Wells Fargo Pays $24 Million To End Investigation Over Dubious Mortgages
WASHINGTON (AP) -- Wells Fargo & Company is paying $24 million to end an investigation by eight states into whether lenders acquired by the bank made risky mortgages to consumers without disclosing their perils.
The states said loans known as option adjustable-rate loans, or pick-a-payment mortgages, were deceptive. Those loans allowed borrowers to defer some interest payments and add them to the principal balance. Borrowers could make payments so low that loan debt each month.
Wells Fargo announced the agreement Wednesday with attorneys general in Arizona, Colorado, Florida, Illinois, Nevada, New Jersey, Texas and Washington State.
The loans were made by the Wachovia Corporation and a California company it acquired, World Savings Bank. Wells bought Wachovia at the end of 2008. Wachovia had already stopped making those loans before that acquisition.
As part of the agreement, Wells has agreed to offer loan assistance worth more than $770 million to more than 8,700 borrowers through June 2013, though that amount will depend on how the economy fares. The $24 million will be used to help states reach out to such customers.
The agreement includes no admission of wrongdoing by Wells Fargo.