Wells Fargo: Widespread principal reduction needed
Five years into the foreclosure crisis, a record number of Americans continue to struggle to keep their homes.
So many struggling homeowners can afford their homes at current market value, but are being kept stuck in bubble-era inflated mortgages. These families are needlessly losing their homes, only to see those properties sit vacant or be re-sold for less than what they would have been willing to pay.
We cannot wait for the underwater crisis to heal itself.
Without more aggressive intervention, it will continue to undermine the health and safety of families, communities and our financial system. CoreLogic’s most recent report says that negative equity has fallen back to the third quarter 2009 “housing market trough” level, with 11.1 million families underwater on their loans – nearly one out of every four mortgage holders. These families collectively hold $717 billion in underwater debt.
Economists from across the political spectrum agree that this massive overhang of underwater debt is the biggest drag on achieving a broader economic recovery.Research shows that principal reduction is key for reducing re-default rates and keeping families in their homes over the long term.
One servicer, Ocwen has begun to systematically write down principal. Even Bank of America pledged last month to reduce principal balances by up to $100,000 for as many as 200,000 underwater homeowners. More and more servicers are doing the math and finding that writing down mortgages and keeping people in their homes is a better business decision.But Wells Fargo continues to refuse to conduct more wide-scale principal write-downs.
The solution:
Mortgage Resets: Wells Fargo should initiate a comprehensive principal and interest reduction program that resets mortgages to present market value and offers families affordable monthly payments for loans Wells Fargo owns and services.
Halt Foreclosure: Wells Fargo should keep all families at risk of foreclosure in their homes through an immediate moratorium on all foreclosures, property auctions and evictions.
Transparency and accountability: Wells Fargo should immediately begin “showing the note”, proving chain of title through legal documentation to borrowers to prove they in fact are the rightful owners of the mortgage being foreclosed upon.
Prepared by The New Bottom Line. 1 - Moody's ResiLandscape, Jan. 20, 2012
Win/Win - How writing down principal breaks the cycle
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