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.

dow paula nj ag Wells Fargo Settles With NJ Over Pick A Payment MortgagesPredecessor 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

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