Wells Fargo’s Bad Loans Rise in Quarter – Loan Modifications and Short Sales Rise Also
July 22, 2009 By
No one is safe from the specter of foreclosure in this new economy, here in California we are seeing more and more 30 year fixed rate mortgages go bad. Unemployment is officially 11.6% here in CA the unofficial number is somewhat larger, there are many people who are under employed or who are working for less than half of what they once earned. This is all adding to the distress in the housing market, people just simply can not afford to keep there homes. Loan modifications are one option for some people and when it makes sense we encourage people to take this option but often a short sale makes more sense. A short sale is where we negotiate with the bank to accept less than is owed, we are finding it less of a struggle to get the banks to agree with are short sale proposal.
Give us a call 1-619-631-4546 to discuss your situation.
July 22 (Bloomberg) — Wells Fargo & Co., the biggest U.S. home lender this year, said bad loans jumped in the second quarter as the recession made it harder for borrowers to keep up with payments. The bank dropped 6.6 percent in New York trading.
Assets no longer collecting interest climbed 45 percent to $18.3 billion as of June 30 from the first quarter, the San Francisco-based bank said today in a statement. The increase was disclosed as Wells Fargo reported second-quarter net income soared 81 percent to a record $3.17 billion.
Wells Fargo added to credit reserves amid a 26-year high in unemployment and rising commercial real estate delinquencies. While the acquisition of Wachovia Corp. in January bolstered deposits and home lending, the bank must stanch losses from defaults in California and option adjustable-rate mortgages, ranked among the riskiest loans issued during the housing boom.
“We’re not out of the woods in terms of credit quality,” said Jennifer Thompson, an analyst at Portales Partners LLC in New York. She has a “hold” rating on Wells Fargo, because “with the company more exposed to some higher-risk markets, I’d rather wait for a better entry point,” Thompson said.
Wells Fargo, whose biggest shareholder is Warren Buffett’s Berkshire Hathaway Inc., fell $1.68 to $23.67 at 9:31 a.m. in New York Stock Exchange composite trading, and sold for as little as $23.51. The bank declined 14 percent this year through yesterday.
Profit for the quarter equaled 57 cents per diluted share, compared with $1.75 billion, or 53 cents, a year earlier, the bank said. Revenue almost doubled to $22.5 billion.
Wachovia Loans
The increase in bad assets, including a $5.3 billion rise in loans that aren’t accruing interest, was tied to Wachovia mortgages, the cost of modifications, the difficulty of liquidating holdings, and the deterioration of commercial real estate, Wells Fargo said.
The cost of loans written off as uncollectible jumped 35 percent from the first quarter to $4.39 billion, including $984 million of Wachovia assets, more than double the previous period. The charge-offs widened to 2.11 percent of loans from 1.54 percent in the first quarter, exceeding the 1.85 percent estimate of Sterne Agee & Leach Inc. analyst Adam Barkstrom.
Wells Fargo took writedowns on Wachovia’s riskiest loans at the time of the takeover through so-called purchase accounting. The company said today that losses increased in the portion of the Wachovia portfolio that hadn’t been viewed as impaired at the time.
TARP Repayment
The bank said it generated $14.2 billion toward satisfying the Federal Reserve’s Supervisory Capital Assessment Program, surpassing the $13.7 billion requirement. The process will be completed at the end of the third quarter, Wells Fargo said.
Wells Fargo is the last of the top four U.S. banks to post results. Bank of America Corp., the biggest U.S. lender, said last week that second quarter profit fell 5.5 percent on higher loan losses. JPMorgan Chase & Co., the second-largest U.S. bank reported its first profit increase since 2007 on record investment-banking fees. Citigroup Inc. had a loss, excluding a $6.7 billion gain from selling control of the Smith Barney brokerage unit, as consumer and business loan defaults rose.
Of the four, only New York-based JPMorgan has repaid its bailout funds distributed by the Treasury last year. Wells Fargo said last month it will repay its $25 billion loan “at the earliest practical date.”
Credit Reserves
The lender probably won’t be able to pay back the funds within the next year to 18 months unless it raises more capital, wrote Sanford C. Bernstein & Co. analyst John McDonald, in a report this week.
Wells Fargo added $700 million to build credit reserves, a decline from the first quarter’s $1.3 billion increase. The company incurred a $565 million special assessment fee from the Federal Deposit Insurance Corp. along with a merger-related and restructuring expense of $244 million.
Mortgage originations in the U.S. surged 40 percent in the second quarter to $625 billion, according to estimates from Inside Mortgage Finance publisherGuy Cecala. Wells Fargo reported mortgage banking income of $3 billion in the quarter on $129 billion of originations.
In California, unemployment hovered at a record 11.6 percent in June, compared with a nationwide average of 9.5 percent. Six of the state’s cities are among the 10 with the highest foreclosure rates in the U.S., according to RealtyTrac Inc., an Irvine, California-based company that keeps data on repossessed homes.
“Credit quality is going to get worse,” said Thompson at Portales Partners. “The question is how much does it deteriorate and in what categories.”
To contact the reporter on this story: Ari Levy in San Francisco atalevy5@bloomberg.net
Short Sales more prevalent in 2009!
July 20, 2009 By
If you read below you you will see 60% of short sales do not close, we close close to 93% of our deals as we or our Investors are the buyers in most cases. We do not need to wait for loans as we buy with all cash and close quickly enabling you to move on with your life and worry less about the burdens of a high mortgage payment.
Need help with your Short Sale Get Started HERE
Troubled Borrowers Increasingly Allowed to Sell for Less Than Loan
Washington Post Staff Writer
Saturday, July 11, 2009
More than two years into the housing crisis, lenders are beginning to allow more troubled homeowners to unload their homes for less than they owe. The practice, known as a short sale, is gaining popularity as an alternative to foreclosure, but it remains a difficult and lengthy task to pull off because the lender bears the brunt of the loss.
The number of short sales completed jumped 208 percent during the first quarter of this year compared with the same period in 2008, according to a report issued last month by the Office of Thrift Supervision and the Office of the Comptroller of the Currency, which regulate banks.
Short sales could increase further as home prices continue to fall, leaving a growing number of borrowers owing more than their home is worth. Also, the Obama administration is implementing a program to pay lenders to accept less than the balance owed by the borrower in such deals.
Already, Bank of America, the country’s largest mortgage lender, has seen completed short sales jump 50 percent so far this year, said Dave Sunlin, a senior vice president who manages the foreclosure and real estate division. “We understand this is an opportunity to mitigate our losses, while helping turn around the housing market and help homeowners,” he said.
Bank of America opened a short-sale call center last year. And the bank hopes to launch a pilot program within 30 days that would shrink to one week the time it takes to have a specific short-sale offer approved, Sunlin said. Under the program, prospective sellers apply to Bank of America to get preapproved to pursue a short sale in general, then go back to the bank for approval of specific offers as they come in. The program will initially focus on borrowers who fail to qualify for a government foreclosure-prevention program, he said.
“If they have come to the conclusion that there is no possible workout, they should contact us as quickly as possible,” Sunlin said.
The types of homes that end up in short sales vary widely. At the beginning of the financial crisis, most of the homes were on the lower-priced end of the market, said Marc Cormier, an agent for Re/Max Allegiance in McLean. But now, more higher-end homes are ending up in such deals, including a 10-bedroom home in Potomac, which was originally put on the market last year for $10 million, he said. The seller reduced the asking price to $5.5 million last month, and it’s listed as a short sale. “You’re going to be seeing more of that from now until 2010,” Cormier said.
Last year, about 5 percent of home sales in Loudoun County, one of the hardest-hit parts of the region, were short sales. Now they account for about 23 percent of the market, said Tony Arko, an agent for Market Advantage Real Estate. “A year ago, there was almost nothing. Everyone thought short sales were going to be a blip on the screen,” Arko said.
Still, the short-sale process is notoriously slow and cumbersome. Unlike normal sales, the seller’s lender must approve the deal and is often suspicious of lowball offers, potentially dragging out the process for months. About 60 percent of approved short sales do not ultimately close, largely because buyers walk away from the deals, according to Bank of America.
Wells Fargo began streamlining its short-sale process last year, said David Knight, its senior vice president of specialty servicing for default and retention operations. It used to take more than 90 days for a short-sale offer to be approved; now it can be done in 30 days in some cases, Knight said. “We said there were a lot of things we can do ahead of time so we can give a decision faster,” he said.
For example, bank officials used to wait until they received a short-sale offer before starting the process. Now, Knight said, they encourage borrowers to contact them early so they can begin assessing whether the home would qualify for the program and help them set a proper price.
Before attempting a short sale, borrowers should weigh the potential tax liability and prepare for the usual hassles of a sale — cleaning for open houses and negotiating with bidders — even though they won’t reap the usual cash payoff, real estate agents and lenders said. A real estate agent experienced with short sales can be helpful, they said, but borrowers should also prepare to provide documentation of a hardship that would persuade their lender to accept less than owed.
“You can’t have $25,000 sitting in your checking and expect the lender to take a bath on the house,” said Frank Borges Llosa, owner of FranklyRealty.com, an Arlington-based brokerage.
For bargain hunters, a short sale can provide a chance to get a home at a below-market price. But don’t expect a lender to accept every lowball offer, Arko said. A bank may be willing to write down the value of the property 10 percent from the current value, but it probably will balk at taking a larger hit, he said. “They are not just taking any offer. . . . You are not going to be able to get 20 or 30 percent off market value,” Arko said.
But the process can also test a buyer’s endurance. Despite efforts to streamline the process, lenders apply a hodgepodge of rules and vary in how long they take to approve a deal.
“You have to be patient” said Mary Ellen Nicol, a certified housing counselor for Consumer Credit Counseling Service of Atlanta. “Be prepared to give the lender time to review the process. Be prepared to call the lender frequently.”
That is what James Sejd, an industrial contractor, has learned. Sejd researched short sales and the market before making an offer on an 8,500-square-foot Gainesville home in April. The home was listed for $900,000, and with his $850,000 bid, Sejd felt confident of a quick approval.
But for three months, Sejd said, he has been waiting for an answer from the bank. In the meantime, home values have continued to fall. Sejd said he is worried that the home’s value has fallen even further, to about $800,000, and interest rates have risen from historic lows since he placed his offer. The higher interest rates could raise the mortgage payments by $300 to $400 a month and cost at least $100,000 over the life of the loan, Sejd said.
“I am like a racehorse in the gate, and the gate won’t open,” Sejd said. “I offered money to be moved up in line; they said that wasn’t possible.”
This house is in a good location for his family, including access to a preferred school district, Sejd said. But if a comparable home is put on the market in the same neighborhood, he would consider it. “If I find another property, I have nothing to lose by moving on,” he said.
Despite the cumbersome process, more homeowners are expected to opt for a short sale over losing their home in a foreclosure in the next year. It is a way to retain some minimal amount of control over the experience, despite the fact they are still losing their homes, Nicol said. “You have some say-so in the closing process, in the whole process of moving out of the house,” she said. “Especially for families, this gives them a timeline so they can look for other housing and worry about the right schools with less disruption.”
FTC, 23 states act to stop sham loan consultants
July 15, 2009 By
We do not charge up front fee’s and in many cases we do not charge anything.
It is our belief that in many case loan modifications do not make sense for many home owners and a better solution is to short sales your house and rent a home for a while until the real estate market stabalizes. Read our other article http://troubledpropertysolutions.com/483/selling-your-home-when-you-are-upside-down-in-a-short-sale-could-save-you-500000/ to find out how much a loan modification may actually cost you.
Prosecutors file 189 legal actions in nationwide sweep of loan modification consultants
LOS ANGELES (AP) — Prosecutors nationwide filed 189 legal actions Wednesday against loan modification consultants accused of bilking homeowners who are desperate to make their mortgage payments more affordable.
The lawsuits and cease-and-desist orders announced by Federal Trade Commission Chairman Jon Leibowitz and California Attorney General Edmund G. Brown were part of a nationwide sweep of alleged sham consultants conducted by the federal agency and 23 states.
In Colorado, Attorney General John Suthers announced Wednesday that seven loan modification companies agreed not to do business there until they follow state laws.
Brown said the lawsuits his office filed in Orange and Los Angeles counties include allegations against five companies and their subsidiaries and staff members. In all, 21 individuals and 14 companies were named.
Authorities said they also arrested a Newport Beach man Tuesday who was accused of using the names of the Department of Housing and Urban Development and other government agencies as part of his business.
The lawsuits seek millions of dollars in civil penalties, restitution for victims and a permanent injunction to keep the companies and the defendants from offering mortgage-relief services, Brown said.
“The loan modification industry is teeming with confidence men and charlatans who rip off desperate homeowners facing foreclosure,” he said. “Despite firm promises and money-back guarantees, these scam artists pocketed thousands of dollars from each victim and didn’t provide an ounce of relief.”
One defendant, Irvine-based U.S. Homeowners Assistance, is accused of collecting up to $3,500 each from dozens of borrowers in danger of losing their homes.
The suit says one victim had her signature forged and financial information falsified on documents filed with her lender.
Another company, Orange-based U.S. Foreclosure Relief Corp., collected more than $4.4 million from borrowers during a nine-month period, but failed in most instances to provide any services and avoided responding to consumers’ inquiries, the officials said.
“These con artists see the high foreclosure rates as an opportunity to prey on people in distress,” Leibowitz said. “They promise to rescue homeowners in troubled financial waters, but after they take their money they throw them an anchor instead of a lifeline.”
Leibowitz said the FTC was working on rules that would prohibit a mortgage modification service from accepting upfront payments. He said he hoped to have the regulations in place by the end of this year.
Also named in the lawsuits are Home Relief Services LLC, with offices in Irvine, Newport Beach and Anaheim; RMR Group Loss Mitigation, which has offices in Newport Beach, Orange, Huntington Beach, Corona and Fresno; and Los Angeles-based United First Inc.
A voicemail message seeking comment was left Wednesday at the offices of U.S. Homeowners Assistance. Calls to the other companies led to messages saying the phone numbers were no longer in service.
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