rate. I contacted Wells Fargo Bank Customer Care and XXXX XXXX in XX/XX/2022, after receiving a Payment Change Notice indicating that the interest rate on my arm was changing. I knew interest rates on mortgages was raising and totally understood that I would be paying more interest on the remaining amount on my loan. The Payment Change Notice also showed the amount of my monthly payment going to Principal was being reduced from {$2200.00} to {$2000.00}. This results in a decrease of my monthly payment in the amount of {$210.00} being applied to Principal. In my XXXX call to Wells Fargo, I asked them to explain why a rise in my interest rate also meant a decrease in the amount of my payment being applied to Principal. Their response was to send me the formula on how they calculate my new payment which doesn't explain why the decrease in applying my payment to Principal. I have a 30 year mortgage and if they keep reducing the amount I pay to Principal, I will not have my mortgage paid off in 30 years. I believe Wells Fargo has developed a formula they are using to calculate new payments that decrease amounts paid to Principal so the loan will not be paid off in 30 years and will necessitate taking out a new mortgage with them. 

Since it is an interest rate increase, it would logically follow that the increase in my monthly payment should be applied to interest only - not to subtracting the amount being applied to Principal. So far, the only information I have received from Wells Fargo is a letter showing the formula they use to calculate the new payment. I need to know WHY Wells Fargo allows for an interest rate increase also results in a reduction in the Principal. My total monthly payment has gone up so its not like Wells Fargo is trying to keep my payment within a certain amount. I am willing to pay whatever the rise in interest rate dictates on the balance of my mortgage owed. It doesn't make rational sense, however, for Wells Fargo to keep decreasing the amount being applied to Principal. 

Please help me understand how the bank can keep decreasing amounts paid to Principal even though I am making much, much higher monthly payments based on interest rate increases that should be applied to Interest only. 

Like with my response from them, please don't let their response to you be only a " business '' formula they use to appear to be a legitimate way they calculate new payments. Applying an interest rate increase to a mortgage should be straight forward. An increase in the amount of the monthly payment based on an interest rate increase should be applied to the amount of interest I am paying not on subtracting from Principal XXXX pay. 

I feel that the formula Wells Fargo is using for my loan is also being applied to other ARM loans for other people. Given Wells Fargo history of fraudulent activity which they have paid fines for, I am now under the impression this may be another Scam used by Wells Fargo to ensure ARM mortgages are not paid off within their 30 year timeframe so another loan will have to be taken out with them. 

Thanks for looking into this for me.

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