David Dayen: Wells Fargo Shareholder Report Reveals Information on Foreclosure Fraud Settlement

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David Dayen: Wells Fargo Shareholder Report Reveals Information on Foreclosure Fraud Settlement

David Dayen: Wells Fargo Shareholder Report Reveals Information on Foreclosure Fraud Settlement

FDL-

It’s embarrassing that the most information we’ve yet received about the foreclosure fraud settlement comes from an annual report to stockholders by Wells Fargo. In other words, we had to wait for the banks to tell us what was in the settlement, I guess because the regulatory officials who negotiated it weren’t entirely proud of their work.

The Wells notice (it begins on page 74) isn’t legal language, and it states clearly that “the terms… do not become final until approval of the settlement agreement by the U.S. District Court and execution of a consent order.” But it provides some more detailed information than the broad sketch that has been released. For example, we have the first breakdown that I’ve seen of the credit system for principal reductions.

first lien principal forgiveness for LTV less than or equal to 175%: 100% credit (must constitute at least 30% of the Consumer Relief Program credits);

first lien principal forgiveness for LTV greater than 175%: 50% credit for portion forgiven over 175% LTV;

forgiveness of forbearance amounts on existing loan modifications – 40% credit;

earned forgiveness over no more than a 3 year period: 85% credit for LTV less than or equal to 175%; 45% credit for forgiveness over 175% LTV;

second lien principal forgiveness: 90% credit for loans 90 days or less delinquent; 50% credit for loans greater than 90 but less than 180 days delinquent; 10% credit for loans 180 days more delinquent. Subject to a number of requirements, servicers participating in the settlement will be obligated to implement second lien principal forgiveness on second mortgages it owns when another participating servicer reduces principal on a first mortgage via its proprietary non-HAMP modification programs (must constitute at least 60% of the Consumer Relief Program credits when combined with the first lien principal forgiveness credits);

deficiency balance waivers on first and second lien loans: 10% credit;

short sale deficiency balance waivers on first and second lien loans: 20% to 100% credit depending on whether the servicer, servicer/lien holder or investor incurs the loss;

payment arrearages forgiveness for unemployed borrowers: 100% credit;

transitional funds paid to homeowners in connection with a short sale or deed-in-lieu of foreclosure for payments in excess of $1,500: 45% credit if a non-GSE investor bears the cost or 100% if the servicer bears the cost;

anti-blight – forgiveness of principal associated with properties where foreclosure is not pursued: 50% credit;

anti-blight – cash costs paid by servicer for property demolition – 100% credit; and

anti-blight – donation of real estate owned properties to qualifying recipients such as non-profit organizations: 100% credit.

[FIRE DOG LAKE]

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