Wells Fargo 2011 Annual Report Download - page 77

forgiveness of forbearance amounts on existing loan
modifications – 40% credit;
earned forgiveness over no more than a 3 year period:
85% credit for LTV less than or equal to 175%; 45% credit for
forgiveness over 175% LTV;
second lien principal forgiveness: 90% credit for loans
90 days or less delinquent; 50% credit for loans greater than
90 but less than 180 days delinquent; 10% credit for loans
180 days more delinquent. Subject to a number of
requirements, servicers participating in the settlement will be
obligated to implement second lien principal forgiveness on
second mortgages it owns when another participating
servicer reduces principal on a first mortgage via its
proprietary non-HAMP modification programs (must
constitute at least 60% of the Consumer Relief Program
credits when combined with the first lien principal
forgiveness credits);
deficiency balance waivers on first and second lien loans:
10% credit;
short sale deficiency balance waivers on first and second lien
loans: 20% to 100% credit depending on whether the
servicer, servicer/lien holder or investor incurs the loss;
payment arrearages forgiveness for unemployed borrowers:
100% credit;
transitional funds paid to homeowners in connection with a
short sale or deed-in-lieu of foreclosure for payments in
excess of $1,500: 45% credit if a non-GSE investor bears the
cost or 100% if the servicer bears the cost;
anti-blight – forgiveness of principal associated with
properties where foreclosure is not pursued: 50% credit;
anti-blight – cash costs paid by servicer for property
demolition – 100% credit; and
anti-blight – donation of real estate owned properties to
qualifying recipients such as non-profit organizations:
100% credit.
Additionally, the Consumer Relief Program limits the total
amount of credits that may be applied toward the $3.4 billion
commitment from certain activities such as:
credits from deficiency balance waivers are limited to 10% of
credits under the Consumer Relief Program;
credits for forgiveness of forbearance are limited to 12.5% of
credits under the Consumer Relief Program; and
anti-blight provisions are limited to 12% of credits under the
Consumer Relief Program.
We will begin to receive credit towards satisfaction of the
requirements of the Consumer Relief Program for any activities
taken on or after March 1, 2012. We can also receive an
additional 25% credit for any first or second lien principal
reduction taken within one year from March 1, 2012. Because we
will not receive dollar-for-dollar credit for the relief provided in
some circumstances, the actual relief we provide to borrowers
will likely exceed our commitment. The terms also require that
we satisfy 75% of the commitments under the Consumer Relief
Program within two years from March 1, 2012. If we do not meet
this two-year requirement and also do not meet the entire
commitment within three years, we are required to pay an
amount equal to 140% of the unmet commitment amount. If we
meet the two-year commitment target, but do not meet the
entire commitment amount within the three years, we are
required to pay an amount equal to 125% of the unmet
commitment amount. We expect that we will be able to meet our
commitment (and state-level sub-commitments) on the
Consumer Relief Program within the required timeframes.
We expect to be able to meet our Consumer Relief Program
commitment primarily through our first and second lien
modification and short sale and other deficiency balance waiver
programs. We have evaluated our commitment along with the
menu of credits and believe that fulfilling our commitment
under the Consumer Relief Program has been appropriately
considered in our estimation for the allowance for loan losses as
well as our cash flow projections to evaluate the nonaccretable
difference for our PCI portfolios at December 31, 2011.
Refinance Program
The Refinance Program is intended for borrowers in good
standing who are not experiencing financial difficulty, but are
not able to take advantage of refinancing at lower rates to lower
their payments because they have little or negative equity in
their home. The terms of the pending settlement for the
Refinance Program require that we provide notification to
eligible borrowers indicating that they may refinance under the
program. The minimum eligibility criteria for the program are as
follows:
must be Wells Fargo owned first lien mortgage loan on
property that is occupied;
loan must be current with no delinquencies in the last
12 months;
must be fixed rate, adjustable rate, or interest-only
mortgages with an initial period of five years or more;
current LTV is greater than 100%;
loans originated prior to January 1, 2009;
loans must have a current interest rate of at least 5.25% or
100 basis points above the Freddie Mac current primary
mortgage market survey rate, whichever is greater;
the minimum difference between the current interest rate
and the offered interest rate under the Refinance Program
must be at least 25 basis points or there must be at least a
$100 reduction in monthly payment; and
the maximum unpaid principal balance must be below the
GSE lending limit applicable to the respective state where the
property is located.
Additionally, there are defined exclusions from the eligibility
criteria such as FHA/VA loans, properties outside the 50 states,
the District of Columbia and Puerto Rico, and loans for
borrowers who have been in bankruptcy or foreclosure anytime
in the prior 24 months. We are also permitted to extend the
Refinance Program to borrowers beyond the minimum eligible
population detailed above provided they have an LTV over 80%
and would not have qualified for a refinance under our other
offered refinance programs in existence as of
September 30, 2011. The structure of the refinanced loans can
vary to include interest rate reductions for the entire life of the
loan or, depending on current interest rates, a minimum of
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