Tuesday, December 21, 2010

Wells Fargo mod madness

Wells Fargo got busted by the California AG over a bunch of crap mortgages it didn't even sell. Unfortunately for Wells it purchased Wachovia who did sell them. They garbage loans are the pick-a-pay variety which are pretty much the most toxic crap around. Nearly every one that took one paid the absolute minimum the contract allowed. This usually was far less than even an interest only payment. Because they borrowers were paying less than the actual interst amount the balance of what was owed was tacked onto the principal. So there was little chance of anyone paying these things off. Jerrry Brown went after these lenders for false and deceptive advertising.

Wells has agreed to do loan mods for the 27,000 loans in California and to offer "restitution" to homeowners that have already lost homes (they will get a nice Xmas present from Wells, an average of $2650 each). I suspect the loan mods will be nothing more than offering a fixed low interst loan for the original loan balance. I seriously doubt they will write the principal down any farther than that. I suspect this is another story that sounds a lot better than it will actually be.

It will be interesting to see if any other lenders will be affected by this investigation. There were a lot of lenders selling this toxic crap in 2004 to 2007.

No comments: