Wednesday, January 12, 2011
Wells Fargo has pledged to make approximately $2.4 billion load modifications for California borrowers with adjustable rate mortgages. In addition to the large load modification payment, California's Attorney General, Edmund "Jerry" Brown reached an agreement with Wells Fargo wherein Wells Fargo will pay the state of California $33 million to put toward the prevention of foreclosure as well as reducing the effects foreclosures have already had on borrowers. Attorney General Brown stated that the money will be distributed to about 12,000 borrowers who lost their homes due to foreclosure.
Wells Fargo admits that adjustable rate mortgages, which are loans that begin with low, seemingly manageable payments but eventually mushroom to exorbitant rates that few borrowers can afford, are unfair and harmful to borrowers; however, it is quick to point out that it did not originate any of the loans it is seeking to remedy. Instead, the loans were issued by Wachovia and World Savings Bank, both of which have since been subsumed by Wells Fargo.
Prior to these promises, Wells Fargo had already modified more than 50,000 adjustable rate mortgages, reducing borrowers' principal balances by $2.9 billion. In addition, Wells Fargo remains open to increasing the amount they spend on loan modifications, depending on how the housing market responds and progresses in the future.
This progress in California is promising for Florida borrowers, too. Wells Fargo representatives express hope that they can reach similar agreements in all 50 states, and as the fourth-largest bank in the nation, other banks may be encouraged to follow suit.