Foreclosure prevention

Wells Fargo agrees to modify second mortgages




SAN FRANCISCO – March 18, 2010 – Facing criticism over the slow progress of its foreclosure-prevention efforts, the Obama administration has struck deals with two giant banks that would extend mortgage relief to homeowners with second mortgages.

Wells Fargo & Co. said Wednesday that it has agreed to modify home-equity loans in cases where borrowers have already qualified for relief under the U.S. Treasury’s mortgage-modification program. Wells Fargo joined Charlotte, N.C.-based Bank of America, which made a similar announcement in January.

Together, the two banks account for 25 percent of the second-mortgage market in the United States, according to the U.S. Treasury.

Consumer advocates say a key weakness with the government’s $50 billion foreclosure-prevention program is that mortgage modifications leave second loans unchanged. Borrowers qualifying for lower mortgage payments risk default because of large payments on a home equity loan. Some homeowners owe more on a second mortgage than the first.

The U.S. Treasury, recognizing the second-mortgage problem, last summer began urging large banks to modify those loans, too.