It’s not entirely fair to lump Wells Fargo in with the other banks who gave out Pay Options but the fate of Well Fargo’s portfolio is very likely related.

HELOC performance hasn’t been as bad as expected yet but with the Alt-A and Prime defaults going up it’s very likely that a ton of HELOCs go to zero. Well Fargo having a massive 80+ billion HELOC portfolio heavily centered in Florida and California should be expected to see a lot of these losses.

What should be of more concern is the default rate in commercial real estate loans on their books is up almost 400% from a year ago. With the CMBX spreads gaping wider than the Grand Canyon we should expect to see a double pinch on Wells as they get hit by both commercial and residential losses. It may not be enough to take them down but I don’t believe they will be as free from the crisis as everyone thinks.

Seems that they are increasing the allowable time to foreclosure. Are they overwhelmed with foreclosures, trying to help the borrower or pushing off losses for another quarter or two of profitability?