Wells Fargo & Co. has agreed to pay $24 million to end an investigation by eight states looking into allegations that lenders acquired by the bank made risky payment option ARMs to consumers without disclosing their perils.
The states said POAs or "pick-a-pay" mortgages were deceptive to borrowers, allowing them to choose low monthly payment plans that resulted in negative amortization they did not fully understand.
Wells announced the agreement late Wednesday with attorneys general in Arizona, Colorado, Florida, Illinois, Nevada, New Jersey, Texas and Washington state.
Many of the loans were made by World Savings of Oakland, which Wachovia Corp., agreed to buy in 2006. Two years later Wells purchased Wachovia and all its "legacy" troubles.
As part of the agreement, Wells agreed to offer loan assistance worth $770 million to roughly 8,700 borrowers through June 2013, though that amount will depend on how the economy fares during that time. The $24 million will be used to help states reach out to customers who took out such loans.
