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Wells Launches Rescue Plan for Wachovia Borrowers

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Mortgage Daily

                                                 January 26, 2009

Wells Fargo Home Mortgage hopes to prevent nearly a half million Wachovia Corp. foreclosures. The company boasts a 70 percent success rate on its modifications.

A press release today indicated the Des Moines, Iowa-based company is aggressively using a streamlined strategy to prevent 478,000 foreclosures on Wachovia loans. Affected borrowers include those who are already delinquent or are likely to become delinquent.

Included among the impacted loans are Wachovia’s infamous pick-a-payment loans. Wachovia’s total option-ARM portfolio is around $120 billion, while its total mortgage portfolio was reported at $201 billion as of June 30, 2008.

“As the ‘investor’ for these loans, we are rapidly designing programs to help these customers,” Wells Fargo Home Mortgage Co-President Mike Heid said in the statement. “For those at-risk, we will offer combinations of term extensions of up to 40 years, interest-rate reductions, charge no interest on a portion of the principal for some period of time and, in geographies with substantial property value declines, we will even use permanent principal reductions.”

While Wells is now the investor on Wachovia’s option ARMs, it said that investors own 97 percent of the loans serviced by the home mortgage unit.

The strategy includes a moratorium on foreclosures until Feb. 28 to all delinquent borrowers time to work out a mitigation plan.

Wells claims to have prevented 650,000 foreclosures from July 2007 to November 2008. It noted that it has reached 94 percent of its borrowers that are at least 60 days past due, and reported that only 30 percent of its modifications become 90 days or more past due within a year of modifying.

The company’s loss mitigation staff has been increased by 125 percent during the past two years and now stands at 6,000. Further expansion is planned. Wachovia’s loss mitigation staff had been expanded by 330 percent during the past year to 2,000.

“Given changing economic factors, the exact number of customers expected to be helped in this approximate $120 billion portfolio cannot be provided,” Wells stated.

Wells completed its acquisition of Wachovia on Dec. 31.

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