CORRECT: Wells Fargo Says Loan Modifications Help Home Prices
("Wells Fargo CEO: Bank's Loan Modifications Help Home Prices," published at
12:46 p.m. EST, incorrectly described the rates of foreclosures in pools of
mortgages serviced by Wells Fargo and other large mortgage servicers in the
third paragraph. The correct version follows.)
By Marshall Eckblad
Of DOW JONES NEWSWIRES
NEW YORK -(Dow Jones)- Wells Fargo & Co. (WFC) Chief Executive John Stumpf
said Friday his bank's handling of at-risk, underwater mortgages helps support
the nation's housing prices and also offers borrowers better options than other
large lenders.
Stumpf told investors at a conference in Boston that Wells Fargo's effort to
lower borrowers' monthly payments helps borrowers stay in their homes. Helping
borrowers avoid foreclosure or short sales can help stabilize sliding housing
prices by keeping inventories of for-sale homes at lower levels.
Stumpf said the mortgages Wells Fargo services, as of June 30, had a lower
combined rate of foreclosures and delinquencies than other large mortgage
services. Of mortgages Wells Fargo services, as of June 30, 7.49% of them were
either delinquent or in foreclosure, according to Inside Mortgage Finance; among
other large mortgage servicers, the average combined rate of delinquencies and
foreclosures was 11.18%.
An article published by Dow Jones Newswires earlier this week said Wells Fargo
is reducing troubled borrowers' mortgage payments in many instances by deferring
principal payments for as long as a decade, and that Wells Fargo is likely for
years to hold billions in underwater mortgage debt tied to the nation's most
depressed housing markets.
Stumpf told investors, in response to a question, that such criticism "misses
the point." The modification program aims to lower borrowers' monthly costs, he
said, rather than immediately address a borrowers' negative home equity--or when
borrowers owe more in mortgage debt than their underlying homes are currently
worth.
"This is about working with customers one-on-one...and helping them," Stumpf
said. Borrowers with modified Wells Fargo loans are going back into default at
half the rate of borrowers with modified loans from other lenders, he added.
"The proof is really in the pudding," Stumpf said. "I challenge anyone to find
a better mortgage company in this respect."
The loans in question are $107 billion in debt tied to option adjustable-rate
mortgages, a relic of the U.S. housing boom that allowed borrowers to make small
monthly payments in return for increasing their mortgage balance. Wells Fargo
inherited the loans from Wachovia Corp. last year and in essence purchased them
at a steep discount, which means the loans can generate billions in losses
before additional losses affect Wells Fargo's earnings.
Stumpf said bout 60% of the loans are tied to properties in California, where
Wells Fargo says it's seen strong indications that prices of lower-end homes are
stabilizing. JPMorgan Chase & Co. (JPM) made similar comments Thursday about
California real estate.
-By Marshall Eckblad, Dow Jones Newswires; 212-416-2156; marshall.eckblad@
dowjones.com
(END) Dow Jones Newswires
11-06-091412ET
Copyright (c) 2009 Dow Jones & Company, Inc.
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