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.

August/September 2009

Home Affordable Modification reports made public

On Aug. 4, the Administration released the first monthly report on the Home Affordable Modification Program (HAMP):

• to show progress on the government's goal to help American homeowners through HAMP over the next

three years, and • provide comparable progress metrics for the servicers who participate in the program.

While the report provided HAMP-specific performance, it did not include the total number of modifications completed in the first seven months of the year. For instance, Wells Fargo completed 240,000 modifications and trial modifications during this time, and 20,219 of these were Home Affordablestarts.

Modification

The early HAMP results show that servicers chose to take different approaches in how they initially implemented the program as the guidelines for each version of the program became available over time. Wells Fargo, for instance, chose to continue to make its own equally-aggressive modifications to help customers reach sustainable mortgage payments while the government developed the program details.

The Administration has requested that servicers in total generate a collective 500,000 HAMP trial modification starts by Nov. 1. In addition, the Administration has requested a ‘second look' process to be developed by Freddie Mac to audit applications from borrowers that have been denied. This is aimed at adding a measure to help borrowers avoid foreclosure.

On July 30, the government introduced new guidelines for a Federal Housing Administration (FHA)-HAMP (see article in this issue). And, on Aug. 13, new second-lien HAMP guidelines were made available. The second lien program coordinates with HAMP's first mortgage modification program to lower payments on second mortgages and create comprehensive affordability for homeowners.

Administration announced program Administration released components of Homeowner Affordability and Stability Plan Final Fannie/Freddie HAMP guidelines approved Administration provided guidelines for non-GSE HAMP to begin Servicers received updated guidelines on non-GSE HAMP; defined trial period requirements Administration included home price depreciation incentives Administration released FHA guidelines Administration included data collection requirements Treasury releases servicer specific HAMP results Administration released second lien program HAMP guidelines Feb. 18, 2009 HAMP Timeline

The Wells Fargo View:

HAMP is an important part of the Administration's efforts to provide mortgage relief and stabilize the housing market. It standardizes and streamlines how companies change loan terms, interest rates, and principal to create sustainable mortgage payments. Wells Fargo contributed to the design of this program, and it is the first of several options we use to help eligible customers facing financial difficulty.

Now that the program details are largely complete, our company has been accelerating our use of HAMP. In addition, Wells Fargo already has a final review process in place to ensure all options are exhausted before a home moves to foreclosure sale. We're confident we can achieve our portion of the government's goal to reach 500,000 HAMP trial modification starts by Nov. 1.

Administration announced FHA-HAMP alternative

On July 30, the U.S. Department of Housing and Urban Development (HUD) announced that FHA borrowers will be able to seek a loan modification through their current mortgage company or loan servicer under a new program called FHAHome(FHA-HAMP).

Affordable Modification Program

The program was developed to permanently reduce a family's monthly mortgage payment through the use of a partial claim, which defers the repayment of mortgage principal through an interest-free subordinate mortgage that is not due until the first mortgage is paid off.

The Wells Fargo View:

As a lender that services one-third of the nation's FHA loans, Wells Fargo is pleased the government

has announced the refinement of HAMP to include FHA loans. This change will remove a significant obstacle in providing even more homeowners with sustainable loan modifications for at-risk FHA customers. Wells Fargo is actively working with HUD to get clarity on the program specifics, and we fully intend to implement HFA-HAMP for eligible FHA borrowers soon. We hope HAMP can be further refined to more broadly serve other customers such as our Wachovia Pick-a-Payment customers who have pay option adjustable rate mortgages (ARMs).

Homebuyers are going green

Rising energy costs have consumers thinking about energy conservation and the green must-haves for their home. The Energy Efficient Mortgage (EEM) is federally recognized and has benefits for both buyers and sellers. Buyers can stretch their dollar with the energy-saving measures in the home that will help save on utility bills. Sellers who use an EEM to make improvements on their home will make older homes more comfortable and more attractive to buyers looking to go green. Homeowners looking to remodel or refinance also gain benefits from EEM by making improvements that will help save on utility costs and potentially increasing the resale value of the home down the road.

According to the Energy Efficient Mortgage Home Owner Guide on the Housing and Urban Development Web site, buyers who qualify for a home loan may also qualify for the EEM. The guide also says that availability is not limited by location, home price or utility company. When applying for an EEM, a Home Energy Rating System report must be completed on the house. An energy appraisal is done by an inspector and the results are certified. More information about EEMs and case study examples are available at www.hud.gov.

Tax credits also are available for energy-saving home improvement products placed in a home in 2009 and 2010. For specific details visit http://www.energystar.gov/index.cfm?c=tax_credits.tx_index.

The Wells Fargo View:

Through new and existing housing construction, Wells Fargo offers financing and tools to provide the long-term value that energy efficiency can offer. This value extends to indoor environmental air quality, and the efficient use of sustainable materials. More information about how we help customers and clients go green can be found at https://www.wellsfargo.com/about/csr/ea/greenbuildings/homes.