Wells Fargo: Loan Repurchase Reserve Liability Of $1.3 Billion On $144 Billion In Loan Originations

The only pages in Wells Fargo's typically labyrinthine earnings release were 26 through 30, in which Warren Buffett's bank, which continues to be in denial over Fraudclosure and still refuses to admit it also was a RoboSigner, discloses its putback/repurchase liability. The total disclosed repurchase reserve liability as of September 30 was $1.3 billion. This compares to Bank of America's total Rep and Warranty liability of $4.4 billion, which as we disclosed yesterday took a tiny provision of $872 million in Q3. This means that when, not if, Wells is also subject to a comparable action by litigants such as the one from yesterday which included Gross, Fink and Dudley on the offensive, the hit to the bank will be that much more dire. And since Wells management now has zero credibility, and negative fiduciary duty to its shareholders, we are currently combing through the MaidenLane portfolio to determine which New York Fed securitizations include loans originated by Wells Fargo. We are confident quite a few will make the cut. After all, as the bank itself notes, of its $1.8 Trillion Resi Mortgage Servicing Portfolio, "8% [or $144 Billion] are private securitizations where Wells Fargo originated the loan and therefore has some repurchase risk."

Drilling further down into this $144 number:

  • 55% are from vintages 2005 and prior
  • 83% are prime
  • Only $69 million of repurchases in 3Q10

Additionally, another $144 billion of the portfolio is non-current. Shortly we hope to have enough data to cojoin these two Venn circles and determine how much of the non-current loans were Wells originated. The 30,000 foot answer: a lot.

Below is a summary of the company's servicing portfolio:

And here is just how unprepared the bank is to an action comparable to that taken against BofA yesterday:


In other words, how many lambs does one slaughter to thank the gods for not being John Stumpf right about now?