Texas Attorney General Greg Abbott along with seven other states (Arizona, Colorado, Florida, Illinois, Nevada, New Jersey and Washington) have entered into an agreement with Wells Fargo which will provide $5 million in relief to more than 200 Texas homeowners who had pick-a-pay (POA) adjustable rate mortgage loans which originated with Wachovia Corp and Golden West Corp but were eventually acquired by Wells Fargo.
According to Attorney General Abbott, "eligible homeowners will benefit both from modified loans and debt reduction. These concessions - which are warranted because the lender failed to properly disclose the potential for payment increases to homeowners - are intended to help affected Texas families keep their homes."
Pursuant to the Agreement, between December 1, 2010 and June 30, 2013, Wells Fargo will offer modifications to eligible residential borrowers who are either 60 days delinquent or facing imminent default. Eligible homeowners will first be considered under the federal Home Affordable Modification Program (HAMP), and if ineligible, then Wells Fargo will consider borrowers for its new modification program. Loan modifications will be offered to almost 9,000 eligible borrowers in the eight participating states.
On the surface this is a great program for homeowners facing foreclosure because of POA loans; but then when you look beyond the surface there are problems. First of all, we already know that HAMP is not working. Thousands of homeowners have already lost their homes to foreclosure while waiting for the HAMP program approval or after they have had their approval revoked. Also, while it is great that we are helping those who are already facing imminent foreclosure, many of these POA toxic loans are so underwater, that even if the homeowner is making timely payments, they couldn't sell the home if they tried in the event that they could no longer make payments.
And finally, why are only 9,000 people being offered a modification of these toxic loans which the bank as openly admitted it tricked many into signing on to? Most people who have signed a POA loan are going to face imminent foreclosure as soon as they face the resetting mortgage or they are forced to refinance and realize that the principal of the loan has ballooned to outrageous proportions. We need to get direct and aggressive about modifying these toxic loans if we intend to help more Americans avoid foreclosure.