MORTGAGE UPDATE:
Lending update courtesy of MS&C Mortgage,
an affiliate of Wells Fargo

Market in Review: The Wells Fargo View

Wells Fargo is a strong, sound mortgage lender and servicer. Our business is uniquely positioned to succeed in today’s challenging market. Here is our insight on current conditions, and how we will continue to responsibly make loans to customers across the credit spectrum.

President Signs Housing and Economic Recovery Act of 2008 Into Law

Heralded as the most sweeping housing reform since the “New Deal,” the Housing and Economic Recovery Act of 2008 includes the creation of a strong regulator for Fannie Mae and Freddie Mac, changes in conforming and Federal Housing Administration (FHA) loan limits, a comprehensive modernization plan for FHA, and the HOPE for Homeowners plan, which may help as many as 400,000 distressed homeowners by refinancing them into government-backed loans.

To qualify for the HOPE for Homeowners plan, eligible borrowers must have spent more than 31% of their monthly income on their mortgages as of March 1, 2008. The troubled loan must have been originated no later than Jan. 1, 2008, and be secured by the borrower’s primary residence. Additionally, the borrowers must also be able to verify their income.

Another part of the plan is the first-time homebuyer credit for qualifying homebuyers for purchases on or after April 9, 2008 and before April 1, 2009. The refundable tax credit is equal to 10% of the purchase price of a residence and not to exceed $8,000. It requires taxpayers who receive the credit to repay it over 15 years in equal installments by imposing a surcharge on the taxpayer’s annual income tax.

While questions remain about when major provisions of the bill will actually be implemented, the HOPE for Homeowners program is scheduled to start Oct. 1, 2008 and be available through September 2011. Lenders’ participation in the program is voluntary.

The Wells Fargo View: Wells Fargo has long advocated stronger oversight of Fannie Mae and Freddie Mac, as well as modernization of FHA, and views these reforms as beneficial in stabilizing the mortgage markets. Given the tremendous impact this legislation will have on the industry, WFHM is assessing the components of the new law, and working with the various agencies to ensure crisp, accurate implementation.

Mortgage Servicers Set Monthly, Quarterly Records for Helping Homeowners Avoid Foreclosure

The HOPE NOW Alliance, a national alliance of mortgage servicing companies, investors and non-profit counseling agencies formed to help at-risk homeowners facing foreclosure or difficult adjustable-rate mortgages, announced that mortgage servicers helped a record number of homeowners avoid foreclosure in June 2008 and the second quarter of 2008.

The HOPE NOW Alliance estimated that on an industry-wide basis:
• The total number of foreclosures prevented since July 2007 has risen to approximately 1.9 million.
• In June, more than 181,000 workouts were completed and in the second quarter 2008, servicers completed more than 522,000 workouts – which include loan modifications and repayment plans.
• So far, HOPE NOW has sent almost 1.9 million letters to consumers who may be at risk of losing their homes
• About 18% of homeowners receiving the HOPE NOW coordinated letters have contacted their servicer, 6 times more than the routine 2-3% response rate servicers receive when they send their own mailings.

The Wells Fargo View: The Wells Fargo Servicing team recently conducted a study of consumers who were 60 or more days past due on their loans and were not in foreclosure or bankruptcy. For every 10 of these customers, we were able to offer solutions to 7, 2 declined our help, and the remainder were either unreachable or a solution could not be found. This demonstrates our steadfast commitment to not only making homeownership achievable, but also sustainable for our customers.

It’s critical to reach out to your mortgage servicer as soon as possible if you have difficulty paying your mortgage. Typically, the sooner a servicer knows, the more options may be available.

Industry Second Quarter Earnings

Earnings of some financial institutions weren’t as “bad” as investors originally expected, causing the stock market to rally in mid-July, and the industry to reassess their definition of “bad.”

In addition to earnings news, tax rebates from the stimulus package encouraged consumer spending. According to a July 31 report by the Commerce Department, consumers boosted their spending at a 1.5% pace in the second quarter – up from a 0.9% growth rate in the first quarter 2008.

The Wells Fargo View: Wells Fargo & Co. reported a $1.8 billion profit, or 53 cents per share, for the second quarter 2008. A MarketWatch.com article released after Wells Fargo & Co.’s earnings announcement had this to say about our company: "This is a major victory for the banking business, and these guys need to be held up as the 'poster child' of present and future banking activities. “We continue to lead the mortgage industry in recommending reforms that balance the needs of customers with those of investors to ensure the long-term viability of the industry.

New Regulator For Fannie Mae and Freddie Mac

The Federal Housing Finance Agency is the new regulator for Fannie Mae, Freddie Mac and the Federal Home Loan Banks. According to a July 23 Wall Street Journal article, Treasury Secretary Henry Paulson said in a recent speech that the stability of Fannie Mae and Freddie Mac was key to erasing uncertainty in the U.S. financial markets.

The new, stronger regulator for the housing Government Sponsored Entities (GSEs) is independent and funded outside the appropriations process, and has improved general regulatory authority, additional discretion over GSE capital levels, and the ability to set rules governing their portfolio holdings.

Fannie Mae and Freddie Mac also must now submit any new products for the regulator to approve before they can offer them, and they will have revised affordable housing goals. Finally, the legislation gives the U.S. Department of Treasury the authority to increase existing lines of credit available to Fannie Mae, Freddie Mac and the Federal Home Loan Banks, and to invest in obligations of the GSEs if the Secretary determines that doing so is necessary to stabilize the markets, maintain liquidity and protect taxpayers.

The Wells Fargo View: The GSEs play an important role in ensuring the long-term stability of the mortgage market. Wells Fargo will continue to work closely with these agencies to help support leading the industry out of the current mortgage market turmoil and to promote a vital mortgage market in the future.

Wells Fargo & Company is a diversified financial services company with $575 billion in assets, providing banking, insurance, investments, mortgage and consumer finance to more than 23 million customers from almost 6,000 stores and the internet (wellsfargo.com) across North America and elsewhere internationally. Wells Fargo Bank, N.A. is the only bank in the U.S., and one of two banks worldwide, to have the highest possible credit rating from both Moody's Investors Service, "AAA," and Standard & Poor's Ratings Services, "AAA." Information is accurate as of date of printing and subject to change without notice. Wells Fargo Home Mortgage is a division of Wells Fargo Bank, N.A. © 2008 Wells Fargo Bank, N.A. All rights reserved.