Wells Fargo refinances more loans than expected from settlement

by KW Calabasas on General August 14th has no comments yet!

With interest rates at record lows, Wells Fargo & Co. is refinancing twice as many home loans as it expected as a result of its settlement of mortgage probes by federal agencies and 49 states.
In its second-quarter earnings filing with the Securities and Exchange Commission, Wells Fargo said it expects to refinance as many as 40,000 borrowers with loan balances totaling up to $8 billion under one of the settlement’s provisions.
The San Francisco bank is the nation’s largest residential mortgage firm. Its first-quarter report to the SEC had estimated it would refinance up to 20,000 borrowers owing a total of about $4 billion on their mortgages.
The customers being given new loans under the settlement are not delinquent on their mortgage payments, Wells Fargo said in the SEC filing Monday. But they have little or no equity remaining in the properties, which normally would preclude them from refinancing.
That contrasts with the troubled borrowers who will be helped by another part of the settlement, which requires reduction of the amount owed for certain delinquent borrowers.
Wells Fargo estimated that it would reduce the rates on the refinanced loans by 2.6 percentage points on average. That is expected to reduce its interest earnings by $1.4 billion to $1.7 billion over eight years, the average life of the loans, compared with its previous estimate of $720 million in reduced revenue.
The lower interest earnings are on loans kept on Wells Fargo’s own books, such as jumbo mortgages and home-equity loans, bank spokeswoman Vickee Adams said. Wells Fargo and other lenders also are refinancing huge volumes of standard loans for sale to government-supported loan buyers Freddie Mac and Fannie Mae.
Refinancing certain borrowers into lower-interest loans was one of the requirements included in the settlement among the government agencies, which included the federal departments of justice, treasury, housing and veterans affairs, and the five largest mortgage lenders.
In addition to Wells Fargo, the lenders are Bank of America Corp., JP Morgan Chase & Co., Citigroup Inc. and Ally Financial Inc.
They had been accused of widespread wrongdoing in their handling of troubled borrowers and in their processing of foreclosures. The offenses included having employees certify certain facts to courts without determining if they were true, a practice known as robo-signing.

By E. Scott Reckard – Los Angeles Times

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