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Wells Fargo Dealing with Option ARM Loans

Wells Fargo saw a $28.2 billion reduction in unpaid principal balances on legacy payment option ARM loans last year, according to an investor conference presentation by the company’s CFO. A recent Wall Street Journal report indicates that Wells has been reducing payments for borrowers strapped with an upside-down mortgage who originally took out negative amortization loans by offering them extended-term financing with interest-only payment options.

Wells Fargo also reduced its legacy credit-impaired commercial real estate portfolio by $5.6 billion year-to-year, said CFO Howard Atkins in a web cast presentation from New York. Wells inherited both the CRE portfolio and the negative amortization ‘Pick-a-Pay’ ARMs when it bought Wachovia in the fall of 2008. Mr. Atkins said that despite these negatives, the Wachovia purchase was beneficial. Wells improved its distribution network and diversified its financial offerings. The deal also allowed it to bolster its origination and servicing volumes.

Addressing questions about the company’s second mortgage exposure, Mr. Atkins said performance in that area is relatively good given that it includes some first-lien product and has strong underwriting outside of the third-party sector it exited a couple of years ago. When asked about HAMP mortgage modifications’ effect on home equity loan program, he said he would not take a position other than to note the company is exploring its options. Wells has completed more than 118,000 loan modification plans through the government’s Home Affordable Modification Program.

Posted in Bad Credit Mortgage, Foreclosure Articles, Home Affordable Modification Program, Home Financing Articles, Mortgage News, option ARM.

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