Wells Fargo in Home Equity Morass
On November 11th we exposed Wells Fargo's 10 Q Chicanery.
On November 15th we noted: "Wells Fargo, #2 U.S. mortgage lender said it had net credit losses on:
0.77% of its $83 billion in home equity loans and its $67 billion portfolio of first mortgage home loans faces only 11 basis points of losses during Q3.
CEO John Stumpf cited "disciplined underwriting."
Guess what the cat dragged in today?? The gutted carcass of Wells Fargo's Home Equity Loans with a credit loss percentage 18 times what CEO Stumpf claimed...
Wells Fargo, the 5th largest US bank and 2nd largest mortgage lender, is absorbing $1.4 billion in losses on home equity loans that borrowers have stopped repaying.
Wells intends to liquidate $11.9 billion in home equity loans that have been flagged as major problems.
The nettlesome loans represent about 14% of the bank's total home equity portfolio of $83.4 billion.
Isn't that extra special? Let's see now, 14% vs the 0.77% reported by Wells on its 10Q, why these numbers have the Nattering One absolutely Stumpfed.
18 times the percentage reported on the 10Q. So much for the "disciplined underwriting" that CEO John Stumpf credited for the 0.77% initially reported.
Wells said $60 billion of its remaining $71.5 billion in home equity loans, apart from the liquidation pool, has a second lien position.
Christopher Thornberg of Beacon Economics:
"If your house is under water in terms of loan to value, then the home equity loan is the first thing to go.
It's going to become much worse. Prices went up way too high and now they are coming down. The foreclosures are just starting to hit."
Oh yes, Mr. Thornberg is spot on, 2nd liens are subordinated to 1st liens, and when a property is worth less than the 1st lien...
and the property is liquidated through REO foreclosure or short sale, the 2nd lien holder gets NOTHING.
On November 11th we noted: "The number of REO listings in California alone, for Wells Fargo as of Sept 5th, roughly 3800. Wanna know what the number is NOW? 5380; UP 41% in just 2 months."
Lets do some quick math: 5380 x California median sales price at market peak of 484K = $2.6 Billion in non performing California loans.
Thats just California folks and today's median sales price is $424K, meaning a hit of $323 Million on median price alone.
The CEO and the idiots running the REO department at Wells Fargo are doing their stock holders a great disservice. How does the Nattering One know they are idiots?
I tracked a Wells REO from early Sept when it was foreclosed upon, the last owners asked 900K.
Since then, Wells cut to 850, then 799, then 749, at which point an offer of 600 was rejected. Since more cuts, 699 and now 630, still no takers.
At this rate, by January the property will go for under 500K, making the offer of 600K look good.
To further my case, I recently wrote an offer on a Wells REO, offering a generous 65 cents per dollar on the balance due.
Wells countered with a $35K price reduction on a $705K price, still asking $90K more than what is due on the loan.
Worse yet, the asking price is far above what the comps or rents in the area justify. Much like the decisions made by an addict in withdrawal, simply brilliant.
The Nattering One believes that this home will suffer the same fate as the other REO. By January Wells price will have been trimmed by 35% or more and my offer will look good.
We hope none of our readers are holding Wells stock. With this companies haphazard state of denial which runs from the CEO down to the REO dept...
shorting it should continue to be profitable in the near and long term.
On November 15th we noted: "Wells Fargo, #2 U.S. mortgage lender said it had net credit losses on:
0.77% of its $83 billion in home equity loans and its $67 billion portfolio of first mortgage home loans faces only 11 basis points of losses during Q3.
CEO John Stumpf cited "disciplined underwriting."
Guess what the cat dragged in today?? The gutted carcass of Wells Fargo's Home Equity Loans with a credit loss percentage 18 times what CEO Stumpf claimed...
Wells Fargo, the 5th largest US bank and 2nd largest mortgage lender, is absorbing $1.4 billion in losses on home equity loans that borrowers have stopped repaying.
Wells intends to liquidate $11.9 billion in home equity loans that have been flagged as major problems.
The nettlesome loans represent about 14% of the bank's total home equity portfolio of $83.4 billion.
Isn't that extra special? Let's see now, 14% vs the 0.77% reported by Wells on its 10Q, why these numbers have the Nattering One absolutely Stumpfed.
18 times the percentage reported on the 10Q. So much for the "disciplined underwriting" that CEO John Stumpf credited for the 0.77% initially reported.
Wells said $60 billion of its remaining $71.5 billion in home equity loans, apart from the liquidation pool, has a second lien position.
Christopher Thornberg of Beacon Economics:
"If your house is under water in terms of loan to value, then the home equity loan is the first thing to go.
It's going to become much worse. Prices went up way too high and now they are coming down. The foreclosures are just starting to hit."
Oh yes, Mr. Thornberg is spot on, 2nd liens are subordinated to 1st liens, and when a property is worth less than the 1st lien...
and the property is liquidated through REO foreclosure or short sale, the 2nd lien holder gets NOTHING.
On November 11th we noted: "The number of REO listings in California alone, for Wells Fargo as of Sept 5th, roughly 3800. Wanna know what the number is NOW? 5380; UP 41% in just 2 months."
Lets do some quick math: 5380 x California median sales price at market peak of 484K = $2.6 Billion in non performing California loans.
Thats just California folks and today's median sales price is $424K, meaning a hit of $323 Million on median price alone.
The CEO and the idiots running the REO department at Wells Fargo are doing their stock holders a great disservice. How does the Nattering One know they are idiots?
I tracked a Wells REO from early Sept when it was foreclosed upon, the last owners asked 900K.
Since then, Wells cut to 850, then 799, then 749, at which point an offer of 600 was rejected. Since more cuts, 699 and now 630, still no takers.
At this rate, by January the property will go for under 500K, making the offer of 600K look good.
To further my case, I recently wrote an offer on a Wells REO, offering a generous 65 cents per dollar on the balance due.
Wells countered with a $35K price reduction on a $705K price, still asking $90K more than what is due on the loan.
Worse yet, the asking price is far above what the comps or rents in the area justify. Much like the decisions made by an addict in withdrawal, simply brilliant.
The Nattering One believes that this home will suffer the same fate as the other REO. By January Wells price will have been trimmed by 35% or more and my offer will look good.
We hope none of our readers are holding Wells stock. With this companies haphazard state of denial which runs from the CEO down to the REO dept...
shorting it should continue to be profitable in the near and long term.
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