Wells Fargo & Co. has agreed to pay nearly $1 million to Maryland residents who lost their homes to foreclosure after receiving so-called "Pick-a-Payment" mortgages originated by lenders Wells later acquired.
In an agreement with the state Consumer Protection Division and announced Thursday by the Maryland Attorney General's office, Wells also agreed to address ways to help "at-risk" borrowers who signed "Pick-a-Payment" contracts and are still in their homes.
The mortgages gave borrowers several different payment options, including one that let them pay less than the actual amount of interest due. They loans were written by either Golden West Financial or Wachovia Corp., which acquired Golden West in 2006. Wells took over teetering Wachovia at the height of the financial crisis in 2008.
The state consumer watchdog said that Golden West and Wachovia used deceptive marketing practices to attract borrowers to its adjustable-rate mortgages, some of which offered teaser rates as low 1%. About 250 borrowers with "Pick-a-Payment" loans are believed to have lost their homes after rates adjusted and they quickly falling behind on mortgage payments.
Under the agreement, first reported by the Baltimore Sun, Wells will contribute $940,056 to a relief fund intended to help families who have lost their homes. Wells also said it will seek to modify loans to borrowers who received "Pick-a-Payment" mortgage who are not eligible to participate in the federal Home Affordable Modification Program.
Wells has signed similar agreements with attorneys general in 11 other states. It has also contributed $59.5 million to the states to help prevent or mitigate foreclosures.