Wells Fargo came in second only to JP Morgan Chase in 2010 in terms of net income. The bank has reported a net income of $12.4 billion for 2010, surpassing their income from 2009. In 2009 the bank became the top mortgage lender and stayed on top in 2010. The bank originated $386 billion in home loans while competitors like Bank of America spent the majority of their time trying to recover from troubled mortgages.

“Wells is in a uniquely strong position to continue to outperform its peers,” says Andrew Marquardt, an analyst at Evercore Partners in New York. “They have weathered the storm far better than most.”

While other banks are still struggling with the impact of the mortgage crisis, Wells Fargo seems to have pushed through to the other side. This does not mean that they have not had their fair share of difficulties along the way. Back in 2008 when the bank bought Wachovia they inherited a portfolio full of option-ARM mortgages. These mortgages tend to have a history of high default rates. To date, Wells Fargo still has $90 billion worth of unpaid principals from this batch of loans, so they could still have difficulties with these loans down the road. When Wells took on the loans however, they did take the precaution of setting aside $26 billion to cover losses and they still have not exhausted these funds.

Looking ahead Wells Fargo is planning to branch out to new opportunities, possibly lending to mid size businesses. During 2011 the bank plans to increase its work force by 10% in the area of business lending. Currently they have 2,400 employees who work with businesses that have somewhere between $10 million and $500 million in revenue.

Additionally, the bank plans to begin offering a wider variety of other types of loan products and letting their local branch salespeople have the authority to make these loans. Currently Wells Fargo operates 187 commercial banking branches in locations around the US.

Reference:

http://www.businessweek.com/magazine/content/11_06/b4214043656537.htm

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Even though many homeowners have looked into this trial modification plan, many have stated that is exceedingly difficult to actually obtain such a modification to their mortgage. Many homeowners have also complained of an extended stay in the trial modification and periods where they were seeking a more long term modification option.

Wells Fargo and Wachovia homeowners don’t have to feel like they have no options in this matter. They do still have opportunities which could offer them the capability to try to access a trial modification plan from the Making Home Affordable Program. This program could benefit those homeowners that are facing foreclosure on their home. The trial modifications from servicers such as Wells Fargo and Wachovia are being tracked with the Making Home Affordable Servicer Report. This report has indicated that there was an increase in the amount of homeowners that were using the trial modifications in October and November of 2010.

As reported on The Red White and Blue Press, “As of the October 2010 report, Wachovia Mortgage had 4,463 active trial modifications and Wells Fargo reported 11,297. Totaled, the trial modifications stood at 15,760 as of October, but according to the November 2010 report Wells Fargo/Wachovia had a combined total of 16,612 active trial modifications.”

There are still numerous homeowners that are frustrated with servicers such as Wells Fargo and Wachovia when it comes to plans that are offered from the Making Home Affordable Program. Homeowners are usually advised to consult their mortgage servicer for trial modifications and permanent modifications, but they are also able to consult with a reputable housing counselor from the FHA, HUD, and the Making Home Affordable Program.

Not all of the homeowners that are consulted with such services and go through the modifications will be able to avoid foreclosure. Many do get such from their mortgage servicer and or from the government to help to assist them in this time of need, so it is well worth it to seek this help and assistance when someone is in such crisis.

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Citigroup has reportedly tried working with homeowners to make payments more affordable by reducing principal amounts owned on the loan for consumers who were upside down on their loans. Bank of America (NYSE: BOA) is another lender who has been offering customer reductions. But not all lenders have been offering such reductions and not all homeowners will qualify for principal forgiveness plans.

Consumers and experts agree that these modification cancellations are one of the main issues facing the Make Home Affordable program. Critics do not feel the program has been making much of a difference and leaves homeowners stuck without many alternatives for help. Homeowners can not take advantage of the program because so many are being initially denied for the modification or finding that their trial modifications have been cancelled because they can not meet the payment requirements each month. Some homeowners are able to again an alternative payment arrangement after their modification loans have been denied. Others are forced into a short sale of their home to avoid foreclosure.

The Make Home Affordable program has had its share of issues but believe that homeowners still have the opportunity for assistance in getting mortgage help through the program. Homeowners are encouraged to seek assistance from the program if they are having trouble meeting their mortgage payments each month especially if they are upside down on their loans. While many have found it difficult to qualify for a trial modification program or have ended up with their trial plan being canceled, in order to stave off foreclosure, alternatives should be pursued before short sale or bankruptcy is considered.

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The mortgage principal forgiveness is being offered to people with certain types of home loans that originated with Countrywide Home Loans. Primarily, Bank of America is offering loan forgiveness to 45,000 customers who have pay-option adjustable-rate mortgages and subprime adjustable-rate mortgages through Countrywide. Bank of America purchased Countrywide Home Loans in 2008, which meant they took ownership of $25 billion in adjustable-rate mortgages and subprime loans that Countrywide provided. If you’re a current Bank of America mortgage holder who did not originally have a loan with Countrywide, you are not part of the 45,000 people who will be offered home mortgage debt forgiveness.

Bank of America is offering a principal reduction in the first step of a HAMP-style loan modification. HAMP stands for Home Affordable Modification Program and is part of President Obama’s mortgage stimulus package to keep American Homeowners struggling to keep up with their mortgage payments in their homes. Homeowners who owe a lot more than their homes are worth at this stage are reluctant to modify their mortgages unless it offers a reduction in the principal amount owed. For customers originally of Countrywide with pay-option ARMs, many were given the option to pay less than the interest accumulated on their mortgage each month. They maybe would rack up $1,200 in interest a month, but have the option to pay a $1,000 payment. The extra $200 difference in what their interest was charging and what they paid was added to their principal balance – meaning their mortgage was getting bigger each month instead of smaller.

For customers who have these pay-option ARMs, Bank of America is offering to forgive all or some of the debt that was added as negative amortization.

For customers with pay-option ARMs and subprime ARMs, Bank of America may offer earned principal forgiveness. To qualify, borrowers must owe at least 20% more than their home is worth. Bank of America will not charge interest on the entire loan amount and will forbear a percentage of principal for five years. This means that if you owe $120,000 and the bank forbears $20,000 you will be paying interest on $100,000 for five years (but still owe $120,000). For at least three years, Bank of America will then forgive one-fifth of the amount they forbeared provided you are current on the loan. In the fourth and fifth years of the forbearance period, your home value should have risen and you will no longer be upside down on the loan, and no more debt will be forgiven at that point.

Bank of America will begin to contact borrowers who qualify for the mortgage loan forgiveness programs starting in May.

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Many people, especially the first time home buyer may find they get more then they bargained for when applying for a loan. Completing the paperwork and even trying before hand to improve credit score and other information in order to qualify can be a tremendous effort. Going into a loan application blind can be detrimental to your qualifying for a loan.

Here are some tips as to what lenders are looking for on a loan application.

Adequacy - Mortgage lender want to make certain that you have the adequate ability to make payments each month on the interest and principal of the loan each month. Your income will largely affect this part of the process. Lenders also want to be sure that you are capable of paying for all of your property taxes and homeowner’s insurance policies.

Track Record – Mortgage lenders obviously want to know how you have paid your debts in the past. This is where your credit score and credit history report come into play. By working to improve your credit prior to applying for your mortgage, you may stand a better chance of proving a successful track record.

Collateral - Your prospective new home will require an appraisal that will assess the value of the home and the relative to the agreed upon purchase price.

Equity - The mortgage lender will take under consideration the amount of money you place towards the down payment of the home. Based on the purchase price of the home, the higher the percentage you put towards your down payment, chances are the more favorable your loan application will appear.

All of the above things together is what ultimately makes your application for financing approved or denied. There is not just one thing that will outweigh the other things. Just because you make a good income, it doesn’t erase those negative marks on your credit report. Again, being prepared to face the financing application process is one of the best things you can do to ensure you are qualified the first time. Be ready to produce plenty of information that can be verified to prove yourself worthy of a financed home loan. Typically you will be asked to produce your paycheck stubs and bank statements for varying periods of time, tax returns for the past two or three years, and lots of other information concerning your personal finances.

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While most lenders will require a down payment in order to qualify for a loan, there are other advantages to putting down a payment towards the purchase of a house, namely that your monthly payments will be lower. It is also equity being put into the home upon closing the sale.

So how can you save the money you need for a down payment? Here are 5 ways you can come up with the cash to afford your new home.

Sell Something Valuable

Many people have a boat, second car, or collectible keepsakes that do nothing much more than collect dust. If the prospect of a new home is more enticing than the idea of your baseball card collection, sell the cards to the highest bidder and get ready to move.

Establish an Automatic Savings Plan

If your employer allows for direct deposit of payroll, sign up to have a percentage of each paycheck directly deposited into a savings account. If you do not see or have access to the extra cash, you won’t be tempted to spend it. Plus, it will help confirm your commitment to buying a house.

Explore Private or State-Sponsored Programs

Do your research about the different programs that specialize specifically in providing down payment money to purchase a house. Rules and regulations do apply and will vary but it may be a great alternative for people with no other options.

Approach Your Boss

If it is customary to receive bonuses at work and you feel comfortable speaking to your boss about personal information, ask if a bonus is coming your way in the near future. Explain your down payment situation. The worst they can tell you is no.

Get Back Your Loan

If you have ever leant money to a friend or relative, now is a good time to ask for it back. This may not be the best route to take but often people forget about a loan and are happy to repay it after a gentle reminder.

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1. Are your credit accounts current? If your accounts are not current now, then you are not making enough money to make your mortgage. Get those balances current before applying for a credit card.
   
2. Have all of your balances been paid on time within the last 12 months? Paying on time for 12 straight months will make you an “A-Paper” borrower, something lenders consider just as important as your score. If you are an “A-Paper” borrower, you will get bumped up to the better end of loans you credit score will qualify you for. Therefore, go 12 months with timely payments to give you that extra boost regardless of your score.
3. Do you have a lot of negatives on your credit report? Negatives are usually late payments, balances over their limits, and items charged off for collections. You can “dispute” these items on your credit report and have them removed, which will make you look more attractive in the application process and raise your score at the same time. (Plus it only takes 30 days to do.)
4. How many times have you applied for credit in the last three to six months? Too many credit inquiries lowers your score and says you are trying to get yourself into a heap of debt. Try to make it through three to six months without applying for new credit before applying for a home loan.
5. How much money do you have to pay towards other credit on a monthly basis? A creditor will figure your mortgage at approximately 50% of what you make. This number varies depending on the lender. Your credit report totals all of your payments right up front. If you are paying more then 50% towards credit cards and other loans, then you will most likely be rejected for a mortgage. Ask your creditors to lower your interest rates so that the total monthly payments on your credit report will go down. Also, try to pay down as much of your credit balances as possible so that you can get a higher pre-approved mortgage amount.
6. How much longer will you be paying your car loan? If you have a car loan, and you only have one year’s worth of payments left, mortgage lenders will usually not take that debt into account when calculating your potential mortgage amount. Therefore, if you have more then one year of payments left, pay it down to one year in order to get a higher mortgage.

Remember, knowledge is power. A pre-approval letter is knowledge and it gives you bargaining power when it comes to home loans. By cleaning your credit before applying for a mortgage, you can bargain for the best loans and make the toughest home offers. Do these things before applying for a loan, and soon you will own the home of your dreams.

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