19 Oct Texas AG signs Agreement with Wells Fargo Giving Some Mortgage Relief
Texas Attorney General Greg Abbott and seven other states (Arizona, Colorado, Florida, Illinois, Nevada, New Jersey and Washington)entered into an agreement with Wells Fargoon October 5, 2010 which will provide $5 million in relief to more than 200 Texas homeowners who had payment option (pick-a-pay) adjustable rate mortgage loans with Wells Fargo.
The Agreement applies to “POA” loans that originated with Wachovia Corp. and Golden West Corp. Wells Fargo acquired both of these companies and their loan portolios.
According to Attorney General Abbott, “eligible homeowners will benefit both from modified loans and debt reduction. These concessions – which are warranted because the lender failed to properly disclose the potential for payment increases to homeowners – are intended to help affected Texas families keep their homes.”
POA loans were mortgages that allowed the homeowner to choose their payment amount each month. Golden West and Wachovia, according to state investigators, failed to properly explain to borrowers the consequences of not paying a full payment each month. For example, customers who remitted payments that did not cover the interest were not told that their unpaid interest would be added to the principal of the loan. As a result, the totalamount of the loan increased andresulted in the negative amortization of the loan. So, when the homeowner goes to refinance their mortgage, their new payment could be much higher since the principal amount due has greatly increased.
Pursuant to the Agreement,between December 1, 2010 and June 30, 2013, Wells Fargo will offer modifications to eligible residential borrowers who are either 60 days delinquent or facing imminent default. Eligible homeowners will first be considered under the federal Home Affordable Modification Program (HAMP), and if ineligible, then Wells Fargo will consider borrowers for its new modification program. Loan modifications will be offered to almost 9,000 eligible borrowers in the eight participating states.
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