Conn. AG strikes deal with Wells Fargo over pick-a-payment mortgages
Connecticut Attorney General George Jepsen reached an agreement with Wells Fargo ($40.66 -0.18%) over allegedly deceptive marketing practices of adjustable-rate mortgages written by Wachovia and Golden West Financial.
Wells acquired the two mortgage originators in 2008. Under the agreement, Wells will consider 1,535 Connecticut homeowners for modification and pay $741,465 to the state's foreclosure prevention efforts.
The AG claimed Wachovia and Golden West violated state consumer protection laws by not explaining to "pick-a-payment" borrowers that their minimum payment would not cover the full amount of accrued interest and would actually lead to an increase in the loan amount.
"I want to stress that Wells Fargo inherited this problem when it acquired Wachovia and Golden West. I am pleased that Wells Fargo is addressing this issue," Jepsen said. "Connecticut homeowners struggling with these risky, 'pick-a-payment' loans will have a fair opportunity to achieve a loan modification or other relief."
The borrowers will first be considered for the Home Affordable Modification Program and then for the bank's private initiative known as Mortgage Assistance Program 2. The AG's office said some of the modifications could include principal forgiveness but depends on the borrower's circumstances.
"Through assurance agreements it has signed with the Attorneys General in Connecticut and 10 other states, Wells Fargo is further helping at-risk Wachovia Pick-a-Payment customers who may be eligible to earn principal forgiveness by making on-time mortgage payments," a Wells spokesperson said. "The program is an extension of Wells Fargo’s ongoing efforts to assist at-risk Wachovia Pick-a-Payment customers with home payment relief, which began immediately following the merger."
The bank reached similar agreements with AGs in Arizona, California, Florida, Illinois, Kansas, Nevada, New Jersey, Texas and Washington. Wells will be considering borrowers for a workout through June 2013.
Write to Jon Prior.
Follow him on Twitter @JonAPrior
Don’t miss out: get HW delivered via email
- Current Chg.
- NASDAQ 3423.55 0 ^ixic
- S&P 500 1628.93 -22.88 ^gspc
- Volatility Index 16.64 0.03 ^vix
- KBW Mort. Financial Index 30.95 -0.59 ^mfx
- MSCI US REIT Index 939.49 -27.14 ^rmz