Richard DeGrace, NMLS # 149277 Camden County, NJ Loan Officer

Attorney General Announces Settlement with Wells Fargo Home Mortgage; Company Providing $67 Million in Loan Modifications, Paying State $3.98 Million TRENTON – Attorney General Paula T. Dow announced today that Wells Fargo Home Mortgage has agreed to provide New Jersey consumers with nearly $67 million in loan modifications and pay the state $3.98 million to resolve allegations that companies it acquired - Wachovia Corporation, Golden West and World Savings - deceptively marketed adjustable rate mortgage loans. Acquired in 2008 by Wells Fargo, the companies sold thousands of so-called “Pick-a-Payment” adjustable rate mortgages in New Jersey by touting the mortgages’ low monthly payment options. However, the companies failed to warn borrowers that choosing the minimum-payment option could lead to a treadmill of debt. Specifically, a borrower’s “low” monthly payment option often failed to cover the interest on his or her loan. This resulted in an increase in the loan’s principal balance, causing the monthly payment to spike well beyond what the consumer expected to pay. Some borrowers became delinquent and faced the prospect of foreclosure. Others ultimately lost their homes. “This case is part of our on-going effort to protect New Jersey consumers, and to assist homeowners who may have fallen victim to misleading or exploitative lending practices,” said Attorney General Dow. “In many cases, those who seek out these ‘minimum payment’ option mortgages are the very people who have the most limited financial resources. Signing them up for loan terms that sound attractive without warning them of the potential financial pitfalls is wrong, and we intend to hold companies that engage in such conduct accountable.” New Jersey homeowners accounted for about 5 percent of the “Pick-a-Payment” loans acquired by Wells Fargo as part of its acquisitions of Wachovia, Golden West and World Savings in 2008. In 2009, the State opened an investigation into whether Wells Fargo and/or the three predecessor companies had violated New Jersey’s Consumer Fraud Act by failing to explain to borrowers how “Pick-a-Payment” worked. The agreement announced today resolves the matter. Under terms of the settlement, Wells Fargo will provide across-the-board forgiveness of accrued interest and late fees for eligible delinquent borrowers who live in the homes on which they took out “Pick-a-Payment” mortgages. Starting on December 18, 2010, the company also will provide loan modification terms that enable affordable payments and reduce principal for some consumers. Modified loan terms will vary according to the circumstances of the borrower, but can include principal forgiveness, loan extension, interest rate reduction, and principal forbearance (which gives the borrower additional time to pay off the loan principal). Borrowers who remain current on their modified payments over three years will earn additional principal forgiveness. Borrowers who qualify may also convert into a fixed rate loan. All modification fees and pre-payment penalties will be waived. The modification program will extend until June 30, 2013. Under Wells Fargo’s projections, which include certain modifications completed during negotiations, the settlement will result in modification of mortgage loans for upwards of 900 eligible New Jersey consumers. The value of those loan modifications will total close to $67 million. Under the settlement, Wells Fargo also has agreed to make a number of servicing commitments to its “Pick-A-Payment” borrowers, including: ■Ensuring adequately staffed help lines to serve consumers, including Spanish-speaking consumers. ■Providing a single, primary point of contact to assist borrowers seeking modifications under this assurance. ■Making decisions on modifications within 30 calendar days of receiving a complete application. ■Establishing a formal “second look” or appeal process for borrowers who are turned down for a modification. ■More clearly communicating with borrowers to avoid confusion during this process. “This settlement is an excellent example of the state using its authority to help New Jersey consumers who may have been financially harmed, or placed in jeopardy of losing their homes, by questionable business practices,” said Division of Law Director Robert M. Hanna. “The agreement provides real relief by forgiving principal as part of a mortgage modification program that is designed to place homeowners in sustainable mortgages, and to keep them in their homes,” said Acting Director of the Division of Consumer Affairs Thomas R. Calcagni. In addition to the loan modifications, Wells Fargo will pay the State $3.98 million. Of that amount, up to $2 million will be distributed as restitution to New Jersey consumers who had a “Pick-a-Payment” mortgage, became delinquent and were forced to leave their homes due to foreclosure or short sale between January 2, 2005 and December 18, 2010. The remaining $1.98 million will be used to support the state’s on-going efforts to combat mortgage fraud and loan modification fraud, and to prevent foreclosures. During its investigation, New Jersey conducted direct interviews with homeowners who complained about the “Pick-a-Payment” mortgages, and surveyed other consumers by mail. Most borrowers said they did not understand what they’d signed up for, and many were dissatisfied after their loans underwent “negative amortization” (where the monthly payment fails to cover the interest on the loan, leading to an increase in the principal balance and, ultimately, greater debt.) New Jersey was a lead state within a multi-state group that investigated Wells Fargo and the “Pick-a-Payment” mortgages, and that ultimately reached settlement with the company. New Jersey consumers who believe they qualify for the restitution program should submit their contact information to the Division of Consumer Affairs’ Web site at www.state.nj.us/lps/ca/wellsfargo. Wells Fargo customers who currently hold “Pick-a-Payment” mortgages and who want information about the loan modification program can call the dedicated Wells Fargo toll-free number at (888) 565-1422. The Division of Law’s Affirmative Litigation Section investigated the Wells Fargo matter in cooperation with the Division of Consumer Affairs. Deputy Attorney General Janine Matton led the investigation in consultation with Deputy Attorney General Megan Lewis, the Section Chief, and Deputy Attorney General Samuel Cornish. From the Division of Consumer Affairs, the investigation was handled by Supervising Investigator Jennifer Micco and Investigator Joseph Iasso. Assistant Attorney General James Savage provided assistance and support to the investigation. Attorney General Dow said the state continues to be concerned about deceptive business practices in the mortgage and foreclosure remediation industries. She explained that the Division of Consumer Affairs is aggressively pursuing these matters whenever New Jersey borrowers are believed to have been victimized by unscrupulous lending, foreclosure or foreclosure remediation practices. (Article From NJ Consumer Affairs Site)

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What's Going On With Mortgage Rates?

The Fallout From QE2

November 19, 2010

After reaching the lowest levels in decades, mortgage rates have shot higher over the past two weeks. There is not a simple explanation for why this happened, but looking at the many factors which are influencing mortgage rates right now will help to understand what's going on. In short, when investors look ahead, they see few reasons for mortgage rates to move lower and many possible causes for them to move higher. The major negatives include stronger than expected economic growth, domestic and foreign opposition to quantitative easing, and concerns about lower foreign demand for US securities.

Beginning in late August, the Fed hinted that they would initiate a new stimulus program to purchase Treasury securities, which is known as quantitative easing. In the short-term, the Fed buying increases demand for bonds, including mortgage-backed securities (MBS). In anticipation of this added demand, investors purchased MBS, which pushed mortgage rates lower. The announcement of the details on November 3, $600 billion through the middle of 2011, was close to expectations.

A couple of days later, mortgage rates begin to move higher for a variety of reasons. Stronger than expected economic data caused investors to raise their outlook for economic growth. Stronger growth decreases the need for additional Fed stimulus, and it generally leads to higher inflation. In addition, there was substantial opposition to the quantitative easing program from other countries and from many US politicians and economists, meaning that the Fed will face strong resistance to an expansion of the program. Investors had viewed the $600 billion figure as a first step which would likely be increased in the future. Stronger economic growth and opposition to quantitative easing reduce the likelihood that the program will be increased and possibly could cause the program to end early. In short, the expected level of added demand from the Fed decreased.

The quantitative easing program pumps dollars into the economy, and the increased supply weakens the value of the dollar relative to other currencies. When foreign investors sell US securities, they must convert the US dollars they receive into their own currency. If the value of the dollar falls, then the value of their US investment falls in relative terms to their own currency. As a result, foreign investors may reduce their purchases of US securities, including mortgagebacked securities (MBS), which would cause yields to increase. This fear of weaker foreign demand hurt mortgage rates.

China's announcement of a rate hike was another negative for US mortgage rates. Yields must rise in other markets to compete with higher yields in Chinese markets. Renewed financial troubles in Ireland and other smaller European countries helped US mortgage rates a little over the past week, but those concerns have mostly passed. The recent news has not been uniformly negative for mortgage rates. Current inflation levels remain extremely low. In fact, the Consumer Price Index data released this week showed that annual core inflation dropped to a record low in October.

Bottom line, though, when mortgage rates reached such extremely low levels, it left them in a position to reverse direction very quickly.

Home Improvement Loan
Two special loans administered through the Federal Housing Administration (FHA) are the Title I and Section 203(k) programs. A Title I loan allows you to borrow up to $25,000 for improvements to a single-family home. These are fixed-rate loans that FHA insures against the risk of default. Loans must be made by an approved Title I lender.

The 203(k) program is not as well known, but if you are looking to purchase a fixer-upper, it is a terrific opportunity. It allows home owners to receive a single, long-term, fixed or adjustable rate loan that covers both the acquisition and rehabilitation of the property. To obtain a loan under the 203(k) program, you must use an FHA-approved lending institution. Most mortgage lenders are approved to make loans through this program.

Call us today to learn what repairs you can include in this type of FHA loan!