Wells Fargo Offering Principal Reductions to Wachovia Borrowers

February 6, 2009 No Comments »

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As part of a broader plan to prevent foreclosures and reduce related losses, Wells Fargo has reportedly offered principal balance reductions to select Wachovia borrowers.

According to Bloomberg, letters were mailed to an unknown number of Wachovia borrowers who could be eligible for such a loan modification.

They are requesting proof of current income and a 2007 income-tax statement as a means to qualify borrowers in return for a 20 percent principal reduction, presumably enough to put them back in a positive position.

Wells Fargo spokeswoman Debora Blume told the publication that customers are also provided with a phone number to contact a loan consultant, and said the response thus far has been encouraging.

Late last month, Wells Fargo announced that its home loan modification program would be available for 478,000 Wachovia customers acquired via its recent acquisition.

At the time, the mortgage lender mentioned a number of loss mitigation options, including mortgage rate reductions, extended amortization, and permanent principal reductions.

Wells Fargo has traditionally been one of the more conservative players in the mortgage lending space, but took on major losses after acquiring Wachovia’s enormous stable of poorly performing option arm mortgages.

During the fourth quarter, Wells charged off $1.2 billion in Pick-a-Pay loans and set aside $1.7 billion for future losses.

Somewhat amazingly, Wachovia offered its controversial negative amortization Pick-A-Pay loan program until the end of the second quarter last year, well after the unpleasant fate of the loans was widely known.

(photo: spinspin)

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