New Jersey Announces Settlement with Wells Fargo - is your mortgage modification around the corner?

Attorney General Paula T. Dow announced today that Wells Fargo Home Mortgage has agreed to provide New Jersey consumers with nearly $67 million in loan modifications and pay the state $3.98 million to resolve allegations that companies it acquired – Wachovia Corporation, Golden West and World Savings — deceptively marketed adjustable rate mortgage loans.

What happened to bring about this announcement? A loan with negative amortization, that's what. Negative amortization loans generally kept your monthly payments artificially low. They were not sufficient to pay down any principal and, in fact, usually neither the interest. At the end of 5 years, you could owe as much as 125% of the money you borrowed.

New Jersey homeowners accounted for about 5 percent of the “Pick-a-Payment” loans acquired by Wells Fargo as part of its acquisitions of Wachovia, Golden West and World Savings in 2008. Under terms of the settlement, Wells Fargo will provide across-the-board forgiveness of accrued interest and late fees for eligible delinquent borrowers who live in the homes on which they took out “Pick-a-Payment” mortgages.

Starting on December 18, 2010, the company also will provide loan modification terms that enable affordable payments and reduce principal for some consumers. Modified loan terms will vary according to the circumstances of the borrower, but can include principal forgiveness, loan extension, interest rate reduction, and principal forbearance (which gives the borrower additional time to pay off the loan principal). Borrowers who remain current on their modified payments over three years will earn additional principal forgiveness. Borrowers who qualify may also convert into a fixed rate loan. All modification fees and pre-payment penalties will be waived. The modification program will extend until June 30, 2013.

I'm sure by now we are tired of reading about lender's abuse of their customers but it's good to see that the state is doing something to correct a past abuse.

What do you think?

Read the full article from Real EstateRama - Attorney General Announces Settlement with Wells Fargo Home Mortgage

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