Wachovia Terminates Outsourced Loan Modification Program

November 11, 2008 No Comments »


Today seems to be all about the loan modifications, with the Citi launch and word of a government move to modify Fannie and Freddie loans forthcoming.

But while most banks are launching or expanding their loan modification programs, Wachovia’s seemed to take a big step backwards.

The Charlotte-based bank, which had agreed to outsource loss mitigation duties to a handful of companies in late September, apparently pulled the plug about a week ago, according to the Contra Costa Times.

The 60-day pilot program was launched with the intention of restructuring about 135,000 Pick-A-Pay loans into more conventional 30-year fixed-rate mortgages, but things didn’t work out as planned.

Michelle Kinder, an executive vice president with BWC Mortgage, one of the companies commissioned for the job, said very few homeowners could actually benefit from the program the way it was setup.

She noted that some of the “solutions” offered by Wachovia didn’t make sense for the borrowers, while potential workouts fell short because the bank wouldn’t agree to offer assistance.

One borrower cited by the paper said all he was offered was a forbearance plan, which simply delays mortgage payments and doesn’t create a more sustainable loan going forward.

A Wachovia spokesman told the Contra Costa Times the bank chose instead to focus on assisting customers internally, a process deemed more efficient in conducting the modifications.

Wachovia, which agreed to be taken over by Wells Fargo last month, has more than $100 billion in pay-option arms on its hands, now seen as the most toxic loans in the mortgage industry.

(photo: dlytle)

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