WELLS FARGO S.H.A.R.P.

2. WELLS FARGO S.H.A.R.P. Saving Homes Affordable Reality Program Presented By: Alexander Evans Brittany Wunderlich Jiajing Li Justin Spragins Matthew Lahde

3. Introduction • During 2008 recession, 18,157,518 homes have gone into foreclosure • In 2012, foreclosures has dropped 29% • 1 out of 624 homes in foreclosure in Dallas area (July 2012) WELLS FARGO S.H.A.R.P.

4. Introduction cont. • Wells Fargo, 2nd largest US bank in deposits, home mortgage serving and debit cards • S.H.A.R.P.= Saving Homes Affordable Reality Program • Saving families that are struggling with mortgage • Protecting Wells Fargo from losing defaulted loan and interest WELLS FARGO S.H.A.R.P.

5. Understanding Foreclosure • Ten day grace period for missed payment • Missed payment notice after 10 days • Notice of Default after 3-6 months • Notice of Sale after 5 days • Trustee Sale date established by N.O.S. WELLS FARGO S.H.A.R.P.

6. Existing Programs • Deed in Lieu- Does not allow you to keep your house. Multiple requirements. Negative effect on credit • Home Affordable Refinancing Program (H.A.R.P.) must be current on your mortgage and meet refi. Requirements. • Short Sale- allows you to sell house when it is worth less than what you owe on your loan, avoids eviction WELLS FARGO S.H.A.R.P.

7. Existing Programs Cont. • Short-Term Forbearance- bank allows you to temporarily reduce or suspend payments, but your monthly payments end up increasing after, as you are still responsible for paying for what you owed during suspension • Loan Modification- changes interest rate or number of years to pay off house WELLS FARGO S.H.A.R.P.

8. How S.H.A.R.P. Works • Stops homeowner’s mortgage payment • Plan steps with trained financial advisor • Education on how to remain in control of finances • Forgives interest WELLS FARGO S.H.A.R.P.

9. How S.H.A.R.P. Works Cont. • Mortgage is frozen for amount of time homeowner is behind (Can continually be extended for up to 1 year) • Does not accrue interest during freeze period • Payments after freeze remain the same as before the increase • Average interest amount forgiven for amount fallen behind WELLS FARGO S.H.A.R.P.

10. How S.H.A.R.P. Works Cont. • Financial advisor will assess homeowner situation, and plan a course of action • Develop a relationship with homeowner • Follow-ups after program WELLS FARGO S.H.A.R.P.

11. Application Process • Must be employed with reasonable income • Must have good credit history up to first missed payments • Must be able to commit to sacrifice and drastic lifestyle changes • Cannot have participated in S.H.A.R.P before WELLS FARGO S.H.A.R.P.

12. Costs to the Bank • Loses interest they would have received during freeze period • Salary of Financial Advisor • Plus the Nine 3-hour sessions @ $15/hour=$1,405 • Facilities and Advertising costs WELLS FARGO S.H.A.R.P.

13. Costs to the Homeowner • Period of frugality and sacrifice during freeze • Less control over financial planning during freeze WELLS FARGO S.H.A.R.P.

14. Benefits to the Bank • Potential to avoid foreclosure • Average foreclosure loss is around $100,000 (Andres) • Develops and increases quality customers WELLS FARGO S.H.A.R.P.

15. Benefits to Homeowner • Potential to become debt free • Interest forgiven on debt • Keeps ownership of home • Stress management • Develops skills to help stay out of debt • Burden of debt is reduced or eliminated WELLS FARGO S.H.A.R.P.

16. Marketing Materials Sample Brochure Sample Statement This is not a collection notice. Wells Fargo is currently aware that you are currently behind on your mortgage. This notice is to inform you that you have options regarding your mortgage. The first and arguably best option is to make the payment on your mortgage. Another option available to you is to apply for the S.H.A.R.P. program. For more information about the S.H.A.R.P. program please visit our website or make a call to your local banker. The S.H.A.R.P. program requires an application and assessment of one's financial situation in order to insure that the program will be successful for both Wells Fargo and the client. The last option available to you is foreclosure and in most cases the least favorable option. WELLS FARGO S.H.A.R.P.

17. The Wilson Family • Wesley, Heather, Chris (10), and Catherine (8) • 2013: Decide their 2 bedroom condominium isn’t a suitable living situation any more WELLS FARGO S.H.A.R.P.

18. Mortgage • Their realtor recommends a lender at Well’s Fargo • Purchase 1,700 Square Foot Home (4 Bedroom, 3 Bath) • Average Price in DFW: $187,000 • Close in April 2013 • 30 Year Conventional • 5% Down • FICO: 718 • Interest Rate: 3.875% • Cumulative Interest Income over life of loan: $123,085.42 WELLS FARGO S.H.A.R.P.

19. Crisis Hits • March 2015, five months after finding out Chris (12) was diagnosed with Leukemia. • Affordable Care Act proposed in 2012 didn’t pass • Out of pocket average expenses: $1,266 (Duke University Medical Center) • After 3 months of missed payments, June comes and a S.H.A.R.P. application is mailed. WELLS FARGO S.H.A.R.P.

20. BUDGET Income: • Wesley: $5,000 (Associate Director at Mohr Partners) Expenses: • Mortgage: $835.38 (Principal: $283.68, Interest: $551.69) • Property Taxes: $325.69 [(Loan Amount x 2.20%)/12] • Homeowners Insurance: $74.02 [(Loan amount x .50%)/12] • Total: $1,235.09 • Electricity: $300-$350 (Buen) • Cable/Internet: $192.93 (Sales Representative from Time Warner Cable) • Includes: Triple Package + All access to Pittsburgh Steelers games for Wesley • Cars: $703.46 ($351.73 per vehicle) • Both 2012 Jeep Grand Cherokees are being financed the same over 5 years at an interest rate of 4%. This payment is after trade in values of $2,500 per previous car, and after putting down $5,000 on these certified pre-owned vehicles. • Gas: $332 ($3.63 x 23 x 4) • $3.63 per gallon/ 23 gallons/ 2 times per month/ 2 vehicles • Cell Phones: $129.99 (AT&T unlimited wireless plan) • 3 iPhones • Wells Fargo Credit Card: $57 minimum (Balance: $6,258) • Student Loan: $226 (Balance: $7,159) • Student Loan: $125 (Balance: $9,768) • Medical: $1,266 (Outstanding Balance: $3,000) • Chris’s doctor visits, chemo therapy, medicine, etc. • Food: $1035.20 • According to the official USDA Food Plans, the average monthly cost of food on the moderate cost plan for a family such as the Wilsons’ is $1,035.20 (United States Department of Agriculture). TOTAL: • After Expenses: -$652.67 WELLS FARGO S.H.A.R.P.

21. Sold 2 out of 3 MacBook’s: $1,600 • Sold 2 out of 3 T.V.’s: $500 • Sold Used Clothing: $300 • Sold jewelry and accessories: $600 • Sold all 3 iPhones: $300 (They exchange them for the most basic phones) • Total: $3,300 ASSET SACRAFICE WELLS FARGO S.H.A.R.P.

22. Income: • $5,000 Expenses: • Mortgage: $283.68 (Amount owed on mortgage minus forgiven interest) • Property Taxes: $325.69 [(Loan Amount x 2.20%)/12] • Homeowners Insurance: $74.02 [(Loan amount x .50%)/12] • Total: $683.39 • Electricity: $150 (Buen) • Cable/Internet: $69.99 • Cars: $546 ($273 per vehicle) • They each trade in their 2012 Jeep Grand Cherokee for a 2010 Toyota Prius. They put $0 down with trade in value of $5,000 at the same 4% interest rate over 5 years. • Gas: $129.59 ($3.63 x 11.9 x 3) • Cell Phones: $79.99 • Wells Fargo Credit Card: $57 minimum (Balance: $5,258) • Student Loan: $226 (Balance: $3,159) • Student Loan: $125 (Balance: $3,768) • Medical: $1,266 (Outstanding Balance: $3,000) • Chris’s doctor visits, chemo therapy, medicine, etc. • Food: $634.20 Total: • After Expenses: $1,032.84 New Budget WELLS FARGO S.H.A.R.P.

23. Going Forward • Adviser helps the Wilsons save $1,685.51 in their budget • Continue to meet every 4 weeks until pre determined debts are cleared to lower the debt to income ratio • Wells Fargo salvages potential interest income and develops a more solid customer WELLS FARGO S.H.A.R.P.

24. Potential Problems • If homeowner stops participating in program • After 5 days of no contact, program cancelled, all money that was owed before is still owed, immediately receives Notice of Default • If homeowner fails to pay off full amount during program: • Leftover amount owed will still be owed and put into future payments WELLS FARGO S.H.A.R.P.

25. Potential Problems Cont. • If homeowner falls behind again after program • Not eligible to participate in S.H.A.R.P., but can discuss other options • If homeowner fails to manage debt in program • Financial advisor can help arrange other options, but is not obligated to WELLS FARGO S.H.A.R.P.

26. Conclusion • We would like to ask for your approval. • $2,000 to help with marketing materials and training/incentives for financial advisors to participate in the program • Thank you! WELLS FARGO S.H.A.R.P.