Wells Fargo OKs modifying up to $2.4 billion in mortgages

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Wells Fargo said Monday it had reached an agreement with California to make as much as $2.4 billion worth of loan modifications for borrowers with certain high-risk mortgages called “Pick-a-Pay” loans.

In a statement, the bank also said it would contribute $33 million to California so the state could pay restitution to certain homeowners who had already lost their homes to foreclosure.

The agreement is the result of an investigation by Attorney General Jerry Brown’s office that began earlier this year. The bank said it had reached similar agreements with nine other states: Arizona, Colorado, Kansas, Florida, Illinois, Nevada, New Jersey, Texas and Washington.

Brown’s statement on the agreement is here.

Pick-a-Payment mortgages allowed borrowers to essentially choose how much they wanted to pay on their monthly mortgages. These choices included interest and principal payments, interest-only payments or lesser minimum payments. When these minimum payments did not cover the interest owed, however, the balances owed on these mortgages increased.

-- Alejandro Lazo