Following news of a mortgage foreclosure moratorium by PNC Bank, Bank of America, J.P. Morgan Chase, and Ally Financial’s GMAC Mortgage unit, Wells Fargo Bank has settled charges of deceptive marketing practices with attorney generals in Arizona, Colorado, Florida, Illinois, Nevada, New Jersey, Texas, and Washington state.
Attorney General Bill McCollum announced last week a multi-state agreement with Wells Fargo over allegations of deceptive marketing regarding payment option adjustable rate (POA) mortgage loans. The agreement settles allegations of misconduct made prior to the acquisition of Wachovia and Golden West Corp., also doing business as World Savings Bank, by Wells Fargo.
According to the allegations, Wachovia and Golden West failed to fully advise mortgage borrowers that the minimum payment due in the first years of a loan did not adequately cover the amount of accrued interest owed. Over time, the amount of a borrower’s loan increased, thus resulting in higher principal balances and higher monthly payments.
Borrowers will first be considered for the federal Home Affordable Modification Program (HAMP) and if the borrower cannot qualify under HAMP or elects not to accept a HAMP modification, Wells Fargo will consider the borrower for its new modification program, known as Mortgage Assistance Program 2 (MAP2R).
From April 1, 2010 through the term of the agreement, over 4,000 Florida POA borrowers will be eligible for loan modifications that are expected to provide approximately $388 million in mortgage relief. This sum includes more than $208 million in principal forgiveness for Florida homeowners.
Analysts say principal forgiveness is the most effective way to end the housing debacle. The federal government and Bank of America announced plans earlier this year to reduce mortgage balances, but critics say the practice remains rare.
In the settlement , Wells Fargo agreed that they will offer loan modifications to approximately 8,700 qualified POA borrowers in Arizona, Colorado, Florida, Illinois, Nevada, New Jersey, Texas, and Washington state between Dec. 1, 2010, and June 30, 2013, who are either 60 days delinquent or facing imminent default. The total economic value of the loan modifications is expected to exceed $772 million by mid-2013.
The agreement also makes a number of substantial servicing commitments for POA borrowers including ensuring adequately staffed help lines to serve consumers, providing a single, primary point of contact to assist borrowers seeking modifications, making decisions on modifications within 30 calendar days of receiving a complete application, establishing a formal second look or appeal process for borrowers who are turned down for a modification, and more clearly communicating with borrowers to avoid confusion during the process.
Wells Fargo will also offer other foreclosure alternatives, including short sale, deed-in-lieu, and relocation assistance. The agreement provides for a compliance monitor and quarterly reporting to the eight Attorneys General. Wells Fargo will also pay more than $10.2 million to the Florida Attorney General’s Office to assist with the state’s efforts to prevent or mitigate foreclosures and prevent mortgage or loan modification fraud, along with investigative costs.
In 2008, McCollum announced a similar agreement with Countrywide Financial Corp., now owned by Bank of America. That agreement called for loan modifications for 57,000 Florida homeowners and foreclosure relief payments of about $6,000 to approximately 2,700 homeowners.
Wells Fargo Bank customers who originally received mortgages from Wachovia or Golden West should call 888-565-1422 for more information on the loan modification program.
If you would like to learn more about the Wells Fargo settlement or file a complaint with the Attorney General’s Office, visit their website at www.myfloridalegal.com or call 866-9-NO-SCAM (866-966-7226).
Source: The Credit Report with Bill Lewis – Highlands Today, an edition of the Tampa Tribune (Media General Group) – http://www2.highlandstoday.com/content/2010/oct/10/wells-fargo-settles-deceptive-marketing-charges/ To review Bill Lewis’ entire consumer protection series, please visit http://www.williamlewis.us
William E. Lewis Jr., is a credit repair expert with Credit Restoration Consultants and host of “The Credit Report with Bill Lewis” on AM 1470 WWNN, a daily forum for business and financial news, politics, economic trends, and cutting edge issues.