Wells Fargo Settles With NJ Over "Pick-A-Payment" Mortgages
TRENTON, NJ (CBS) -- Wells Fargo Bank will pay the State of New Jersey $4 million and adjust mortgages for nearly a thousand homeowners to resolve allegations that it deceptively marketed adjustable rate loans.
Predecessor companies that Wells Fargo acquired -- including Wachovia, Golden West, and World Savings -- sold thousands of so-called "pick-a-payment" adjustable mortgages, according to New Jersey attorney general Paula Dow (right):
"They quickly became in many instances delinquent loans and sometimes lost homes."
She says the companies failed to warn borrowers that choosing the minimum payment option could lead to a "mountain of debt," in her words, because it failed to cover the interest. Dow says monthly payments then spiked:
"This was an outrage for consumers in a really difficult time in our nation's history."
As part of the settlement, Wells Fargo Home Mortgage will provide across-the-board forgiveness of accrued interest and late fees for eligible delinquent borrowers.
All told, mortgage loans will be adjusted for upwards of 900 consumers in New Jersey, totaling close to $67 million.
Dow points out that Wells Fargo never made pick-a-payment mortgages itself and the settlement was triggered by other companies that Wells Fargo had acquired.
Reported by Steve Tawa, KYW Newsradio.
Photo provided
Graphic by Ed Fischer
