Wells Fargo And Mortgage Crisis Fallout
By Scott Blake
With Miami’s housing market still reeling from the mortgage crisis, Wells Fargo Bank is working from both sides of the fallout.
On hand one, Southeast Florida’s largest bank continues to process local foreclosures while, on the other, it is helping local homebuyers with down payments.
The San Francisco-based bank is continuing to work through court backlogs in carrying out foreclosures, Frank Newman, the bank’s regional president for Southeast Florida, told Miami Today.
While the flood of foreclosures has put many people out of their homes, it also has greatly reduced prices on those properties — by an average of 42% in Miami — for the next buyers who come along, statistics show.
Meanwhile, Mr. Newman said, this month Wells Fargo expanded its down payment assistance program to cover eligible homebuyers in all of Miami-Dade County.
Wells Fargo was one the nation’s "Big Five" mortgage servicers targeted in the $25 billion multi-state settlement last year, which included Florida, related to "robo-signing" and other abuses in the mass processing of home foreclosures.
This year, new foreclosure filings industry-wide have escalated in Miami. There were more than 4,000 new filings in March alone, the fourth consecutive month of increases, according to real estate data firm RealtyTrac.
Wells Fargo may face more enforcement action, disclosing in February that its past mortgage-related practices are being investigated by the federal government. The bank said the probe is focusing on the making and packaging of home loans by its Wachovia unit.
Wells Fargo quickly became a leading player in the South Florida banking market following its acquisition of Wachovia at the peak of the financial crisis in late 2008 as losses from Wachovia’s mortgage portfolio were ballooning.
Referring to the mortgage crisis, Mr. Newman acknowledged, "We’ve had our share of it." At the same time, he said, Wells Fargo is reaching out to aspiring homebuyers in Miami-Dade.
The program — called NeighborhoodLIFT — is not part of a government settlement or regulatory mandate, Mr. Newman said.
The bank started the program last year in Miami, offering up to $15,000 in down payment assistance to homebuyers who earn less than 120% of the area’s median income, adjusted for family size. So far, 300 to 400 homebuyers have been helped, Mr. Newman said.
Beginning this month, he said, Wells Fargo doubled the down payment amount to $30,000 per homebuyer and expanded the program to cover homes purchased anywhere in the county.
Although the assistance is technically a loan, it operates more like a grants program. There is a 0% interest rate for the down payment assistance, and 20% of the down payment is forgivable each year over five years.
The only caveats are that buyers must make the homes their primary residence and must attend a homebuyer education program. Homebuyers do not have to repay the down payments if their property is not sold, refinanced or foreclosed on within the first five years of ownership.
And homebuyers do not have to take out a mortgage through Wells Fargo — they can do it through any lender and still qualify for a down payment from Wells Fargo, Mr. Newman said.
He said the program, administered through NeighborWorks America and its affiliates, is aimed at stabilizing neighborhoods hurt by the crisis. By getting homebuyers into homes, he added, "the value of property improves; tax collections improve; the cycle of stability [is enhanced]; and no city wants to have empty [homes]."
Mr. Newman was named to his current position in 2011 to help oversee the conversion from Wachovia to Wells Fargo in Southeast Florida.
As of June 2012, Wells Fargo operated 201 branches in the Miami-Fort Lauderdale-Pompano metropolitan area with more than $30.8 billion in deposits — tops with an 18.36% market share, according to the latest statistics available from the Federal Deposit Insurance Corp.
Mr. Newman said Wells Fargo plans to open a new branch in Hialeah later this year, pending federal approval. The company has about 5,000 employees in Southeast Florida, including many who were Wachovia employees, he said.
In its quarterly earnings report Friday, Wells Fargo reported net income of $5.2 billion in the first quarter — a company record. Meanwhile, the bank reported that it continues to whittle away at eliminating its troubled or weak-performing loans, acquired mostly through the Wachovia purchase.
As of March 31, the bank held "credit impaired" consumer loans for first mortgages valued at a total of $26.08 billion. That was down from $26.84 billion at the end of the previous quarter and down from $39.2 billion at the end of 2008, shortly after the Wachovia purchase, the bank reported.
Mr. Newman said Wells Fargo is now the largest mortgage lender in Southeast Florida, and the bank has hired more home mortgage consultants dedicated to generating new mortgages. He said the bank is encouraged by rising property values in the area.
However, statistics still show that the area’s high rate of foreclosures — among the highest in the nation — continues to be a drag on housing prices, but it also is providing buyers with opportunities for bargains.
According to RealtyTrac, 55,818 properties in Miami are currently in some stage of foreclosure. In March, the number that received a foreclosure filing in Miami was 7% higher than the previous month and 34% higher than the same time last year.
RealtyTrac said the median sale price of a "non-distressed" home in Miami was $189,000 in February, while the median sale price of a home in foreclosure was $109,750, or 42% lower than non-distressed homes.To read the entire issue of Miami Today online, subscribe to e-MIAMI TODAY, an exact digital replica of the printed edition.