Deal will bring mortgage relief

About 700 Nevada homeowners with nontraditional mortgage loans are eligible for $78 million in mortgage relief under a multistate agreement with Wells Fargo Bank, Attorney General Catherine Cortez Masto said Wednesday.

That sum includes $45 million in principal forgiveness for some borrowers who are having difficulties making mortgage payments, according to Masto. Wells Fargo Home Mortgage Chief Financial Officer Franklin Codel said the borrowers also may qualify for reduced interest rates, lower monthly payments and term extensions so that they can afford mortgage payments.

"The bar has been raised, and I call upon other financial institutions to adopt these servicing commitments in their dealings with Nevada residents," Masto said in a statement.

Wells Fargo also will contribute
$24 million to end the investigation by eight states, including Nevada, which were looking into whether risky mortgages were made to consumers without disclosing their perils.

Nevada's share of that contribution totals $1.2 million, which will be used to prevent foreclosures and loan modification fraud.

The agreement stems from payment-option adjustment rate mortgage loans that were made by Wachovia Corp. and World Savings Bank before Wells Fargo acquired the institutions and their loan portfolios.

Wachovia called the product the Pick-a-Payment mortgage. Homeowners with those loan products each month were allowed to make a minimum payment, middle level sum or full payment.

The states' investigation centered on allegations that consumers were misled about the possibility that their mortgage amounts would increase. The lenders allowed borrowers to defer some of their interest payments and add them to the principal balance.

Wells Fargo will offer modifications to borrowers who are 60 days delinquent or facing imminent default. Borrowers first will be considered under the federal Home Affordable Modification Program. Borrowers who don't qualify or reject the HAMP modification then may ask for consideration under the Wells Fargo program.

As part of the agreement, Wells has agreed to offer loan assistance worth more than $770 million to more than 8,700 borrowers through June 2013, though that amount will depend on how the economy fares during that time.

Wells Fargo didn't admit to any wrongdoing under the agreement. Many large lenders made pick-a-payment loans during the housing boom, but borrowers defaulted in massive numbers after the market went bust.

Wells Fargo said the program will have no effect on its third-quarter financial results. It said "pick-a-payment" customers already have received about
$3.4 billion in principal forgiveness.

Borrowers who already have received a loan modification from Wells will not be eligible for the new program. Call Wells at 1-888-565-1422 for information.

The Associated Press contributed to this report.
Contact reporter John G. Edwards at
jedwards@reviewjournal.com or 702-383-0420.