Wells Fargo & Co. has agreed to pay nearly $1 million in restitution to Maryland residents who lost their homes to foreclosure after receiving so-called "Pick-a-Payment" mortgages.
In an agreement with the state Consumer Protection Division and announced Thursday by the Maryland Attorney General's office, Wells also agreed to consider modifying the mortgages of customers who signed "Pick-a-Payment" contracts and are still in their homes.
The mortgages gave borrowers several different payment options, including one that let them pay less than the actual amount of interest due. They loans were written by either Golden West Financial or Wachovia Corp., which acquired Golden West in 2006. Wells took over teetering Wachovia at the height of the financial crisis in 2008.
The state consumer watchdog said that Golden West and Wachovia used deceptive marketing practices to attract borrowers to its adjustable-rate mortgages, some of which offered teaser rates as low 1%. About 250 borrowers with "Pick-a-Payment" loans are believed to have lost their homes after rates adjusted and they quickly falling behind on mortgage payments.
Under the agreement, first reported by the Baltimore Sun, Wells will pay those borrowers $940,056 in restitution. Wells also said it will consider modifying mortgages for other borrowers using the federal Home Affordable Modification Program or its own modification program