Is WFC Playing a Mortgage Shell Game?

Jingle mail, Jingle Mail, Jingle all the way.....

This borrower couldn't pay and thus stopped doing so. This should generate a "NOD" (Notice of Default) and ultimately lead to foreclosure, right? It should result in an impaired asset which might be sold to some other company (at a discount), right?

It got sold all right - right at the "120 day" late point where Wells counts a loan as "defaulted."

But look at who it got sold to..... (click for a larger copy)

Yes, Wells (WFC) bought the loan from.... itself?

Yep.

I have the original purchase documentation on the mortgage from July 21st 2008, when it was bought (by Wells in Frederick MD) from the original funding company in Tempe AZ.

Now, when the borrower defaults, Wells buys the loan from itself?

For what purpose?

The obvious questions that arise are:

1. Is this loan "suddenly new and thus not yet non-performing" after playing this shell game? And if so, how many more "performing" loans does Wells have now that they haven't been "non-paying" for at least 90 days (having "just been acquired")?
2. Was it sold at Par?
3. Was this accounted for as a "true sale" when it was in fact "sold" from and to the same company in a different office location?

You don't think there might be a little shell game going on here do you?

Doesn't anyone remember that the S&Ls did this same sort of crap (with the twist that in many cases they colluded with each other to shuffle them around between institutions) as they swirled the bowl?

Inquiring minds want to know the answers to the above three questions, and if we had honest regulators they'd be demanding answers to those questions too.

Comments

[Steve Justice:]

If what Karl is suggesting is true it would be illegal, this is highly implausible.

Sep 17 11:49 AM

[BerkeleyBob:]

Yet another example of why I don't like financials, with the exception of credit card processor Visa and probably the best house on a very bad block, JPM.

Sep 17 12:48 PM

[Karl Liesman:]

Karl,

The WFC website does not list a MD address and none in Tempe AZ either. The only address listed in AZ are in Phoenix for Home Equity and Auto Finance.

Why even bother posting this article without knowing the answer to your first question? The document does have a listed address for WFC's Home Mortgage division in IA. What is the big deal? Without these answers is it possible that you are overreacting again?

"1. Is this loan "suddenly new and thus not yet non-performing" after playing this shell game?"

www.wellsfargo.com/hel...

Home Equity
Wells Fargo Home Equity-Internet
MAC S3837-020
2nd Floor
2222 W Rose Garden Lane
Phoenix, AZ 85027-2644

Home Mortgage
Wells Fargo Home Mortgage
P.O. Box 10335
Des Moines, IA 50306-0335

Sep 17 02:17 PM

[LKofEnglish:]

So will the Feds let Wells fail? Haven't allowed one bank failure yet. And now the political class is talking about the "failure of Lehman" as "the cause of the whole crisis." Failure of WFC would definitely cause a huge draw on the FDIC's emergency reserve (which i believe is $500 billion.) Enough to precipitate a dollar collapse?

Sep 17 04:03 PM

[ts2:]

I don't think this would be illegal?

But I'm gonna short WFC anyway. So much bad news.

Sep 17 04:56 PM

[artkarl:]

I work in the Frederick Md. area.
(not it real estate)
A more surreal and suspicious local real estate market couldn't exist.
Proximity to D.C. contributes.

Sep 18 09:56 AM

[Trane250:]

"I have the original purchase documentation on the mortgage from July 21st 2008, when it was bought (by Wells in Frederick MD) from the original funding company in Tempe AZ."

OK, then post it so that we can all see for ourselves. Otherwise, you're blowing hot air.

Sep 18 11:51 AM

[RATHER FISH:]

If what the BANK BANDITS is doing is illegal...whats new?
Don't know what bothers me more is what BANK BANDIT "did" or what they gatting away with NOW and U.S. taxpayer dollars are helping them.

Sep 18 03:07 PM

[Mortgage Prof:]

Possibly the "BANK" (WFB, na) purchased the loan from the parent corporation (WFC) at a discount (i.e.the face value less the anticipated loss).

That way the losses remain at WFC and the Bank does not see a loss on it's books (the value is already written down and so there is no loss unless the value of the property further erodes).

Sep 25 12:47 PM

[SA Editor M...:]

After removing this article to review the questions raised about the original documents, Seeking Alpha agrees that the redactions to protect the identity of the person named therein are appropriate. Mr Denninger has additional correspondence with the person named therein to support his discussion, which are not provided for privacy reasons.

Sep 30 12:09 PM