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Wells Settles REO Issues With HUD

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The banking subsidiary of Wells Fargo & Co. has reached an agreement to settle issues tied to its handling of real-estate-owned assets. Area’s near President Obama’s current residence and his home town were big beneficiaries.

A conciliation agreement was reached on June 5 between the Department of Housing and Urban Development and Wells Fargo Bank, N.A.

Wells Fargo committed to invest a total of $39 million in 45 communities throughout the country, according to an announcement from HUD.

Neighborhoods in 19 areas — including four in or near the metropolitan area of President Barack Obama’s home town of Chicago; three in the metropolitan area of his current Washington, D.C., residence; and three California towns — will receive $27 million in support.

The total also includes funding of $11.49 million for a community grant program in another 25 cities.

The funds will be administered by an independent third-party agency selected by Wells Fargo and used for “stabilizing and strengthening communities of color.” An agreement needs to be entered with the administrator within 60 days of HUD’s approval of that administrator.

“Wells Fargo’s investment demonstrates an ongoing commitment to stabilizing African-American and Hispanic neighborhoods in a way that advances equal housing opportunities and HUD is committed to working collaboratively with Wells Fargo to support the effort.” HUD General Deputy Assistant Secretary for Fair Housing and Equal Opportunity Bryan Greene said in the announcement.

The agreement addresses alleged deficiencies in Wells Fargo’s handling of foreclosed assets that violated the Fair Housing Act.

HUD issued a letter of reprimand to Wells Fargo Bank, N.A., in December 2011 for failing to comply with property preservation and protection requirements on two FHA-insured real-estate-owned properties.

Best practice standards included in the Wells Fargo Premiere Asset Services Broker Procedure Manual will be maintained on REO assets owned by Wells Fargo.

On agency REOs serviced by Wells Fargo, the agreement calls for maintaining compliance with the respective housing agency’s guidelines.

However, “Consistent with the requirements of the GSEs, HUD, and VA, respondent will play no role in the marketing, maintenance, repairs or renovation of the GSE REO properties following conveyance of the property to the GSE, HUD, or VA.”

On non-agency loans included in private-label mortgage-backed securities, Wells is committing to maintaining and marketing REO properties according to standards outlined in the third-party investor servicing agreements. When standards are missing from investor agreements, then the policy for its own portfolio assets applies.

A revised Real Estate Broker Procedure Manual and property inspection checklist will be used by Wells. The training program for real estate brokers and agents who list REO properties will be enhanced.

The company’s own REO management staff will also take the training.

In an effort to increase owner occupancy levels, Wells Fargo is extending the length of time that individual REO properties will be exclusively available for purchase by an owner-occupant or a non-profit organization.

REOs where Wells Fargo’s Corporate Trust Services is the trustee in an RMBS transaction and the loans are serviced by another company aren’t impacted by the agreement with HUD.

For its part, Wells Fargo, which didn’t admit wrongdoing or liability, “denies that it has violated the Fair Housing Act or engaged in differential treatment of REO properties on the basis of race, national origin or any other prohibited basis,” the agreement states. “Respondent avers that it is firmly committed to the principles of home ownership, fair housing, and equal opportunity and has invested heavily in minority communities throughout the nation.”

Wells Fargo asserts that it has responsibly managed REO properties without regard to ethnic or racial composition. It claims to use industry-leading policies and procedures for managing REO properties.

“These policies and procedures were and are applied to REO property maintenance and marketing without regard for race, national origin, or any other impermissible factor,” the agreement states.

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