NEW YORK (CNNMoney.com) -- Wells Fargo, in an agreement with California's attorney general announced Monday, said it would provide $2 billion worth of loan modifications to nearly 15,000 homeowners.
Under the deal, the bank is also paying a total of $32 million to borrowers who lost their homes to foreclosure, according to the AG.
"Customers were offered adjustable-rate loans, with payments that mushroomed to amounts that ultimately thousands of borrowers could not afford," said Brown, who takes over as California's governor next month. "Recognizing the harm caused by these loans -- Wells Fargo accepted responsibility and entered in this settlement with my office."
Pick-a-pay loans, where the rate changes throughout the life of the loan, became notorious during the housing market meltdown. According to the AG's office, payments often started low -- at levels that were "insufficient to cover the monthly interest owed, and the unpaid interest was added to the loan balance." The loans would ultimately increase "dramatically," soaring to unaffordable heights for the homeowner and creating the risk of foreclosure.
In addition to the loan modifications, Wells Fargo will pay $32 million in restitution to more than 12,000 pick-a-pay borrowers who lost their homes through foreclosure in California.
The attorney general noted that the loans were not made by Wells Fargo, but by banks that it acquired: World Savings and Wachovia.
Wells Fargo stated that so far it has already extended significant home payment relief to more than 50,000 at-risk, pick-a-payment homeowners in California -- through interest rate reductions, term extensions, tax forgiveness, insurance advances and principal forgiveness.
|Overnight Avg Rate||Latest||Change||Last Week|
|30 yr fixed||4.23%||4.19%|
|15 yr fixed||3.26%||3.27%|
|30 yr refi||4.22%||4.18%|
|15 yr refi||3.26%||3.26%|
Today's featured rates:
Law enforcement officials say Frank Tamayo was the middleman in a $5.6 million insider trading scheme that involved him eating pieces of paper to cover up the crime. More
Scotland's clear rejection of independence has eased fears that it could suffer the kind of decline seen in Quebec after it failed to break away from Canada. More
As Occupy Wall Street goes on its debt-abolishing tear, thousands of people across the country are begging them to forgive their loans. More