Digital News Report – An agreement between the California Attorney General Edmund G. Brown Jr. and Wells Fargo was reached that said the bank would give home loan modifications for certain borrowers that will lower the balance they owe considerably and make their loans affordable. These home loan modifications will help thousands of homeowners with “pick-a-pay” mortgage loans. In addition Wells Fargo will be paying an additional $32 million to thousands of pick-a-pay loan customers that lost their home to foreclosure. None of these loans involved were initially made by Wells Fargo, instead they acquired World Savings and Wachovia who were involved in originating these loans.
The pick-a-pay loans allowed the homeowners to make payments at different levels. At the highest amount they could pay the full amount of interest and principal that was due for the month. Another level was an interest only payment. The minimum level payment didn’t even cover the interest that was owed which was then added to the amount owed. If the homeowner paid the lower amounts they would see their monthly amounts increase continually and the minimum monthly payment increase continually. These home loans combined with the many losing their jobs and the sharp drop in home prices caused many homeowners to lose their homes to foreclosure.
With the settlement, Wells Fargo will be making available affordable home loan modifications with those in California that have a pick-a-pay loan with them. There are an estimated 14,900 home loans that could be modified with this agreement said the Attorney General. Many of these loan modifications will involve a principal forgiveness to lower the amount that needs to be repaid. The total modifications are estimated to be savings of over $2 billion to these homeowners.
There are around 12,000 pick-a-pay California homeowners that lost their home because of foreclosure. Wells Fargo agreed with the Attorney General to pay these borrowers $32 million for restitution, with an average amount to be more than $2,650 per homeowner. In addition, Wells Fargo will be paying the state of California, $1.8 million for costs.
California homeowners that qualify for the home loan modification for the pick-a-pay loans should be receiving a notice from Wells Fargo in the next two months. If the homeowner has already went through foreclosure, they will be receiving notifications in the first half of 2011.
In addition to California, Wells Fargo has made similar agreements with Attorney Generals in the states of Arizona, Colorado, Florida, Illinois, Nevada, New Jersey, Texas, and Washington in regard to these pick-a-pay mortgage loans.
By Victoria Brown