Wells Fargo said to U.S.House Reps we did not need the $25 billion bailout money given to banks ~they made us take it!
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PROGRESS OF THE MAKING HOME AFFORDABLE PROGRAM: WHAT ARE THE OUTCOMES FOR HOMEOWNERS AND WHAT ARE THE OBSTACLES TO SUCCESS? HEARING BEFORE THE SUBCOMMITTEE ON HOUSING AND COMMUNITY OPPORTUNITY OF THE COMMITTEE ON FINANCIAL SERVICES U.S. HOUSE OF REPRESENTATIVES ONE HUNDRED ELEVENTH CONGRESS FIRST SESSION SEPTEMBER 9, 2009
Chairwoman WATERS. Thank you very much. Before I dismiss the panel, I would like to just recognize myself to share with you some of the lessons I have learned as I have worked very closely with my staff in learning how to contact servicers, how to work with servicers. I get waivers from my constituents who are trying to seek some help and I get on the telephone with servicers and my constituents and I walk through the process, so I know a lot about it. I have not yet encountered a situation where the documentation for income and debt was not required on a loan modification, and I am going to take a look at the ones that were not handled that way, and I will be in contact directly with you about them since you have testified a bit differently here today about how you are doing some of that. The other thing that I have encountered is this: Some of the big servicers, big banks, have bought up these loans from other small mortgage companies along the way, and clearly there is fraud. You hire lawyers to do foreclosures. How many of you hire lawyers to deal with fraud when you see it? Wells Fargo, let me just ask, have you, your servicers, encountered some of the mortgages that are clearly fraudulent where the signatures have been falsified? A lot of income falsification that clearly was not true, what do you do with that kind of information when you encounter it?
Ms. COFFIN. Well, if we do encounter loans that definitely come to our attention that have fraudulent behavior, yes, we do bring that to the attention. Unfortunately, many of the companies who originated those loans are out of business. And, number two, I will tell you that— Chairwoman WATERS. But the homeowner—you bought the loan. When you bought the loan from this mortgage company, you had to vet it. You had to look at it to see what you were buying, right? Well, maybe you didn’t. Ms. COFFIN. Not loan by loan.
Chairwoman WATERS. Not loan by loan. You bought packages, okay. So if you see fraudulent loans where the homeowner has been basically defrauded, what do you do? How can you help that homeowner?
Ms. COFFIN. I think one of the things that is toughest to do is determine where the fraud came from. Chairwoman WATERS. Well, I know where it came from. It is very clear. It came from the person you bought them from. Ms. COFFIN. But stated income, stated assets, which is where some of those loans that we acquired, determining the fraud—
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Chairwoman WATERS. Well, but I have some where someone said, ‘‘That is not my signature; I didn’t sign that.’’
Ms. COFFIN. That would be hard to determine.
Chairwoman WATERS. No, it wouldn’t. All right. So—okay. Well, let’s look at another kind of fraud that I have run into. Well, it is not fraud really. Let me look at another case. I have constituents who need a loan modification and they are earning the same amount of money at the time that they requested a loan modification as they were earning when they got into the loan, when you accepted them into the loan. It is no different. You accepted them into the loan with what appears to be a lack of adequate income to service that mortgage. They discover along the way that they cannot service that mortgage. It may be a reset, what have you. But then they are asking for a loan modification, and they are told, ‘‘You don’t have enough income.’’ But they had enough income when they got the mortgage. What do you do about that? Bank of America, have you encountered that? Have any of you done loan modifications? How many people have actually done a loan modification? So what do you do when you encounter someone whose income is exactly the same, when they request a loan modification, as it was when they signed on the dotted line for the mortgage; and now you are saying to them, ‘‘You don’t qualify; you don’t make enough money?’’ How do you make that decision?
Mr. SCHAKETT. Well, first of all, we don’t compare really what they were making at origination. And the comment about them not having enough money—
Chairwoman WATERS. I beg your pardon?
Mr. SCHAKETT. I am saying, we don’t make a comparison back to say what they did at the origination time. The MHA program is set up to say how much income they have, use a 31 percent debtto-income ratio.
Chairwoman WATERS. Let’s forget about the 31 percent. Ms. Jones had an income of $3,000 a month. She got a home that cost $500,000. She couldn’t afford the loan then and she certainly can’t afford it now. It has reset. She has the same income. What do you do?
Mr. SCHAKETT. Well, could she not afford the same modified payment if we actually reduced the payment down to her level of income to make it affordable? Could she not afford that payment?
Chairwoman WATERS. No. What you are telling her is, she can’t modify because she doesn’t make enough money to even get a modification.
Mr. SCHAKETT. Well, since the MHA program allows interest rates as low as 2 percent, 40-year terms with forbearance up to 30 percent— Chairwoman WATERS. You think you can work something out for her?
Mr. SCHAKETT. For the vast, vast majority of the customers, we certainly could be able to have an offer for her. We would have to understand the particular circumstances. But definitely the proVerDate Nov 24 2008 18:06 Mar 31, 2010 Jkt 054863 PO 00000 Frm 00054 Fmt 6633 Sfmt 6633 K:\DOCS\54863.TXT TERRIE 49 gram has very nice low floors for interest rates and forbearance amounts that should make the payment affordable for the vast majority of people.
Chairwoman WATERS. Well, I am going to call you about some that we have worked on that fit into that category. The other thing that I wanted to ask you about is, I think you did refer to what Mrs. Capito alluded to when you said you do forbearance in order to provide assistance to homeowners who have no income or little income, or maybe just unemployment and they need some time. Wells Fargo, you and Bank of America and Chase, you guys all say that you help these people with forbearance. Is that right? All right. I am going to call you directly on the ones that we have that have been turned down. Now, one last question I want to ask. It has been said that it is more profitable to not do a foreclosure in some cases than to do a foreclosure. I think, Ms. Cohen, you were the one that tried the explain to us how servicers rush to foreclosure rather than modification because it is not in their best interest to do it. Would you explain that one more time?
Ms. COHEN. Sure. Thank you. When a homeowner stops making payments on the loan, the servicer is still required to advance those payments to the investors. And so one of the challenges for the servicers is to figure out how to finance those advances, because they are generally financed, and how to get the money back to pay back the financing. And when you result in a foreclosure, in general, the pooling and servicing agreements allow the servicer to get paid back first from the foreclosure before the investors get any money. So the servicer gets paid back faster and in a more sure way from the foreclosure. When is a loan modification, the investors still have priority. In general, they don’t get paid first, the servicer doesn’t get paid first. And the servicer has a way of recovering the money, but it is not as sure and it’s not as fast. Chairwoman WATERS. So let me just ask—Ms. Sheehan, Chase Home Lending, JPMorgan Chase, are you, as servicers, advancing payments to the investor?
Ms. SHEEHAN. Yes, we do. But I will say for JPMorgan Chase, we do not need financing for our advances. We have a strong capital base, and it is not in our interest to rush to foreclosure. It is not economic if the loan is positive from a net present value perspective, whether we own the loan or whether we service the loan, because for our investors we have an obligation to do the thing that is best for the investor. Chairwoman WATERS. Wells Fargo, are you advancing the payments, the mortgage payments, to the investors also?
Ms. COFFIN. Yes, we are. And I would concur with all of Ms. Sheehan’s comments. We also have a very strong balance sheet. We are not looking for refinancing, and foreclosure is never a better option.
Chairwoman WATERS. Is this strong balance sheet because of the citizens’ investment in your banks, in your bailouts? VerDate Nov 24 2008 18:06 Mar 31, 2010 Jkt 054863 PO 00000 Frm 00055 Fmt 6633 Sfmt 6633 K:\DOCS\54863.TX
You cannot make this stuff up
Pg.50 on the PDF file:
Ms. COFFIN. No. Wells Fargo has been a AAA bank and we have a strong balance sheet. Chairwoman WATERS. You did get money from the bailout, didn’t you?
Ms. COFFIN. Yes. And we are—
Chairwoman WATERS. How much did you receive?
Ms. COFFIN. $25 billion.
Chairwoman WATERS. You didn’t need it?
Ms. COFFIN. We are working to return those funds.
Chairwoman WATERS. But you didn’t need it when you got it?
Ms. COFFIN. No. Chairwoman WATERS. You just took it? They made you take it?
Ms. COFFIN. Yes.
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