Wells Fargo & Co. became the second bank to sign up for a government program to modify second mortgages. Here is a review of the Wells Fargo Loan Modification Program and how it can help you save your home from foreclosure.
Online PR News – 20-March-2010 – – Leading mortgage servicer Wells Fargo has agreed to participate in the government’s loan modification program for second mortgages, making it the second bank after Bank of America to offer the additional service. This follows a call from administration officials to improve loan modification efforts, especially as the Home Affordable Modification Program (HAMP) continues to struggle to meet the goals it set in 2009.
The program extends HAMP services to “piggyback” loans, or second mortgages that significantly reduced or even eliminated down payments for many borrowers. It mostly benefitted buyers with little or poor credit history, as lenders at the time were more lenient with mortgages. The practice was common during the housing boom from 2004 to 2007, and is the reason behind many of the defaults and foreclosures following the crash.
With the new program, people who have received a Wells Fargo loan modification under HAMP can apply anew for their second mortgage, provided they meet the requirements. While each case is evaluated separately for the loan modification program, the bank’s main criteria is the debt-to-income ratio: the borrower’s total debt payments, including mortgages, credit cards, and other loans, must not exceed 31% of his or her income.
Most of the documentation needs are the same for both the first and second mortgages. Among the most important are financial statements, tax returns, pay stubs, and a hardship letter explaining the reason for the default and showing that the problem has been resolved. As with the previous program, these documents are now required at the upfront rather than at the end of the trial period, which reduces the risk of failed modifications.
The loan modification program is also offered to borrowers of Wachovia, a subsidiary of Wells Fargo which the bank has controlled since 2008. By offering loan modification to Wachovia clients as well, Wells Fargo expects to retain more of its current market and invite more mortgage activity. It will also help reduce loans with negative amortization, which seldom pay out the interest due and therefore become unsustainable in a few years.
Earlier in the year, Wells Fargo was also the second bank to provide a progress report on its loan modification program. According to the report, as of the start of February, the Wells Fargo loan modification plan has helped a total of 137,128 borrowers. Of these, 17,652 eventually succeeded to permanent loan modifications. As of the time of release, another 7,554 loan modifications were also in line to move to the permanent stage.
In the same report, Wells Fargo announced that another 350,000 loan modification plans had been granted outside of HAMP in the given period. Several of them were in the trial period as of January 31st, and thousands have since been completed or become permanent loan modifications. The new rules on documentation and application schedules can also ensure a higher success rate, as most previous failures resulted from missing paperwork.
Wells Fargo loan modification is one of the most active among the major lenders, along with current market leader Bank of America. From October 2006 to January 2010, the bank made three loan modifications for every short sale or foreclosure, greatly reducing its inventory of troubled mortgages. In 2009, they also claimed, the foreclosure rate for all their loans was less than 2%, a number they expect to lower even more this year.