John Suthers, Colorado’s attorney general, has announced that Colorado, along with seven other states, will get $23.7 million from Wells Fargo to put to rest allegations of “deceptive advertising and problematic lending practices of Wachovia and World Savings”[1]. The allegations stem from the “Pick-a-Pay” loan program that offered an adjustable-rate mortgage (ARM) as part of the package. Colorado will receive $900,000 of that settlement, and Suthers has announced that the settlement will be used to “at least…repair some of the damage caused by irresponsible and illegal lending practices in Colorado.”
The problem stemmed from allegations that World Savings and Wachoiva failed to disclose and even misrepresented information about the material terms of Pick-a-Pay loans. Teaser rates as low as 1.5 percent, good for one month, were emphasized; actual interest rates were between 5 and 6.75 percent, and unpaid interest was added to the loan’s principal balance. On top of all that, the loans came with prepayment penalties.
In addition to the monetary compensation, which each state will be in charge of dispensing and that can also be used for foreclosure-relief efforts, Wells Fargo will be providing loan modifications to borrowers that “are 60 days or more delinquent or in danger of imminent default prior to June 30, 2013.” Wells Fargo reports it will be handling Pick-a-Pay modifications directly.
It is important to note that Wells Fargo is not alleged to have engaged in these deceptive lending practices – and, indeed, has remained clear of the recent robo-signer fray as well – but is simply assuming responsibility for the conduct of the two companies, Wachovia and World Savings, the assets of which it now owns. The other states involved in the settlement are Arizona, Florida, Illinois, Nevada, New Jersey, Texas and Washington.
[1]http://nationalmortgageprofessional.com/news20958/colorado-ag-suthers-announces-237-million-settlement-deceptive-lending-practices
