Wells Fargo Prepares For Tsunami Of Loan Repurchase Demands

Tyler Durden's picture

Zero Hedge has obtained Wells Fargo's brand new confidential protocol guidelines on loan repurchase demands by investors and mortgage insurers, sent out on October 15, and which becomes effective tomorrow. We have reproduced these below to see just how much more "streamlined" the process is, now that the bank is fully aware of the massive liability it faces as a "loan puttable" entity in a world that is suddenly replete with pervasive and rampant title fraud. Amusingly, in the CIM, Wells states: "Wells Fargo is committed – just
like you are - to honoring contractual obligations with investors and
mortgage insurance (MI) companies*. We want to ensure that the
resolution process for Repurchase and Rescissions is as smooth and swift
as possible." And even so, Wells continues to refuse to halt foreclosures knowing full well it would face billions in impairments should it do so voluntarily, even though as we confirmed Warren Buffett's pet bank was recently caught with its robosigning pants down as well (an event which was sufficient for everyone else to invoke a self-imposed moratorium, even Goldman, whose Litton Loan Servicing unit was rumored to have serviced about 4 or 5 mortgages in the past century... but not the California real estate monster). What is critical, is that Wells Fargo admits that should all avenues under existing legal guidelines be exhausted, and robofraud is certainly a dealbreaker that can not be "explained or validated away", then the bank will be forced to repurchase the loan. In other words, starting tomorrow Wells is preparing for the loan repruchase tsunami to hit the fan as investors and insurers everywhere swamp the bank with tens if not hundreds of billions of repurchase and recissions demands. Suck it in, Wells investors.

Here is the simplified flowchart that will end up costing the bank pretty much all of its balance sheet cash. The only question is how soon.

Step 1

Wells Fargo receives a deficiency notice or demand from the investor
. Typically, Wells Fargo has 60 days to resolve the issue.

Step 2

Wells Fargo notifies the Seller and provides supporting documentation when available. At this time, the Seller is given twenty-one calendar days to provide an explanation, facts or documentation to demonstrate that the mortgage loan complies with the requirements. If the Seller does not respond within 14 days of the initial notice, Wells Fargo will follow up with the Seller.

Step 3

Wells Fargo will begin internal research (concurrently with Step 2) to resolve the loan issues. During this process, Wells Fargo will determine if there is a missing document and if the document can be located.
For all other issues, Wells Fargo will perform research to determine if there is evidence that proves or disproves the validity of the issue. For example, if the investor provided a review appraisal indicating a value deviation, Wells Fargo will order an independent appraisal review of the origination appraisal and the investor’s review appraisal from a third party vendor.

Step 4

The Seller responds to Wells Fargo’s request and either agrees with the investor’s findings or provides an explanation, missing documents or information for Wells Fargo to utilize in drafting an appeal to the demand or MI rescission notification.

If an appeal is not practical, based on all the information collected, Wells Fargo will notify the Seller, allowing them a final opportunity to provide additional documentation.

If an appeal is submitted to an investor, the Seller will be notified of the result of the appeal. If the Seller provided a response that specifically addressed the investor's issues and the investor deems the information to be insufficient to rescind the repurchase demand or MI rescission, the Seller will be given seven (7) calendar days to provide new documentation to support a second appeal. (Please note: Even if documents are provided by the Seller, the appeal may not be successful).

And here is the punchline that will make old uncle Warren just a few billion bucks poorer:

If attempts to refute the demand or MI rescission are unsuccessful, Wells Fargo will be obligated to repurchase the loan from the investor or accept the MI rescission. Likewise, Wells Fargo will issue a demand to the Seller for the repurchase of the mortgage loan pursuant to the provisions of the Loan Purchase Agreement or reimbursement for costs and expenses, if applicable.

Readers can be confident that over the weekend loan investors and mortgage insurers have received identical letters from all other banks as well. The next step: an attempt by every single mortgage investor and insurance company to get every single mortgage repruchased by the originating company on grounds of robosigning fraud.

The banks had their party of a lifetime, and now the terminal morning after hangover has commenced.

And as the letter highlights, all those who may have questions about this particular suicide process, are encouraged to write to IRMRepurchaseResponses@wellsfargo.com.

Full report (pdf)


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cossack55's picture

Couldn't happen to a nicer bank.  Well, actually it could.  At least 5 more come to mind immediately.

unum mountaineer's picture

he wears depends...hope he has the type with the double lining..it'll be one of those shit storms come monday.

OMG, it's really about to go down huh. the oncoming shit storm will be catastrophic but morbidly I can't..seem...to..look..away..

i-dog's picture

WFC ... puts the 'w' into banking........

Sudden Debt's picture

Watch out with those put against Wells. I've got me my ass creamed twice shorting it.

There always happens something magical thanks to tinkerbell, and those banks get a lucky street.

Take BAC for example. The media is cooking them, but short interest is only 2,5%.

For WFC, there are only 1% shares short!!

These stocks will soons see a heavy rebound!

Wait at least 2 more week before going short and see what Obama plans to do into election time with this mess.

Me, I'm going long on BAC

Gromit's picture

True - I nailed them in late 08 - they've got some of it back since then.

One of these days people are going to figure out that earnings going forward will disappoint all but the bears!

1100-TACTICAL-12's picture

Could someone please break this down, for a half drunk layman....TIA

macholatte's picture

Trailer Park Boys


palmereldritch's picture

"Your ears will implode from the shit pressure.  You've been warned Bubs...Beware my friend, shit winds are a comin'..."


Conrad Murray's picture

Following up on Beanblower's comment:

Banks sold shit to investors as candy.  Investors aren't all that thrilled, but figured they got the shaft.  Turns out selling shit as candy isn't legal unless it's properly documented, conveyed and disclosed.  The shit barometer in the Wells office is going off the charts as the winds of shit build into a category 5 shiticaine of forced poo repurchases.

Horatio Beanblower's picture

:) Concise and to the point, Dr Murray.

Flounder's picture

OMG...haaahaaaa!...what are your tour dates?

Conrad Murray's picture

It's Monday, that means everyone needs some music to get the week rollin.  Here is my answer to Steak's call for playlists (music this time, not comedy):

Steak and Shake:

Steak's picture

while we all win here by having more (very capably selected) tunes to bump to, the big winner here is that baby seal.  go on little one, you won't be clubbed...this week at least :)

FEDbuster's picture

"It's just a flesh wound"  The Black Knight

"It's just a process issue" Sheila Bair 10/17/2010


Rusty Shorts's picture

 - oh god bless, jesus, Sheila Bair, why can't she hold her head in a "upright position"? wtf the fuck is she mumbling about?

Spalding_Smailes's picture

He told me, ....uuuhhhhhhhhh... heeeeee t..t ..to.....-----------------.-------.-.---------


..."How will developments in the subprime market affect the evolution of the housing market?  We know from data gathered under the Home Mortgage Disclosure Act that a significant share of new loans used to purchase homes in 2005 (the most recent year for which these data are available) were nonprime (subprime or near-prime).  In addition, the share of securitized mortgages that are subprime climbed in 2005 and in the first half of 2006.  The rise in subprime mortgage lending likely boosted home sales somewhat, and curbs on this lending are expected to be a source of some restraint on home purchases and residential investment in coming quarters.  Moreover, we are likely to see further increases in delinquencies and foreclosures this year and next as many adjustable-rate loans face interest-rate resets.  All that said, given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.  The vast majority of mortgages, including even subprime mortgages, continue to perform well.  Past gains in house prices have left most homeowners with significant amounts of home equity, and growth in jobs and incomes should help keep the financial obligations of most households manageable"......


..........."Servicers of loans aim to minimize losses, and they appear to be actively working with thousands of individual borrowers to modify their mortgages.  To some extent, the dispersed ownership of mortgages may combine with legal and accounting rules to make successful workouts more difficult to achieve.  For example, the "pooling and servicing agreement" associated with a given securitized mortgage pool may restrict the share of accounts that can be modified.  Accounting rules that, in some cases, require substantially modified pools to be brought back on the originator’s balance sheet may dissuade lenders from undertaking workouts.  And extensive modifications that reallocate expected cash flows across different securities associated with the pool could trigger a review of those securities by the ratings agencies.  At the same time, if workouts are economically viable, then an incentive exists for third parties to purchase distressed pools at a discount and to undertake the workout process.  We see these purchases taking place in the marketplace, a development that should help to increase the number of successful workout"..........


Chairman Ben S. Bernanke At the Federal Reserve Bank of Chicago’s 43rd Annual Conference on Bank Structure and Competition, Chicago, Illinois May 17, 2007

The Subprime Mortgage Market

FEDbuster's picture

"Hi, this is John Stumph over at Wells Fargo, is Shiela Bair available?"

"I am sorry Mr. Stumph, Ms. Bair has several calls ahead of yours.  If you would like to hold, you will be after Mr. Dimon, Mr. Moynihan and Mr. Pandit.  Or you can leave your number, I will make sure Ms. Bair calls you back by the end of the day."

"It's somewhat of an emergency, could you please get her on the phone?"

"That's funny Mr. Stumph, that is what the other gentelmen said, too.  She has your number, have a nice day."

hedgie's picture

I wish you were right.  But the dialogue is probably more like this:


Sheila Bair calls John Stumph.  

Sheila:  John, it's Sheila.

John: Hi, Sheila!  Just got off the phone with Timmy.  He says we gotta wait until after the election to make this go away.

Sheila:  I am afraid he may be right, John, but don't worry.  We are not gonna let them lay a finger on you.  We are going to to change the laws wherever necessary, use that NSA directive to keep some of this silent (and send a few black ops teams after pests like that 4closurefraud.com guy), and then, if necessary, we will have Fannie and Freddie and the Fed buy every last trillion of this crap to get it off your books.


whatsinaname's picture

So the Wachovia steal from Citibank may not have been such a sweet deal after all - thanks to Golden West's mortgage fess ?

knukles's picture

Wasn't the loss on the purchase assets limited for WF with any excess being absorbed by a something or other in Washington equally as unidentifiable as the legal owner of the underlying mortgage notes in question?

I think they got stopped out.  Anyone else recollect?

A Man without Qualities's picture

they thought they were buying a bank, turns out they were buying a bunch of lawsuits and a large portfolio of trailer parks.

knukles's picture

Actually, all kidding aside, trailers (well, mobile homes) are the bad mortgage product, while trailer parks are great.  If a trailerowner defaults to the bank or quits paying for his campsite so to speak, ya just tow it away and there's room for a new trailer.  

I know, I know, sounds silly, but for real....

G-R-U-N-T's picture

William Blacks simplified version of "Control Fraud" and the pathological environment in which it flourished.


rocker's picture

I posted this earlier on another post because this is what took 1-1/2 hours at my branch bank on Friday.

Bank Alert:  My bank has changed 6 x since the 70's. The last change is Wachovia to Wells Fargo. So, being a customer since 1970 to present. Never bouncing a check and credit in great standing I got the shocker. I have a standing 5k balance in checking acc. and a average of higher.  I went to cash a check from Scottrade for 10,000 in cash. I was told I would have to wait for it to clear. I said, "Oh really, Why?"  No answer, just has to be. So I said: "O.K. I'll be back in three days to get the cash. 2nd Shocker: They said: "No, you won't be able to get it then either. It will take a week for us to get that much cash ordered and we only order cash on Fridays". Bottom line, they get to hold the cash for about 10 to 12 business days before I can receive my money. Something tells me there is going to be a bank holiday soon. 

I plan to do this all again for 15k just to protect my own future needs if there is a actual run. I will do it just because of the line of crap I was fed on Friday. I'll just put it in my safe deposit box with my gold and silver. Screw them. Does anyone trust that they have your money ??? Ironic that this comes out tonight on WFC. Maybe it explains why they are not willing to give up cash.

At120's picture

If there's a bank holiday, you're not getting access to your box, either.

You need to go to a main branch in order to get your money faster.



RichardP's picture

Any bank must report any transaction $10,000 and over to the IRS.  Holding your money is likely part of the government's overall efforts to interfere with money laundering, drug purchases, etc.  Cash a check for $4,000 and see if it takes as long to get you your money.

nedwardkelly's picture

Any bank must report any transaction $10,000 and over to the IRS.

There's a bit more to it than that, they're also supposed to report anyone that they think may be making transfers in amounts intentionally set to avoid the $10k threshold. In other words, they report everything over $10k, and anything under $10k that they feel like. More info here:


It's just another one of those crazy things that the US has to do so differently. Plenty of other countries (take australia for example) you can log into your netbank, direct transfer to any other domestic bank account (regardless of the bank) up to $100k. Not in the US though, apparently that would make life too easy.

Pondmaster's picture

I wouldn't look for a Bank Holiday , your bank is simply gaming the system with your large check and 1000's of others . Totally interest free money to play with for 10-12 days . Also this money , if withheld from depositors , near end of quarter can make bottom lines look oh so much better . If you see it in a bank , it is fraud , anything a bank does it is for them alone . But look at the bright side . Pretty soon we will be getting $100 bills by the wheelbarrow load , so no more worries of cashing your Scottrade checks .

dcb's picture

never going to happen the laswt two administrations are willing to destroy the economy in order to rescue the bankers.

not going to happen!!!!!

when you start to realize the system is corrupt, and those in power have no other choice, you realize the end point.

the banks will no be asked to pay for their mistakes. that comes from the tax payer to pay for their bonus.


the end result wll be a new american revolution, or those in power leave and give up the goodies.

I think it will end in violence, and it should have already. the only question is: will the militry come on the side of the people, or the side of the criminals

At120's picture

Explains why PIMCO is buying MBSes hand over fists. 

FEDbuster's picture

Yep, buy em up cheap, then force bank to buy back at original sale price.

Founders Keeper's picture

[Yep, buy em up cheap, then force bank to buy back at original sale price.]

Thanks for your post, FEDbuster.

Very interesting. 

PIMCO and the FED do indeed "have a thing going on."



Pillage's picture

They're going to be so happy to buy them. I mean heck, that's the good stuff they homemade themselves! Just a good ole' comin' home, hello darlin, haven't seen you in while kinda love!

They eat all they can and they sell the rest!

Cistercian's picture

 Suck it in indeed.Today's word is insolvent.Can you say insolvent boys and girls?

   I knew you could.

Cognitive Dissonance's picture

Today's word is insolvent.


Um, let's try that again.


Getting closer. One more time.


Almost have it.


Just about there. Come on, you can do it.

"I've soiled my pants!"

Good boy Charlie, I knew you could do it. Here, have a bank lolipop as a reward.

SWRichmond's picture

Someone send Charlie another box of Depends.

tip e. canoe's picture

xtra small sized so he can suck it in when he puts them on

StychoKiller's picture

Insolvent Green is non-existent Home Loans!

juangrande's picture

Did Mr. Munger actually say "suck it in"! Anyone who has played even Jr. High sports knows the phrase is "suck it up". "Suck it in" might be heard in beauty contest school. Pencil neck geek!