Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Non-Tech : Bill Wexler's Trading Cabana -- Ignore unavailable to you. Want to Upgrade?

To: Kevin Podsiadlik who wrote (3785)	7/17/2008 7:44:20 PM
From: RockyBalboa	Read Replies (2) \| Respond to of 6370

Not me, Sir. But it didn´t take long and out came this piece. A million here, a million there: mrmortgage.ml-implode.com Wells Fargo was one of the first to use heavy Level-3 placement of toxic paper early in 2007. Last quarter there was a debate on how they valued their mortgage servicing rights - if you remember Wells beat last quarter from “mortgage banking.” ... This story concerns their massive $84 B Home Equity Line/Loan portfolio, of which much is now underwater due to massive house price depreciation. Technically (and realistically) these have become unsecured. This is a real problem for banks. By my estimates, Wells Fargo wildly under-reserved on their home equity exposure. Not only did Wells change the time line for placing a loan into technical “default” by extending the term out 60-days, essentially hiding 60-days of defaults, but they are also using AVMs to determine value from March of 2008, though the median home price has fallen 5.4% since then. ... In the second lien portfolio set up for liquidation, the percent of loans that saw borrowers miss two or more payments rose during Q2 to 3.6 percent, up from 2.79 percent one quarter earlier. The $73 billion “core” home equity portfolio saw a similar rise to 1.88 percent in 60 day delinquencies, compared with 1.71 percent in Q1. So delinquencies continued to rise during Q2; net credit losses, however, did not. Charge-offs on second liens were actually down $104 million compared with first quarter 2008 — but don’t let that fool you. The improvement was primarily due to a change in how the bank handles its home equity portfolio charge-offs; earlier in Q2, the bank extended its charge-off policy from 120 days to 180 days, in an effort to give troubled borrowers more time to reach a loan workout (or to protect earnings, take your pick. ... The change deferred roughly $265 million of charge-offs in the second quarter.