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Wells' Imploding Loan Portfolio
The fine folks over at WLMLab Bank Loan Performance have done a great job at updating FDIC loan data by various banks. Some of their conclusions:
- Total US Loans outstanding have dropped by another $110 billion QoQ
- Yet, there is an ever increasing mountain of charge offs coming in 1-4 Family First Liens
- At the same time CRE early stage delinquencies have dropped from 1.37% to 1.17%
Yet the most significant observations is the ticking time bomb that is Wells Fargo's 1-4 Family 90+ past due loans.
WFC's Construction & Development portfolio is also on the verge of implosion.
Conveniently, these loans are low on Non-Accrual rates, meaning that net interest income is not currently affected (and leading to a falsely high EPS number), yet once everything hits the fan, the bank will be forced to charge off a staggering amount of debt at much higher principal amounts. Perhaps any and all rumors about WFC's viability should be evaluated very carefully going forward.
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Like 1980, aren't the COMEX Directors short?
Didn't their CEO guy come out the other day before the close and say everything was hunky-dory? I recall Buffett saying he loved WFC and would buy more shares if he could. Uh, huh...
Maybe he'd like to make a market for WFC later on when the shit hits the fan. He could make a gekco Wells Fargo commericial urging folks to open checking accounts with "free" money. Better yet, the caveman could pitch it.
Hahahaha, commerical with cavemen +10
"I recall Buffett saying he loved WFC and would buy more shares if he could. Uh, huh..."
Buffett has boasted of WFC's future, no question about it. However, his timeline is much, much longer than that of most. I also believe, speculation on my part, that he is fully aware of the crap on their books but recognizes the US gov't and Fed will do everything possible to support the big banks.
On a long enough time line the survival rate of everyone drops to zero.
WEB slinger may die before his Euro puts come due.
Meanwhile BRK took some pretty stiff write-downs.
How does a company earn money when there are no sales?
http://www.jubileeprosperity.com/
yes wells fargo was on cnbc a couple of days ago and said they were going to be able to pay back the tarp money very soon.
I thought this data looked familiar. Yeah, this guy is dead wrong, he doesn't know how to analyze a bank balance sheet. he is collecting this data from the FDIC, but this is raw data, as I posted above, WFC has already written off many of the loans he shows as non-performing. You don't need to reserve for loans you have already written off, but they show up as non-performing to the FDIC.
The FOX Audience Network.. LoL.
They may have to sacrifice WFC this year.
Should have happened last year because of the garbage from WB but at least they kept the illusion going for another year.
Think of the patient on life support and vital signs are getting weaker. Doctors looking at the charts and family trying to find the DNR note. (Spin) Doctors will explain to the family that patient won't feel a thing and it will be the best option for all involved.
Markets will discount the news, all will be bullish.
Jim Cramer for President, Larry Kudlow Vice President.
Lalala birds and stars. The witch (bear) is dead, the witch is dead.
Wells holds my mortgage....I wonder if they can find it?
The relevance of finding the original documents, in a contested foreclosure proceeding, largely depends on state law. In OH and FL, several cases have been decided in the favor of the defendents - literally eliminating the lien of foreclosure because the plantiffs' could not produce original paper work and/or were not legally entitled to a lien (i.e. pension funds).
WFC is going to pay back TARP how? How much WFC toxic stuff is over at the fed? How is WFC not a zero?
How is Fed not at zero?
Less than zero.
SWRichmond, we should call you Socrates!
the TBTF are BLACKHOLEBANKS...
reminds me of an old favorite: http://www.youtube.com/watch?v=UtzsXMV5ve4
great song, great video, great analogy.
Thanks Lou629!
Here is another one for you--(it's my next fav on the album)
http://www.youtube.com/watch?v=QWkbFKJZB0k
more sleepless nights for sheople who keep holding their savings in these banks.
poor sheople
For the daily calculation of a bank's required reserves, 90 day past due receivables are not allowed as part of the asset total. 60 day past due are allowed only at 50%. D rated bonds also not allowed. (in my day anyway) It would be interesting to see how much in federal funds are being purchased daily by Wells. More interesting would be how much is borrowed from member banks and how much is borrowed from the Fed.
Unless, money from TARP is used in place of the reserve requirement balance.
Extremely heavy call buying on the index options today. Almost no corresponding put activity except selling.
Tomorrow is going to be a huge rocket ship up, unfortunately.
ta tap tap tap tap. Magic bond to treasury money box creates call money. Stop.
ta tap tap tap tap. People noticing magic box isn't magic. Stop.
ta tap tap tap tap. Call money may no last forever. Stop.
LOL!
Great call.
Watch Friday's close for the big short setup.
Folks we are in currency cyberwarfare with the
surplus BRICS, Japan and Saudi Arabia.
Would not write America off just yet...
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3251493
I have been reading your things for very long tyler, but I think there is something more you need to put in your analysis.
1) with wells, they aren't going to be allowed to fail and how much of their securities are going to be bought by the fed and taken off their books
2) the second issue is how much more money is going to be pumped into the system with purchases of MBS. this is the amount assets are going to rise
3) they're increasing the length of purchases when will this end?
markets have unlimited funds to play with from the tax payer. things aren't going to be allowed to drop so much that these things go bankrupt.
4) we all know we don't have free markets, so what do you think will happen?
5) I agree it is a complete ponzi scheme, and I'd like to see the public start to riot at the injustice, but until then I'll write and complain, but I've got to start to mae some money too
Well then, you've answered your own question. Short Wells. They will survive by your logic, but they sure as hell aren't worth 26. They raised equity at 22 during the pump and dump. Maybe they're the company rumored to go bankrupt soon. Are you positive they'll be bailed out? Obama is toast if so.
You are probably right but understand that the problem is not just Wells. This is a $10-14T problem (according to Hussman) if not greater. The government simply can't bail all these insolvant banks out without a certain dollar crash. And by crash I mean a huge devaluation well over 50% - not slowly but suddenly. And when that happens it will crash the equity markets for sure albeit DK will spin hyperinflation as a good thing!
The missing component on the WFC statistics is to differentiate between loans that are actual assets and those those that represent serviced for others (securitized). A 9% delinquency rate on SFO loans represents significant labor costs but not writeoffs.
The HELOC and construction portfolios are no doubt assets, as is the toxic shit they got with the Wachovia deal.
But the majority in the 1-4 category won't represent losses to WFC.
Off topic .....TD Peter Schiff, reads ZH, he quotes the Congressman Pete Stark video in his wednesday radio show
Somewhat related story. Heard today about a house across town that was just abandoned. Turns out they hadn't made a mortgage payment in two years. House had been foreclosed on and has been listed for a while now at $165k. That inspired a lot of laughter. It's rundown to all hell and hasn't been touched yet. I'd say $50k might -might- find a buyer. Turns out the bank is $60k underwater on it, and who knows what's really on their books.
I asked who the mortgage was with. Countrywide...
New York Fed Names 11 Members to Community Affairs Advisory Council
note the new members...
http://www.newyorkfed.org/newsevents/news/aboutthefed/2009/an090903.html
http://www.marketwatch.com/video/asset/5-reasons-to-be-bullish/6817A216-...
Eh? Guffaw.
Amazing what kind of drugs you can get with employer provided health care.
Amazing PsyOp AgitProp:
RM hires DK Muppets and "demolishes" the case for rational fundamentals.
Classic line:
Businesses profitable because they fired everybody.
Famous line:
It can't get much worse.
If this is indeed the case, it's seems a blockbuster.
-AnonymousZero
Quick question and please forgive me if this sounds stupid but what the hell happened to all the PMI policies that all the low down payment, subprime type borrowers were forced to pay for. Was that just free money for the banks, was it not actual insurance, was it underwritten by AIG? I have not heard a peep on this subject since the whole housing implosion began, and it has been sort of gnawing at me. I put an additional 90K (on the now obscene 2006 market peak price) down on my house just so I could avoid being saddled with what seemed like a needless expense and another form of syndicated robbery by mortgage lenders. WTF, Over?!?
That is a great question that I would like to know the answer to as well. I've yet to read anything on that whatsoever...maybe there is someone in the industry who reads zh that can provide some insight.
I have another version of this question I keep asking. Why not just let the margin call go out and unwind the derrivatives (which is, I think, where the insurance lives and, the fear is, that no one really has the money to pay for all that is really needed to set it right. Deflationary firestorm of selling off). Let all the fuckers who said they would cover go broke first before we start talking about back stopping thing one. Lets see the real damage after an unwind. It may not be as bad as things are now.
On behalf of a grateful nation, I regret to inform you that you were fucked over by actually putting money down like you were supposed to.
As to your question over where the PMI policy monies went. The answer is it went nowhere, because it didn't exist. All the crooks bought homes with 80/20 liar loans to avoid paying PMI. See the "you got fucked comment above."
Had you of used an 80/20 liars loan you could stopped making your house payment for months or even years by now and threatened to let the house go into foreclosure unless the lender and Hope Now forgot all about that 20 loan.
Next time watch Cramer for instructions on how to fuck over the bank that fucked you:
http://video.google.com/videoplay?docid=6978062039224367008&q=Cramer%3A+...
pretty sure there are basically two pmi companies that had most of the market and both are teetering on bankruptcy. pmi is the stock symbol for pmi group. can't recall the other
The MI companies are in deep trouble. There were seven, and yes, AIG did own one of them.
They are basically all insolvent, but are denying claims like crazy so can claim all those delinquent loans they insured will not result in losses, so they don't post reserves against them. That keeps them solvent.
Of course the banks are suing them over the denials.
One of them (TGIC) is in runoff, has negative net worth from a GAAP perspective, but because their regulator has instructed them to only pay claims at 60 cents on the dollar, they can book the unpaid 40 cents as part of policyholder's surplus so they are solvent from a statutory standpoint (no kidding, you cannot make this stuff up).
The one owned by AIG recently laid off most of its staff, and was rumored to be sold or shut down, but who knows now that the new CEO is trying to raise AIG from the dead.
The three pure mononlines are PMI, MTG, and RDN. All are in various states of collapse. PMI will probably go down first. MTG and RDN will follow. I saw on Bloomberg today that MTG has one of the largest % of float shorted, for good reason, though I would short RDN before MTG.
Unbelievably, 6 of them are still writing business, thanks to Fannie and Freddie still accepting their insurance. it is a disgrace. They all have BB ratings, but charge higher premiums to borrowers than when they were AA, and Fannie and Freddie accept their insurance as good (why are essentially govt-backed companies buying insurance from BB companies?).
The whole situation is a disaster.
Oh, of course their stock prices are all up 300%+ since July.
ghost...thank you for a very nice update. I appreciate you taking the time to share this information.
+1
agree
Got a neighbor that is a complete jerk.. his house has been listed for foreclosure auction for the 2nd time in a month's time.. hope this time it sticks, but i'm not counting on it.. his mortgage is thru WFC
Beaker's gotta gut and likes to waffle.
Do we have the best technology, yes.
Do we have the highest ideals and best government structure on the planet, yes (on paper) Everywhere corrupted
Do we have the hardest working populace Absolutely not. Ever work with the Chinese, Japanese, or Mexican labourers?
Do we have the best and strongest companies? NO--they gutted themselves with debt, handouts, and offshoring.
Do we have the best financial system? NO--they are little more than a criminal class who have brought high intelligence and technology to bear in the greatest purloinery in mankind's history. The greatest financial bubbles, the greatest leverage ever.
The flaws heavily outweigh the pluses, collapse is assured. Just the means and method are unknown. We are all watching it play out as our governors and custodians of power lie, manipulate, steal what little remains.
a friendly reminder Friday 7am - 11am EDT Rosie co-hosts Bloomberg TV/Radio http://www.bloomberg.com/avp/avp.htm?clipSRC=LiveBTV
This is such bad news that it can only mean..... Yes! The stock market will rally BIG TIME tomorrow. I am still hoping that FAZ can actually get pushed down to $5 before congress makes it illegal to own it.
No Radio Z tonight? Please tell me Marla will spin tomorrow. Pretty Pleeeeez?
Wells Fargo is indeed in a bad shape. My good buddy at Foothill which is a sub of Wells had their line cut off 2 months ago an he tells me tonight that all he is doing is putting out fires and working out 90% of his deals. So its only time until we see the mother off all shit hit the fan. Expect a major tun of events tomorrow.
"GE bent the accounting rules beyond the breaking point," said Robert Khuzami, Director of the SEC's Division of Enforcement.
Government Electric
The Mish piece linked above is both funny and infuriating. I'm so glad that BAC at least knows the value of all its trillions of derivative exposure! I'm sure WFC is equally on top of its own asset base, even if once and a while they simply cannot find a house on which they wrote the mortgage. Hey, one house, no big deal. The loan administrator probably didn't get the bonus he deserved due to TARP restrictions, so he left for greener pastures as a coffee barrista or something.
wells fargo cancelled all 75 homes set for auction in the county i live the morning of the sale along with bofa and c over 135 this last month. they have done this about 5 straight months. another sale tomorrow and am expecting the same thing. on another not to tyler thanks for all your hard work i have educate myself from reading you every single day. keep up the good fight
How could 1st liens be at 10% and the second leans only defaulting at 2.75%?
They were big in seconds. Could they have rolled up the loans?.
If you are a creditor and have both first and second lien paper and you are in court it is likely that you will suffer 'equity subordination'. This means that your first lean is treated as a second when things get divided up. If they did that it would explain the disaster in the first lien book.
110B of options arms.
This is interesting, from the 10-Q:
"Included in the Pick-a-Pay portfolio are loans accounted for under SOP 03-3 with an unpaid principal balance of $59.6 billion and a carrying value of $38.9 billion at June 30, 2009."
As of 12/31 this was 93.9B and 56B. Either these loans were refinanced, went delinquent, or were sold within the past 6 months. I have heard rumors they were selling some of their distressed portfolio, but under the radar, so the industry wouldn't have to mark their loans based on the sales.
Hmmmm....
FYI, since I know someone who works there, Wells management has been taken over by the Federal Government. It's pretty obvious to those who are there.
What's going to happen? I'll tell you:
Around February 2010, another, $2 trillion, stimulus. This one will be a big Christmas tree bill, with money for unemployment, Afghanistan, and of course the banks.
Nothing will ever be marked to market again. No losses will ever be recognized again. The reason is that, now that the Federal Government is in actual control of the economy, all those things do is undermine the writ of the political system.
Where you're going to see the effect is in the on the ground economy: disastrous slowdown in economic activity, deflation which will wreck the infrastructure.
In case you didn't know it, it's all over for America.
Meanwhile the Lehman Blame Game spills over:
Lehman downfall triggered by mix-up between London and Washington
"With finance ministers and central bank governors from the G20 countries meeting in London on Saturday, the first-hand accounts of those handling last year's events underline a rift between London and Washington over who was to blame for the demise of Lehman, which triggered a month of mayhem on the financial markets."
http://www.guardian.co.uk/business/2009/sep/03/lehman-collapse-us-uk-blame
All will be ok now, because what I hear is that the USA was just sold
to the Chinese.
Dont believe me? See for yourself:
http://www.chinadaily.com.cn/china/2009-07/13/content_8422505.htm
The portfolio will be dissolved, along with all others.
All jokes aside, I get the feeling that I just woke up in the twilight zone.
Yes I just got off the phone with the President, and it's true! I don't have to pay pay my loans anymore and neither do you. Great news! All it took was some sound negotiation and shuffling of sovereignty and voila, crisis averted. I'm a little torn since I like the Constitution and all but there's always the option to move to Iowa, the only remaining state in the Union, (Obama wanted to avoid looking like a pushover, so the Chinese had to give him something) and I can watch them trample all over that document at my leisure, but now in a lot safer setting.
Ok g2g the new viceroy Jamie Dimon is about to speak on the telley.
Thats right buddy,
We are now just cogs in the great machination known as the PRC.
Wells Fargo executives as well....
This is a Capitol Steps skit, right? Right?
I have, in a moment of weakness, done business with Wells Fargo. They are, without any doubt in my mind, one of the most horrible bunch of idiots in the world. If they're not patently incompetent, then they're thieves. I hate that company. Never ever ever do business with them. Ever.
So, if this ship of fools sinks, I cheer that.
Wachovia wasn't, and the bulk of the impaired portfolio is ~$60 billion face of first-lien ARMs. I'm assuming also that a lot of delinquent seconds just get written off immediately, and I'm not sure how that shows up in FDIC statistics.
No, the total SOP portfolio was $94 billion. Most of that was option ARMs, with the rest being commercial, home equity, and some subprime stuff that, by the way, was sold off like NovaStar and Accredited. Note that Wells took 35 cents on the dollar for that deal, which ZH picked up on. Over time, that's a profit because the relevant SOP portfolio was written down to around 20 cents on the dollar. So, it basically doubles the yield on that portfolio and gets earned over several years.
I think very few people understand how SOP 03-3 works, but the gist is that they estimate lifetime losses and take the writedown immediately. Therefore, Wells's problems have much less to do with Wachovia's worst loans and much more to do with the "non-impaired" books. Probably 90% of the loans in SOP will default, but that's already been accounted for in the non-accretable discount. It's the loans that are currently held at face that are the most lethal (think non-SOP ARMs, commercial, HELOCs).
Note also that Wells probably can't offload much of its option ARM portfolio because a lot of it's based on a proprietary index (COSI).
Wells is not the only one... (maybe one of the worst)
I remember when all bank shares were shitting during the "crisis"
I was immature enough to ask one of my relatives during the crisis about GS (but look at GS...they are still trading at 16(0's)!!!
He told me this (and it proved to be true) "Goldman Sachs is in the same business as all the other IB's, so if ALL the investment banks are in trouble GS is in trouble"
I shorted GS based on his sage advice and it proved to be one of my most lucrative positions I have ever traded.
If Wells is in trouble...others are in trouble.
good point
good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions
Wells is going to declare bankruptcy at 9 am tomorrow
Pizza Delivery man bought a huge position in NatGas today (this is a huge position we will hold for years)
Also shorted oil but have tight rolling stops.
What did you buy - there was a good summary of the dynamics of NG over at Tim Knight`s site
http://slopeofhope.com/2009/09/professionals-input-on-natural-gas.html
If there was still any doubt that America is fucked... check this out:
http://peopleofwalmart.com/
That is the greatest website EVER!!!!
Please can somebody (smarter then me) answer me a simple question :
If WFC has 121B equity and say need to write off 52B (at this rate), they still have 69B cushion and will not go under (please it is not provocative question)?
HFT in commodities
from alphaville
http://ftalphaville.ft.com/blog/2009/09/04/70006/hft-in-commodity-etfs/
Tyler: The data in the two graphics/tables posted differs. look at the WFC's Construction & Development and 1-4 family. both differ between the two tables.
Sometimes, when I'm lying awake at night I wonder, "Does skynet fear the long week-end?", and "Do Androids dream of electric sheep?"
good articles; good articles 4 slow news day ..http://www..
hat tip: finance news & finance opinions
C'mon, Wells Fargo cares about homeowners and is your partner in the American Dream. Haven't you seen the new TV commercials? And B of A is touting their new one-page mortgage statement that "doesn't require a Masters Degree in Economics" (or some such, I'm paraphrasing), because obviously what borrowers need is simplicity, not the burdensome task of reading their documentation and understanding what they're signing. And lenders need not worry about disclosure and educating borrowers, because when the nonsense hits the fan we will again be there to Bail Them Out. So why change anything? No! Just take your BailOut money and use it to take Congressmen for expensive meals and golf outings. And then tell taxpayers that stealing our money is "less worse than the alternative", because otherwise the system will blow up. I say, if Wall Streeters put a gun to their own head and warn us to shut up or they'll shoot, we demand that they go ahead and pull the trigger.
OK, had to get that out of my system ...
I know of several "home-owers" in Florida who have not made a mortgage payment in over a year, and have not even received a Notice of Default. And I'm not looking hard for these examples, I am simply being made aware of them; various lenders.
How much "off-balance sheet" inventory is really out there?
Only "The Shadow" knows.
So the Bankster/Government crony-cap's instill "confidence" in the hopeful lemmings so they will compliantly "buy and hold" until the time is ripe to once again walk them into a buzz saw. Old story ... history repeats.
We are just in the ending of the 3rd inning of an extra inning game in this mess. http://myinfo4u.net
Though obviously I may not be as clever as you folks here as I can tell by the witty banter I've read so far...I must say that for an end of the financial world as we know it you all seem rather fine and dandy.
I'm just a simple blue collar boy and what I have noticed is a deep anger in this country that scares me because in the end it's those with power and guns that win.
As I'm looking at the story...The comments and the posible solutions I come to only one conclusion...There will be riots and an economic crash which leads to sooooo much anarchy and horrible control by the many state and fedreal agencies...It's a chain reaction once it rolls.
Long term loans will NOT work...Current currency will have to be dumped...A Jubilee of sorts will have to happen...I have never seen us so close to the edge of madness and I have never seen such a group of unconcern, unprepared people like our own...Not so much the people of this delightful blog but Americans in general...Good luck to all...get your ammo and guns ready :P
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