Wells Fargo & Co., the second-biggest U.S. home lender is offering to cut mortgage balances for some of Wachovia Corporation customers by 20 percent.So if I have a $500,000 mortgage I can get my mortgage balance reduced to $300,000. I'm in. Well, probably not.
While the terms are still a bit sketchy this is coming in response to the pressure to modify loans due to rising default levels. You have to be in default to get the 20 percent free lunch.
Wells Fargo’s pilot program aimed at Wachovia borrowers is part of a plan announced on Jan. 26 to help avoid “preventable foreclosures.” As many as 478,000 Wachovia customers have access to the wider program and those who are in or at risk of foreclosure have until Feb. 28 to contact the bank. Customers may also win reduced interest rates and extensions of up to 40 years.Well what about people that have been making their payments for say the last ten years? No free lunch?
Speaking of free lunches. Wells Fargo bought Wachovia for a song. Wells did have to eat about $60 billion of Wachovia's impaired loans. These are the option adjusted loans that I wrote about previously--Option ARM--The Toxic Mortgage.
I'm not an accountant or a "rocket scientist" but I can make some intelligent guesses here. Wells has an immediate tax angle. They write down these mortgages and get a monster tax shelter. They can then start selling the good assets they picked up in the takeover--at cents on a dollar-- and pay not a cent in tax. At the end of the day they look like champions for saving the butt of the dumbest investors on the planet--
people who took out an option arm on the advice of a so called mortgage specialist that just a few months earlier was a dishwasher.
Wells gets bail out money. They get a forced sale of Wachovia at a rock bottom price thanks to government pressure. We the public get to finance all of this with our tax dollars.
Isn't it bad enough that we, the taxpayers, are getting screwed coming--bank bailout. Then, get screwed going--tax benefits built into the transaction.
And now the worst of all, if you have been busting your butt making your house payment for the last decade here is what you get--bumpkiss.
I don't know about you but I want a free lunch. No make that--dinner.
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Wells Fargo May Cut Loans for Some Wachovia Customers
Wells Fargo & Co., the second-biggest U.S. home lender, offered to cut mortgage balances for some Wachovia Corp. customers by 20 percent as defaults rise and officials pressure banks to modify loans to avoid foreclosures.
Wells Fargo mailed letters to those borrowers, asking for proof of current income and a 2007 income-tax statement, bank spokeswoman Debora Blume said today in an e-mail. Customers are provided a number to call to speak with a consultant. Wells Fargo didn’t say how many customers received the letter.
“We are encouraged by the response we are getting to our outreach efforts, as it means we will be able to help more people with a solution that works,” Blume wrote.
Regulators and lawmakers are pressing the nation’s biggest lenders to pick up the pace of loan workouts after foreclosures soared 81 percent in 2008. San Francisco-based Wells Fargo inherited billions of dollars in future losses when it bought Wachovia for $12.7 billion. Wells Fargo said last week that Wachovia’s option adjustable-rate mortgage portfolio has close to $60 billion of impaired loans.
Wells Fargo rose $2.87, or 18 percent, to $19.14 at 4:05 p.m. on the New York Stock Exchange, reducing its decline for the year to 35 percent.
Citigroup Agrees
Citigroup Inc., the New York-based bank that received a $346 billion government bailout, bowed to pressure from U.S. Senators Richard Durbin and Charles Schumer and agreed to support “cram- down” legislation that allows bankruptcy judges to cut borrowers’ mortgage principal. Other banks have opposed the plan, saying foreclosures can sometimes minimize write-offs, and undeserving borrowers may seek relief.
Wells Fargo’s pilot program aimed at Wachovia borrowers is part of a plan announced on Jan. 26 to help avoid “preventable foreclosures.” As many as 478,000 Wachovia customers have access to the wider program and those who are in or at risk of foreclosure have until Feb. 28 to contact the bank. Customers may also win reduced interest rates and extensions of up to 40 years.
“It’s very positive that they are willing to look at principal reductions but they need to extend a moratorium for these borrowers” beyond the February deadline, said Kevin Stein, associate director of the California Reinvestment Coalition in San Francisco. “Wells needs time to implement the program.”
After purchasing Wachovia, Wells Fargo controls 16 percent of the mortgage-servicing market, behind Bank of America Corp., with 19 percent, according to trade publication Inside Mortgage Finance. JPMorgan Chase and Co. accounts for 14 percent and Citigroup has 7 percent. Wachovia loans resulted in Wells Fargo’s first quarterly loss since 2001.
FDIC Chairman Sheila Bair endorsed a plan by President Barack Obama to boost spending on modifications. The agency created a “mod-in-a-box” program to help borrowers at least 60 days past due make payments by reducing interest rates, deferring principal or cutting payments.
To contact the reporter on this story: Ari Levy in San Francisco at alevy5@bloomberg.net.
KPMG KPMG KPMG. If I were a KPMGer, I would be worried about this blog post and the pending investigations you know are coming. KPMG is partially responsible for the desecration of the financial system or worse, KPMG helping turn the U.S. into the next Japan. The U.S. would be lucky to be a Japan 2, though it seems highly unlikely the U.S. can even achieve such wonderful economic success that has seen the Nikkei decline from over 30,000 to 7,000.
ReplyDeleteThe U.S. unlike Japan is a 70% debt financed consumption based economy unlike Japan which is a savings and production based economy. It took Japan 20 years to arguably rid all its banks fraudulent financials of there bad debts. Everyone knows the financials of the banks are fraudulent but no one seems to care, why? The answer can only be the accounting firms are well connected to the global social fascist cabal.
How will the recessions ever end as long as the financial statements remain fraudulent? The balance sheets and business models are crap and everyone knows, why continue the charade? All the accounting firms are paid by their corporate masters to issue fraudulent financial statements, there can be no doubt all the banks like Citi are bankrupt yet KPMG keeps signing off on its fraudulent financials, why?
Why does anyone believe any of the fraudulent financial statements? Why does anyone listen to anything KPMG or other auditors have to say? Most of the banks are bankrupt yet the financials keep rolling out, no problem. As an angry Citi investor, I have tried to piece together how I lost most of my money.
KPMG audits many of the financials with all their SIV creations which are used to off load bad loans so the losses don’t have to be recognized on the financials in an Enronesque fashion like KPMG’s client Citi (which is bankrupt).
Of course KPMG’s never ending quest for fees does not stop with fraudulent financials, it also purveyed what Mike Hamersley would describe as fraudulent corporate tax shelters (not withstanding Hamersley’s willing participation in many of them) used by most of KPMG’s big banks including Citi, like the REIT transaction which eliminated tax on real estate loans; back to back loans or rate swaps creating interest deductions; financing arrangements generating noneconomic foreign tax credits; the list goes on forever. All KPMG’s big banks used the strategies to eliminate taxes and create what Hamersley would describe as fraudulent book income (except of course for Hamersley’s own tax shelters).
Tim Flynn is a banking guy and was brought in to purportedly clean up KPMG in 05. Yet Flynn prior to his appointment as KPMG CEO was a high level KPMG audit partner before taking over for O’Kelley and had most of his clients involved in all the fraudulent accounting and questionable tax shelters (which according to Hamersley were fraudulent).
There can be no doubt about the fraud as beginning as early as 2003 many were predicting the implosion that would result from the unsustainable lending patterns of KPMG’s banking clients. In fact, most of KPMG’s banks are bankrupt, what to do?
Flynn decided to throw a bunch of tax partners having nothing to do with all KPMG’s bankrupt banks under the bus for individual shelters which were miniscule in relation to all KPMG’s failed fraudulent audits.
Flynn hired Bennett and Holmes to do his dirty work and assist with the DOJ. Flynn had Bennett and Holmes lie to the DOJ according to an email wherein Joe Loonan KPMG’s head lawyer stated that he did not know if any of the allegations were true (“freedom is just another word for nothing left to lose”). Then to seal the deal Flynn denied legal fees to the tax partners he threw under the bus to the DOJ, even Ernst and Young paid its partners legal fees. Why would Flynn do this after O’Kelley had promised to pay the legal fees?
One can only infer to hide the greater tragedy at KPMG, all of the failed fraudulent audits (not to mention after Flynn cut his deal, KPMG was awarded the audit of the DOJ). If I were a KPMGer, I would not only be extremely concerned about all the civil litigation that is coming for the fraudulent audits but the potential criminal actions that must be coming once the books are scoured (which you know they will be in the civil litigation plus the fraud is relatively easy to discern) because KPMGer’s must know by now the first thing Flynn will do is throw you under the bus and cut off legal fees.
As a decimated Citi investor I am looking for any KPMGer to come forward and tell the truth.
Angry Citi shareholder