New tack in fighting foreclosures

For decades, when Wells Fargo & Co. tried to reach struggling homeowners who had fallen behind on their mortgages, the bank had just a few options: It could call, send letters or knock on doors.

But with the foreclosure rate still rising, nationally and in the Twin Cities, the San Francisco-based bank is turning to the cities of Minneapolis and St. Paul for help in reaching troubled homeowners. Early next year, Wells Fargo and the two city governments will hold joint workshops where people late on their mortgages can apply to have their loan payments reduced.

Significantly, invitations to the events will have Wells Fargo's and the city's names on the envelopes and letterheads, which the bank hopes will make them appear more official and thus harder to ignore.

This marks the first time that Wells Fargo, Minnesota's largest home lender, has joined with city governments to reach struggling homeowners, a spokeswoman for the bank said. Wells Fargo executives announced the partnership a day after the Mortgage Bankers Association announced that 6.98 percent of nearly 900,000 mortgage holders in the state, or about 62,000 Minnesotans, had fallen behind on their payments in the third quarter. It was another record high.

Speaking before a media event in St. Paul's Frogtown neighborhood, Jon Campbell, Wells Fargo's chief executive for the Minnesota region, said the bank needs to find new ways to reach the "significant portion" of delinquent homeowners who walk away from their mortgages without ever telling the bank. Many, he said, ignore the bank's calls and letters and just mail in their keys.

"Families who are struggling, there are a ton of emotions," Campbell said. "There's fear, anger, frustration and embarrassment. When the lender is calling, those emotions are triggered. Unfortunately, the bank is not always loved. ... If we can get some other partners, it increases the likelihood that this emotion will be overcome and we'll be able to establish contact" with mortgage holders.

Wells Fargo isn't the first bank to work with the cities, but it is the largest.

The goal of the alliance is to help homeowners, but also to revive neighborhoods where foreclosures have hit hardest. A study by Mark Ireland of the Foreclosure Relief Law Project in St. Paul confirmed what many people already suspect: Foreclosures pose a safety threat to many neighborhoods. Ireland randomly selected 100 foreclosed properties in Minneapolis, and found that they received an average of eight 911 calls -- the vast majority (74 percent) after the redemption period was over and the house was owned by a lender.

"We all have a vested interest in preserving the stability of the communities where our customers live," Campbell said.

Still, it took some urging from city leaders to get Wells Fargo to the table.

Two years ago, St. Paul Mayor Chris Coleman sent formal letters to Wells Fargo and five other large mortgage lenders in St. Paul, urging banks to work with the city to address the rising number of foreclosures.

The letters were designed to call attention to the crisis, but the city also made it clear that it might resort to litigation if nothing was done, Coleman said.

"It was kind of a carrot-and-stick approach" with the banks, he said after the media event Friday. "Other communities have gone immediately to the courtroom. And we said ... we'd rather be cooperative instead of litigious."

The result announced Friday is a commitment by Wells Fargo and the cities to reach out to struggling homeowners, though both sides were vague concerning details.

There would be an unspecified number of workshops in which borrowers could apply for assistance through the U.S. Treasury's Home Affordable Modification Program (HAMP), a program for reducing monthly mortgage payments. The bank has also agreed to help stabilize neighborhoods by identifying blighted properties and donating them to the cities or to nonprofit groups. On Friday, Wells Fargo presented each city with a $62,500 grant to help first-time home buyers with down payments.

However, the scope of the alliance is still undefined. For the time being, the bank and the cities have not set targets for how many people they expect will benefit through the partnership. Nor do they have any estimates about how many houses will be saved from foreclosure.

"Benchmarks will be forthcoming," Wells Fargo spokeswoman Peggy Gunn said.

Chris Serres • 612-673-4308