Wells Fargo & Co. Chief Executive John Stumpf said Friday his company'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' 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 that at midyear Wells was proceeding with foreclosures on 7.5% of the mortgages it services. Other large mortgage servicers, on average, had foreclosed on 11.2% of their mortgage borrowers at midyear, he said.
Dow Jones Newswires reported last week said that Wells Fargo was reducing troubled borrowers' mortgage payments in many instances by deferring principal payments for as long as a decade, and that for years Wells would likely hold billions in underwater mortgage debt tied to the nation's most depressed housing markets.
Stumpf told investors that such criticism "misses the point." The modification program aims to lower borrowers' monthly costs, he said, rather than immediately address negative home equity.
"This is about working with customers one on one … and helping them," Stumpf said. Borrowers with modified Wells loans are going back into default at half the rate of borrowers with modified loans from other lenders, he added. "I challenge anyone to find a better mortgage company in this respect," Stumpf said.
The loans in question are $107 billion in debt tied to option adjustable-rate mortgages. Wells inherited the loans from Wachovia Corp. last year. Stumpf said that about 60% of the loans are tied to properties in California, where Wells says it has seen strong indications that prices of lower-end homes are stabilizing. JPMorgan Chase & Co. made similar comments Thursday about California real estate.