Wells Fargo steps up pace of mortgage relief

Wells Fargo & Co. has dramatically accelerated relief to troubled homeowners under an Obama administration foreclosure-prevention program, defusing some early criticism that the bank was moving too slowly to modify mortgages.

The U.S. Treasury Department said Thursday that Wells Fargo, the nation's largest home lender, has reduced mortgage payments for nearly 63,000 homeowners through September under the federal Home Affordability Modification Program, or HAMP. About 20 percent of Wells Fargo borrowers eligible for relief under the program have received three-month trial modifications -- up from 11 percent in August and just 6 percent in July, the U.S. Treasury said.

The improvement stems in large part from changes in the way Wells Fargo processes loan modifications. The bank now approves many three-month trial modifications over the telephone, rather than waiting for homeowners to submit all the paperwork. In addition, Wells Fargo has nearly doubled the number of people focused on home retention to 13,000 people nationwide.

"This is reflective of our willingness to keep people in their homes." said Teri Schrettenbrunner, a Wells Fargo spokeswoman.

Yet, frustrations with the overall pace of loan modifications remain. Thousands of borrowers who received temporary relief from Wells Fargo and other major banks have yet to receive permanent relief, even though their three-month trial periods have expired. Many homeowners have asked repeatedly to be enrolled in the federal program, only to be offered alternative bank-run programs that offer less relief.

A spokeswoman with the U.S. Treasury, which oversees the federal program, declined Thursday to reveal how many homeowners have actually received permanent loan modifications, as opposed to the three-month trials. Wells Fargo also declined Thursday to disclose how many of its customers have received final loan modifications, though a spokeswoman said the data may be available soon.

"This is a government program that's being funded by tax dollars," said Mark Ireland, supervising attorney for the Foreclosure Relief Law Project, a nonprofit law firm in St. Paul that has filed a class lawsuit asking a federal judge to halt foreclosures until those eligible for relief under the federal program are evaluated. "We deserve to know how many people are getting final loan modifications."

However, struggling homeowners don't have many options. A trial loan modification that reduces a homeowner's monthly mortgage payment, even temporarily, is still preferable to foreclosure. Area loan counselors say they are encouraging borrowers to be patient and to keep making payments.

'I feel fortunate'

Paul Karlson, 41, a Minneapolis homeowner, said he received a three-month modification from Bank of America about five months ago, which he sought after his work hours were reduced. He said he doesn't mind waiting for a permanent restructure, so long as he can stay in his house. "I feel fortunate, because this [trial modification] is what prevented me from being homeless," he said.

The U.S. Treasury unveiled its loan modification program in February as part of a broader effort to reduce the pace of foreclosures nationally, expected to reach 3 million this year. Mortgage companies such as Wells Fargo would be paid $1,000 for each loan they modified, then $1,000 a year for up to three years. In July, Treasury officials, frustrated by the slow pace of modifications and besieged with homeowner complaints, urged lenders to hire and train more staff.

So far, performance has varied dramatically among the 50-some lenders that participate in the program. Leading the pack among major banks is Citigroup, which has started trial modifications on 33 percent of eligible borrowers through September. J.P. Morgan Chase, meanwhile, is at 27 percent, while Bank of America has modified just 11 percent of eligible mortgages. Nationwide, 16 percent of those eligible are getting relief under the federal program.

Some banks are late entries to the Obama administration program, which has made gauging the program's success difficult.

U.S. Bancorp, for instance, only began offering trial modifications under the program Sept. 9. The U.S. Treasury said the Minneapolis-based bank has offered trial modifications to just 3 percent of eligible borrowers. However, a spokesman for U.S. Bancorp says the government numbers are skewed because they don't include all of its loan modifications. The bank actually modified 16 percent of eligible mortgages in September, the spokesman said.

U.S. Bancorp is resubmitting its data to the U.S. Treasury.

Chris Serres • 612-673-4308