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Wells Fargo Cuts Extensions For Short Sales

Mortgage servicer Wells Fargo & Co. has announced that it will no longer grant extensions for distressed borrowers pursuing short sales past their closing deadline, a change that will move many of these borrowers closer to foreclosure.

Short sale sellers under Wells Fargo received an e-mail memo about three weeks ago, saying short sales have to be closed by the dates indicated in their approval letters. Otherwise, the bank will proceed with the foreclosure process.

The bank said the move was initiated by investors owning some of the mortgages it is currently servicing. This includes the now government-controlled entities Fannie Mae and Freddie Mac.

Fannie Mae sent a message to its loan servicers last month telling them to stop the unnecessary delay of foreclosures. It went on to say that it would conduct on-site reviews and impose fines on servicers found to be doing so.

Borrowers who received their extension letters on or before September 14 can still close past their deadlines, according to bank officials. Wells spokes person Mary Berg confirmed that the e-mail memo was real.

Berg also explained that mortgages on its portfolio, as well as those under its subsidiary Wachovia Bank, can still be granted extensions. Loans whose investors have allowed an extension are also exempt from the change.

Wells stressed that the move was not the result of documentation problems, as is the case with major lenders Ally Financial and JPMorgan Chase. The two recently had to suspend thousands of foreclosures due to faulty paperwork.