The Fees That Priced People Out — Python Bug Hunt

Briefing

Modelled on Wells Fargo, 2018: the bank disclosed that a calculation error in the tool it used to decide whether mortgage customers qualified for a loan modification had included attorneys' fees incorrectly. Hundreds of customers who should have qualified were denied or not offered a modification, and many of them later lost their homes to foreclosure.

This reconstruction re-amortises a delinquent loan and checks the new payment against an affordability ceiling. The fees end up in the wrong place in that calculation.

Fix evaluate so the eligibility decision follows the policy below.

Bug report

BUG-MOD-FEES · Priority: Critical · Reported by: mortgage operations audit

evaluate(app) — all amounts in integer cents. app has principal, arrears, attorney_fees, monthly_income. Returns, in this shape: { "eligible", "balance", "payment", "fees_due" }

• balance: the modified (capitalised) balance = principal + arrears. Attorney fees are NOT capitalised into the re-amortised loan; they are reported separately as fees_due (= attorney_fees).
• payment: policy.monthly_payment(balance, policy.RATE_BPS, policy.TERM_MONTHS)
• eligible: payment <= policy.max_payment(monthly_income) (a payment exactly at the ceiling qualifies)

Observed: applicants whose payment fits the ceiling are denied as soon as their file carries any attorney fees.

Logs

[underwriting] app=M-20417 balance=21900000 payment=66318 ceiling=65100 -> DENIED
[underwriting] app=M-20417 manual review: payment without fees would be 65100

The code as shipped

src/mortgage/underwriting.py (editable)

policy = bug_require("./policy.py")


def evaluate(app):
    balance = app["principal"] + app["arrears"] + app["attorney_fees"]
    payment = policy.monthly_payment(balance, policy.RATE_BPS, policy.TERM_MONTHS)
    return {
        "eligible": payment <= policy.max_payment(app["monthly_income"]),
        "balance": balance,
        "payment": payment,
        "fees_due": app["attorney_fees"],
    }

Read-only context: src/mortgage/policy.py.