This recent report is pitching hard for Wells Fargo to give principal reductions to its underwater customers – excerpts below:
The past five years have been bad enough. But for tens of thousands of California families, 2013 threatens even more misery.
Wells Fargo will be more responsible than any other single mortgage servicer if this economic storm hits California in 2013. The bank is responsible for servicing 11,616 of the mortgages that are in the foreclosure pipeline—nearly one in five of all California homes in this foreclosure pipeline.
But there is an alternative. Economists and policy experts from across the political spectrum are calling for the widespread reduction of the principal on these mortgages.
As we explain below, principal reduction is the fair and common sense solution to this crisis and the key to digging the economy out of its five year slump.
Many experts believe that even servicers like Wells Fargo would eventually benefit from widespread principal reduction.
By clarifying the value of the mortgage-backed securities that are owed the banks, the bondholders, and Fannie Mae and Freddie Mac, and by significantly stimulating the economy, principal reduction would stabilize the housing market and it would effectively put a floor on securities prices. This would help all investors, including banks.
At the moment, however, Wells Fargo remains committed to a shortsighted and selfish approach. Notably, several other banks, including Bank of America, have pursued broader principal reduction as a strategy for maintaining their profits while also helping families retain their homes.
Wells Fargo’s average principal reduction on first-lien mortgage modifications was $74,837, compared to Bank of America’s $192,090. And, during this period, Bank of America gave out nearly $1 billion more in principal reduction in California than Wells Fargo did!
But while thousands of California families struggle daily to make ends meet and face the terrifying prospect of losing their homes, Wells Fargo and its multi-millionaire executives prioritize their short-term profit margins, and the American people are paying the price.
Wells Fargo’s CEO is John Stumpf. The bank paid him $19.8 million in 2011. Since 2007, when the housing market collapsed, Stumpf has raked in nearly $84 million!
Wells Fargo’s other executives have also done exceedingly well, while California’s families suffer: In 2011, its seven key executives were together paid over $72 million.
The average homeowner in the foreclosure pipeline is approximately $95,000 underwater – which means that, on average, each of Wells Fargo’s key executives could keep a one million dollar salary and still have enough left over to personally save nearly 100 homes.
Wells Fargo’s conduct would be atrocious enough if it applied to everyone equally, but the bank has come under intense scrutiny in recent years because its practices have been specifically targeted at African-Americans and Latinos.
The U.S. Department of Justice’s Civil Rights Division determined that mortgage brokers working with Wells Fargo had charged higher fees and rates to tens of thousands of minority borrowers across the country than they had to white borrowers who posed the same credit risk – selling what Wells fargo employees im Baltimore referred to as “ghetto loans.”
First, Wells Fargo should commit to a broad principal reduction program.
Second, Wells Fargo should report data on its principal reduction, short sales, and foreclosures by race, income, and zip code.
Third, Wells Fargo should immediately stop all foreclosures until the first two policies are implemented.
Read the full report here – thanks daytrip:
The report notes that there are 283 homes in San Diego on the NOD and NOT lists, which doesn’t sound like a lot. Giving them a principal reduction will ‘stabilize the housing market’?