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Wells Fargo loses 1st round in its California fee dispute

SAN FRANCISCO — Wells Fargo & Co., California's largest originator of home mortgages, lost a courtroom bid to stop state officials from trying to revoke its license to make such loans.

U.S. District Judge Garland Burrell Jr. on Thursday denied the bank's request for a temporary restraining order, according to a copy of the judge's decision. The California Department of Corporations last month threatened to pull the license after Wells Fargo refused to refund excess charges.

Mortgages accounted for almost half of Wells Fargo's total loans at the end of last year. The San Francisco-based bank claims that if the state prevails, it will have to either close its home-mortgage operations in California or conduct business without a state license.

Wells Fargo hasn't "demonstrated a probability of success" on its claim that the department "should be prevented from revoking" the license, Burrell said.

California regulators last month said they found loans in 2000 and 2001 where Wells Fargo improperly collected an average of $150 in interest per loan before deeds were filed with county recorders' offices. In other cases, Wells Fargo understated by an average of $613 the closing fees it charged on the mortgages.

The California Department of Corporations has found 38 instances since 1998 in which a home-mortgage lender charged such improper interest, said Andre Pineda, a deputy commissioner in the department.

"This is the first time a lender has said no" to the department's request for a refund to consumers, Pineda said.

Wells Fargo, California's largest bank, has sued the state, saying federal rules should apply to its mortgage practices. The Office of the Comptroller of the Currency supports the bank's position, saying Wells Fargo doesn't need a California license to issue home loans in the state.

Wells Fargo wanted the temporary restraining order in place until Burrell had time to rule on a separate request for a preliminary injunction, bank spokeswoman Janis Smith said. The injunction would stop state officials from revoking the license and continuing with an examination of the bank's home mortgages, she said.

"We will continue in the federal court with all of the issues in our case" in spite of Burrell's decision to deny the bank a temporary restraining order, she said.

Wells Fargo and department officials are scheduled to appear before Burrell on Monday for a hearing on the bank's preliminary injunction request.

Both sides will then appear before an administrative law judge in Sacramento the next day for another proceeding to revoke Wells Fargo's home-mortgage license in California.