Exhibit D 

Case: 1:20-cv-02402 Document #: 90-5 Filed: 05/12/22 Page 1 of 10 PageID #:1387
0 

CONFIDENTIAL 

■ Attorney Fee Calculation 

Error - CIT 6214 

Executive Summary 

July 2018 

Together we'll go far 

~ · ·· 

~ .?2_ - -- - -

WF _HERNANDEZ_00106021 

Case: 1:20-cv-02402 Document #: 90-5 Filed: 05/12/22 Page 2 of 10 PageID #:1388
CONFIDENTIAL 

Overview 

Modification guidelines are set by the investors, in this case the GSE's and Treasury, Wells Fargo is 

responsible for strict adherence to underwrite to the guidelines, any deviation to the guidelines could 

result in repurchase risk. 

One of the main factors in a modification in calculating the modification options and determining a 

customer's ability to successfully make monthly payments in the future is housing to income (HT!) 

ratio, the allowable HT! to qualify for an investor program is clearly stated in the guidelines, it is a 

exact number, there is no range or ability to deviate. No application modifications require a payment 

decrease to qualify. (details in appendix) 

Attorney fees that have been incurred due to being in foreclosure, are one of the components that 

goes into the modification calculation which include certain state maximums allowed, defined by the 

investor. Investors guidelines typically capitalized the attorney fees. 

This issue impacted customers whose loans were owned by the GSEs and evaluated for any 

modification and customers whose loans were owned by Wells Fargo and private investors and were 

evaluated for a HAMP modification. While Wells Fargo and private investors normally waive attorney's 

fees during a modification process, the US Treasury HAMP program required that attorney's fees be 

capitalized 

From Apri l 2010 to October 2015 the Home Preservat ion Application (HPA) tool, among other 

underwriting processes, was intended to use a state fee matrix to ensure attorney's fees for 

foreclosure costs did not exceed a certain threshold for each state. However, HPA was Incorrectly 

programmed to add the maximum allowable attorney's fees to the actual attorney's fees already 

incurred. This resulted in the capitalized amount being inflated by the maximum amount of attorney's 

fees that were allowed in that state. 

The calculation resulted in the inflated capitalized amount being added to the principal balance. When 

the revised principal balance, including the inflated capitalized amount, is amortized over the revised 

term of the loan, the payment is higher than it should have been. This caused the HT! ratio to be 

overstated, which could have resulted in the customer's modification application being denied, when it 

should have been approved (example p. 3). 

WF _HERNANDEZ_00106022 

Case: 1:20-cv-02402 Document #: 90-5 Filed: 05/12/22 Page 3 of 10 PageID #:1389
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CONFIDENTIAL 

Executive Summary Continued 

For the no application modifications requiring a payment change to be eligible, due to the calculation 

error the payment increased, causing a decline. When adjusting for the actual attorney fee's the 

payment decreased making the customer eligible. (example p.4) 

No customers were charged fees, nor paid fees, inappropriately. This calculation error only impacted 

the modification decision. When a customer was approved for a modification, the settlement process 

(similar to a loan origination closing) recalculated the attorney's fees correctly. . 

Reviewed 194,194 customers who were denied during this time period and found 646 customers who 

denied or deemed ineligible incorrectly due to the calculation error. (prevalidation) (details on p.5) 

Remediation recommendation is built off a previous remediation in 2016 (FHA-escrow), in which the 

framework was based on Independent Foreclose Review payout structure. In addition we will offer a 

mediation option for customers. (details on p.6) 

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; Redacted - BEP - OCC; BEP - FRB; BEP CFPB ; 

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WF _HERNANDEZ_00106023 

Case: 1:20-cv-02402 Document #: 90-5 Filed: 05/12/22 Page 4 of 10 PageID #:1390
3 

Actual Customer Example which demonstrates how the 

overstatement of attorney fee's impact outcome of decision 

Example: 

State - NY 

State Fee Matrix Amount = $6,021 

Hamp ner 2 Program- Post Mod HT! 42% or lower 

Recoverable Fees in system of record at time of decision = $3,648.33 

Amounts capitalized in Decision 

Delinquent Interest 

O~iquent Escrow 

Amount 

$33,561.99 

$18.967.28 

Attorney Fee's (recoverable expenses) 

• $3,648.33 

(actual)+ S6.021 

_______ ....,(state max) 

S9.669.33 

Total amount to be capitalized $62,198.60 

tnfom,ation on modiflcatlon 

Pre-Mod Unpaid Principal 81l1nce 

Capitalized Amount: 

Unpiid Principal Balance (add capit:alh:ed 

amount ta UPB) 

Rate: 

Term: 

Principal & lntere5t 

Escrow; 

Pricipal, Interest, Taxes, lnsurancl!: 

Housing to Income Ratio 

Deciiion wtth Incorrect 

Attorney fees 

r.'\ $289,484.19 

i,.,!:) $62,198.60 

$351,682.79 

4.50% 

480 

$1,S81.04 

$959.78 

':"\ $2,540.82 

D@cision usinc 

1ctu1I lttorney 

ft!CS 

~ 289.484.19 

v ss6,lt7.60 

$345,661.79 

4.SO" 

480 

$1,SS3.97 

$959.78 

~ $2,513.75 

Difference 

($6,021) 

($27.07) 

-0.45% 

1. 

2 . 

3. 

Decision with the calculation 

error had $9,669.33 in 

recoverable (attorney fees) 

included in the capitalized 

amount which was 

overstated by $6,021 due to 

adding state max allowable. 

This resulted in a Housing to 

Income (Hll) ratio of 

42.08%, the max allowable 

for HAMP program was 42%, 

hence denied. 

When re-calculate using the 

correct attorney fees of 

$3,648.33 (9669.33-$6,021 

state max) the 011 is now 

41.63%, within the HAMP 

guidelines, making this an 

approved loan. 

The payment difference 

between an the denial and 

approval is $27 .07 with a 

.45% change in Hll 

CONFIDENTIAL WF _HERNANDEZ_00106024 

Case: 1:20-cv-02402 Document #: 90-5 Filed: 05/12/22 Page 5 of 10 PageID #:1391
Actual Customer Example of no application modification 

4 

Requires payment to decrease from current to qualify 

Example: 

State - ID 

State Fee Matrix Amount = $2,847 

FNMA No Application Program- Payment Reduction 

Recoverable Fees in system of record at time of decision = $0 

Amounts Capitaliud in Dett:Sion Capitized Amount capitfzed Amount using 

used in Decision actual Attornev f.ees 

Delinquent Interest $4,286.01 $4,286.01 

Deliquent Escrow $1,239.41 $1,239.41 

Attorney Fees {recoverable expenses) $2,847.00 ·(iJ $0.00 

Total amount to be capitalized $8.372.42 $5,525.42 

Information on modification Pre Modrfication Decision with incorrect 

Attorney Fees 

Pre•Mod Unpaid Principal Balance $172,163.EB 

© S172,163.68 

Capitalized Amount: $8,372.42 

Unpaid Principal Balance (add capitalized amount $180,536.10 to UP8J 

Rate: 2.75% 4.625% 

Term: 279 © 480 

Principal & Interest $819.63 

Escrow: S160.68 $160.68 

Pricipal, Interest, Tax:es, Insurance $980.31 $986.87 

CONFIDENTIAL 

1. Decision with the calculation 

error had $2847 In recoverable 

(attorney fees) Included In the 

capitalized amount which was 

overstated by $2,847 due to 

adding state max allowable. 

This resulted In a payment 

Increase, of $6.56 which caused 

the denial. 

2. When re-calculate using the 

correct attorney fees of $0 (0-

$2,84 7 state max) the payment 

decreases by $6.47, meets the 

requirement of no appllcatlon 

modification. 

Decision using actual 

attorney fees Variance 

® 

$172,163.68 

$5,525.42· ($2,847) 

$177,689.10 

4.625% 

,-..._ 480 

(56.47) 

'--' $160.68 

$973.84 ($6.47) 

4 

WF _HERNANDEZ_00106025 

Case: 1:20-cv-02402 Document #: 90-5 Filed: 05/12/22 Page 6 of 10 PageID #:1392
5 

CONFIDENTIAL 

Details on the 646 Customers 

Of the 646 customers there are two types of modifications: 

255 Customer completed an application (engaged With WF) and were denied due to t he calculation error 

391 customers who were eligible to received a GSE no application solicitation but didn't due to the calculation error. 

This a GSE program where If a customer IS delinquent and meets certain criteria a modification offer Is sent to them 

unsolicited. In these cases the customer was deemed not eligible and did not receive t he offer. 

There are 5 categories in which a customer falls into: completed foreclosure, completed liquidation, 

paid in full, service transferred and still current active mortgage with WF 

Complet.-d No 

De dine Due to C,ikulnk>n ErrM ~lat.ion Af.ipltGl'tion Tot,I 

Rl-wiews Modi:fiutlan 

R.vi"•w• 

Ccrnple tl!d F«•dolu1• 113 26.S .,. Compf•Wd Uquida1t0n• •• " 70 

P1id !ft ful •• " •• S.n'Ke Tr.andened 27 " st 

Actlw At(.ounts"'• .. " ., Total! 0.nitd o, lnt&.llff ... "1 ... "' 1-.dudcs S.horl ~ '.cs and Deeds in L;cuorfOfedosure Oi!lta subject to final LOB end WFAS Yi!llidi!ltion 

"'• f<utt mure ~ol(h in P ~ 

% of loans by investor 

81 % GSE (Fannie/Freddie) 

17% private loans (typically WF services t hese like owned asset, however they were eligible for Treasury HAMP 

program during this time 

2% owned asset, customers who were eligible for the Treasury Hamp Program 

Of the 646 loans the average changes when correcting the error are: 

$21. 75 payment change 

1.30% HTI change 

$4,325 overstatement of attorney fee 

WF _HERNANDEZ_00106026 

Case: 1:20-cv-02402 Document #: 90-5 Filed: 05/12/22 Page 7 of 10 PageID #:1393
6 

CONFIDENTIAL 

Remediation Recommendation 

The remediation recommendation is based off of a similar remediation in 2016, FHA-Escrow, in which : 

The Independent Foreclosure Review used in the National Mortgage Settlement provided a relative 

starting point which was approved by regulators and industry standard. 

Recognizing the housing market had changed significant since 2012, an accelerator was added to the IFR 

payouts 

Remediation Amounts: 

$15,000 for customers that ended in foreclose sale, completed a short sale or deed in lieu of foreclosure 

or service transferred and ended in same status. ($6,000 in !FR) 

$5,000 for customers that paid in full. {$2,000 in !FR) 

Customers who are still active will be offered modification with terms they should have received at time of 

incorrect decision. If the customer accepts the modification, we will adjust their account to lower their 

principal balance to the same point it would have been if the modification had been approved. 

Customers credit reporting and tax implications will be reviewed and corrected. 

Customers who are no longer active will be offered a mediation option. 

$10M accrual booked in June, 2018 

6 

WF _HERNANDEZ_00106027 

Case: 1:20-cv-02402 Document #: 90-5 Filed: 05/12/22 Page 8 of 10 PageID #:1394
Appendix 

7 

CONFIDENTIAL WF _HERNANDEZ_00106028 

Case: 1:20-cv-02402 Document #: 90-5 Filed: 05/12/22 Page 9 of 10 PageID #:1395
Program Requirements 

Investor Program Name Housing to Income Ratio or Payment Reduction Requirements 

Fannie/ Freddie No application modification Requires a payment reduction 

Freddie FHLMCMod HTI has to be > 10% and < 55% 

FNMA FNMA New Mod HTI has to be> 10% and< 55% 

FNMA/Freddie/Bank and Private HampTiert HTI of 31% 

FNMA/Freddie/Bank and Private Hamp Tier 2 HTI between 25%-42% 

Bank and Private Non Hamp Bank and Private HTI based on income level one of 31% / 34% / 38% 

Bank and Private Cap to Reinstate HTI o f 3B% or less 

8 

CONFIDENTIAL WF _HERNANDEZ_00106029 

Case: 1:20-cv-02402 Document #: 90-5 Filed: 05/12/22 Page 10 of 10 PageID #:1396