Market In Review: The Wells Fargo ViewSM
Market In Review: The Wells Fargo ViewSM Wells Fargo is a strong, sound mortgage lender and servicer. Our business is uniquely positioned to succeed in today’s challenging market. Here is our insight on current conditions, and how we will continue to responsibly make loans to customers. April 2010 The housing market continues to be integral to the nation’s overall economic recovery, as evidenced by the Obama administration’s latest efforts to provide additional relief to struggling homeowners. On March 26, the Treasury Department announced multifaceted changes to the federal programs intended to stabilize the housing market and enable more mortgage customers to remain in their homes. These enhancements are anticipated to be available in the fall of this year. Highlights of the Home Affordable Modification Program (HAMP) and Federal Housing Administration (FHA) refinance program enhancements include, among other things: • Temporary assistance through short-term mortgage payment reductions of up to six months for unemployed homeowners while they seek a new job. • Principal forgiveness for HAMP-eligible borrowers who owe more than 115 percent of the value of their homes. Borrowers will be able to “earn” the principal reduction over three years by remaining current on their home payments. • A new voluntary FHA refinancing option for underwater homeowners – those owing more on their mortgage than the home is worth because of price depreciation in some local markets. This option will be available to borrowers who are current on their loans and includes a write-down of the first mortgage principal of at least 10 percent to reduce the borrower’s debt burden. • Guidance that all mortgage servicers not foreclose on customers being considered for a Home Affordable Modification.
Treasury will provide mortgage lenders like Wells Fargo the details of the enhancements and changes in the coming weeks, with implementation completed later in the year. U.S. Jobs
Percent of labor force
More help for struggling homeowners
20 18 16 14 12 10 8 6 4 2 0 2005
2006
2007
Underemployment rate
2008
2009
2010
Unemployment rate
Source: Bureau of Labor Statistics
The Wells Fargo View: Wells Fargo already practices many of the Treasury’s program enhancements, such as offering short-term payment relief to unemployed and underemployed customers and offering principal forgiveness in certain instances. We share the government’s desire to keep people in their homes, and we work to exhaust all options before moving a home to foreclosure sale. Since the start of 2009, Wells Fargo has helped more than
half a million struggling American homeowners reach more affordable home payments through trial and completed modifications. About two-thirds of the loan modifications we have done were through our own programs. We remain committed to helping our customers, our communities and our country through the most difficult economy in generations.
Market quick hits A brief roundup of other news you can use: •
The first-time homebuyer tax credit deadline is looming. By April 30, buyers must have a home under contract and the purchase must close by June 30 to be eligible. The tax credit is up to $8,000 for qualifying first-time homebuyers and up to $6,500 for current homeowners who purchase a new primary residence, provided they have lived in their current primary residence for at least five consecutive years out of the past eight years.
•
The Federal Reserve’s mortgage-backed securities purchase program ended March 31, which could affect mortgage rates and liquidity. The Fed has been the dominant buyer of Fannie Mae, Freddie Mac and Ginnie Mae securities and has purchased them at relatively low yields.
•
Congress adjourned in March without reauthorizing the National Flood Insurance Program, meaning that no new or renewal policies can be issued under the program. This may create challenges with closing loans on homes in areas where such coverage is required and in servicing loans in those areas. This issue won’t be resolved until sometime after Congress is back in session April 12.
Alternatives to foreclosure
Loan servicers aren’t always able to help homeowners remain in their homes. A customer’s financial hardship may be so great that no payment plan or loan modification can help him or her reach a reduced and sustainable home payment. But that doesn’t mean foreclosure has to occur. This month, the administration launched the Home Affordable Foreclosure Alternatives (HAFA) program. HAFA is a complement to HAMP that provides incentives for servicers to work with customers on short sales and deeds-inlieu of foreclosure. A short sale is when a lender and a borrower facing financial hardship agree to sell the property for less than the outstanding balance on the loan, and the seller then turns over the sale proceeds to the lender. A deed-in-lieu of foreclosure transaction is when a distressed borrower facing foreclosure voluntarily agrees to turn over the property to the lender to satisfy the loan that is in default. HAFA offers financial incentives to borrowers to assist with moving expenses, to servicers to cover administrative and processing costs, and to investors to distribute a portion of shortsale proceeds to junior lien holders.
Pioneers Home Mortgage Program 1-866-262-1505
The Wells Fargo View: Because we view foreclosure as an action of last resort, we support this new program and appreciate the administration’s efforts to provide further resources to the industry and help to borrowers. It already has been our practice to look to alternatives such as short sales after we have exhausted every option and determined that a homeowner does not qualify for a modification – either through HAMP or our own programs. Short sales and deeds-in-lieu of foreclosure provide the homeowner with a more graceful way out of a difficult situation and help reduce the number of foreclosed, vacant properties in our communities.
Wells Fargo & Company is a diversified financial services company with $1.2 trillion in assets, providing banking, insurance, investments, mortgage and consumer finance through more than 10,000 stores, over 12,000 ATMs and the internet (wellsfargo.com) across North America and internationally. Information is accurate as of date of printing and subject to change without notice. Wells Fargo Home Mortgage is a division of Wells Fargo Bank, N.A. © 2010 Wells Fargo Bank, N.A. All rights reserved.
104455 - 4/10
Treasury will provide mortgage lenders like Wells Fargo the details of the enhancements and changes in the coming weeks, with implementation completed later in the year. U.S. Jobs
Percent of labor force
More help for struggling homeowners
20 18 16 14 12 10 8 6 4 2 0 2005
2006
2007
Underemployment rate
2008
2009
2010
Unemployment rate
Source: Bureau of Labor Statistics
The Wells Fargo View: Wells Fargo already practices many of the Treasury’s program enhancements, such as offering short-term payment relief to unemployed and underemployed customers and offering principal forgiveness in certain instances. We share the government’s desire to keep people in their homes, and we work to exhaust all options before moving a home to foreclosure sale. Since the start of 2009, Wells Fargo has helped more than
half a million struggling American homeowners reach more affordable home payments through trial and completed modifications. About two-thirds of the loan modifications we have done were through our own programs. We remain committed to helping our customers, our communities and our country through the most difficult economy in generations.
Market quick hits A brief roundup of other news you can use: •
The first-time homebuyer tax credit deadline is looming. By April 30, buyers must have a home under contract and the purchase must close by June 30 to be eligible. The tax credit is up to $8,000 for qualifying first-time homebuyers and up to $6,500 for current homeowners who purchase a new primary residence, provided they have lived in their current primary residence for at least five consecutive years out of the past eight years.
•
The Federal Reserve’s mortgage-backed securities purchase program ended March 31, which could affect mortgage rates and liquidity. The Fed has been the dominant buyer of Fannie Mae, Freddie Mac and Ginnie Mae securities and has purchased them at relatively low yields.
•
Congress adjourned in March without reauthorizing the National Flood Insurance Program, meaning that no new or renewal policies can be issued under the program. This may create challenges with closing loans on homes in areas where such coverage is required and in servicing loans in those areas. This issue won’t be resolved until sometime after Congress is back in session April 12.
Alternatives to foreclosure
Loan servicers aren’t always able to help homeowners remain in their homes. A customer’s financial hardship may be so great that no payment plan or loan modification can help him or her reach a reduced and sustainable home payment. But that doesn’t mean foreclosure has to occur. This month, the administration launched the Home Affordable Foreclosure Alternatives (HAFA) program. HAFA is a complement to HAMP that provides incentives for servicers to work with customers on short sales and deeds-inlieu of foreclosure. A short sale is when a lender and a borrower facing financial hardship agree to sell the property for less than the outstanding balance on the loan, and the seller then turns over the sale proceeds to the lender. A deed-in-lieu of foreclosure transaction is when a distressed borrower facing foreclosure voluntarily agrees to turn over the property to the lender to satisfy the loan that is in default. HAFA offers financial incentives to borrowers to assist with moving expenses, to servicers to cover administrative and processing costs, and to investors to distribute a portion of shortsale proceeds to junior lien holders.
Pioneers Home Mortgage Program 1-866-262-1505
The Wells Fargo View: Because we view foreclosure as an action of last resort, we support this new program and appreciate the administration’s efforts to provide further resources to the industry and help to borrowers. It already has been our practice to look to alternatives such as short sales after we have exhausted every option and determined that a homeowner does not qualify for a modification – either through HAMP or our own programs. Short sales and deeds-in-lieu of foreclosure provide the homeowner with a more graceful way out of a difficult situation and help reduce the number of foreclosed, vacant properties in our communities.
Wells Fargo & Company is a diversified financial services company with $1.2 trillion in assets, providing banking, insurance, investments, mortgage and consumer finance through more than 10,000 stores, over 12,000 ATMs and the internet (wellsfargo.com) across North America and internationally. Information is accurate as of date of printing and subject to change without notice. Wells Fargo Home Mortgage is a division of Wells Fargo Bank, N.A. © 2010 Wells Fargo Bank, N.A. All rights reserved.
104455 - 4/10
