Wells Fargo has reduced mortgage balances on 43,500 option ARM’s and counting

[ctr70]

I read where Wells has has reduced loan balance principle on 43,500 option ARM’s they inherited from the Wachovia (World Savings) acquistion. A total of $2 billion or $46,000 per borrower. And they are converting them to super low rate 40 yr fixed interest-only loans.

Who said there was no free lunch? You get to make a 1% teaser payment for 6 years and then have your balance reduced, and convert to a 4.5% 40 yr fixed IO.

The permabears have to factor this in + fannie mae starting to rent out foreclosures. This could severely reduce foreclosures and keep inventory down.

It almost now made sense to have just bought at the peak with an option arm! You got to pay 1% for 6 years and now have your loan balance reduced & get a below market 40 yr fixed IO.

This country continues to reward stupidity and failure and penalize success and careful risk taking.

[Nor-LA-SD-guy]

What I find bizarre is the slow but sure removal of almost all credit in the USA and the explosion of credit in Asia that is now creating housing and other bubbles over there.

I guess that’s one way to make us savers and them spenders.

Makes you wonder if there is a plan or something.

[Nor-LA-SD-guy]

What I find bizarre is the slow but sure removal of almost all credit in the USA and the explosion of credit in Asia that is now creating housing and other bubbles over there.

I guess that’s one way to make us savers and them spenders.

Makes you wonder if there is a plan or something.

[Nor-LA-SD-guy]

What I find bizarre is the slow but sure removal of almost all credit in the USA and the explosion of credit in Asia that is now creating housing and other bubbles over there.

I guess that’s one way to make us savers and them spenders.

Makes you wonder if there is a plan or something.

[Nor-LA-SD-guy]

What I find bizarre is the slow but sure removal of almost all credit in the USA and the explosion of credit in Asia that is now creating housing and other bubbles over there.

I guess that’s one way to make us savers and them spenders.

Makes you wonder if there is a plan or something.

[Nor-LA-SD-guy]

What I find bizarre is the slow but sure removal of almost all credit in the USA and the explosion of credit in Asia that is now creating housing and other bubbles over there.

I guess that’s one way to make us savers and them spenders.

Makes you wonder if there is a plan or something.

[analyst]

[quote=ctr70]

Who said there was no free lunch? You get to make a 1% teaser payment for 6 years and then have your balance reduced, and convert to a 4.5% 40 yr fixed IO.[/quote]

Please tell us where we can read about this deal.

The example given in most accounts was of a 6-year interest-only, with no statement about what was to happen after 6 years.

“One borrower, Danny Annan, an Orange County, Calif., engineer, just finished weighing one of Wells Fargo’s loan modifications. The bank offered to reduce his loan balance by $100,000 and transfer the remaining balance to a six-year interest-only loan with an initial interest rate of about 4.9%, Annan said. The offer will still leave Annan more than $100,000 under water on his home.”

The use of the phrase “initial interest rate” generates the need for follow-up investigation.

Several observations.

Accounts are imprecise whether what is being offered is a loan modification or a refinance into a new loan. If the latter, non-recourse purchase loans may be converted into recourse loans, with dire consequences down the road.

There is probably no principal reduction involved. The balance reduction is probably in the amount of interest not paid by the borrower during the negative amortization period. Wells Fargo reportedly acquired these loans from Wachovia at a 20.4 percent discount from book value, which my arithmetic says may be a good approximation of the percentage of balances attributable to negative amortization (income claimed even though not received).

From the information available so far, there is nothing about this plan that should be appealing to a borrower (from a financial point of view).

[analyst]

[quote=ctr70]

Who said there was no free lunch? You get to make a 1% teaser payment for 6 years and then have your balance reduced, and convert to a 4.5% 40 yr fixed IO.[/quote]

Please tell us where we can read about this deal.

The example given in most accounts was of a 6-year interest-only, with no statement about what was to happen after 6 years.

“One borrower, Danny Annan, an Orange County, Calif., engineer, just finished weighing one of Wells Fargo’s loan modifications. The bank offered to reduce his loan balance by $100,000 and transfer the remaining balance to a six-year interest-only loan with an initial interest rate of about 4.9%, Annan said. The offer will still leave Annan more than $100,000 under water on his home.”

The use of the phrase “initial interest rate” generates the need for follow-up investigation.

Several observations.

Accounts are imprecise whether what is being offered is a loan modification or a refinance into a new loan. If the latter, non-recourse purchase loans may be converted into recourse loans, with dire consequences down the road.

There is probably no principal reduction involved. The balance reduction is probably in the amount of interest not paid by the borrower during the negative amortization period. Wells Fargo reportedly acquired these loans from Wachovia at a 20.4 percent discount from book value, which my arithmetic says may be a good approximation of the percentage of balances attributable to negative amortization (income claimed even though not received).

From the information available so far, there is nothing about this plan that should be appealing to a borrower (from a financial point of view).

[analyst]

[quote=ctr70]

Who said there was no free lunch? You get to make a 1% teaser payment for 6 years and then have your balance reduced, and convert to a 4.5% 40 yr fixed IO.[/quote]

Please tell us where we can read about this deal.

The example given in most accounts was of a 6-year interest-only, with no statement about what was to happen after 6 years.

“One borrower, Danny Annan, an Orange County, Calif., engineer, just finished weighing one of Wells Fargo’s loan modifications. The bank offered to reduce his loan balance by $100,000 and transfer the remaining balance to a six-year interest-only loan with an initial interest rate of about 4.9%, Annan said. The offer will still leave Annan more than $100,000 under water on his home.”

The use of the phrase “initial interest rate” generates the need for follow-up investigation.

Several observations.

Accounts are imprecise whether what is being offered is a loan modification or a refinance into a new loan. If the latter, non-recourse purchase loans may be converted into recourse loans, with dire consequences down the road.

There is probably no principal reduction involved. The balance reduction is probably in the amount of interest not paid by the borrower during the negative amortization period. Wells Fargo reportedly acquired these loans from Wachovia at a 20.4 percent discount from book value, which my arithmetic says may be a good approximation of the percentage of balances attributable to negative amortization (income claimed even though not received).

From the information available so far, there is nothing about this plan that should be appealing to a borrower (from a financial point of view).

[analyst]

[quote=ctr70]

Who said there was no free lunch? You get to make a 1% teaser payment for 6 years and then have your balance reduced, and convert to a 4.5% 40 yr fixed IO.[/quote]

Please tell us where we can read about this deal.

The example given in most accounts was of a 6-year interest-only, with no statement about what was to happen after 6 years.

“One borrower, Danny Annan, an Orange County, Calif., engineer, just finished weighing one of Wells Fargo’s loan modifications. The bank offered to reduce his loan balance by $100,000 and transfer the remaining balance to a six-year interest-only loan with an initial interest rate of about 4.9%, Annan said. The offer will still leave Annan more than $100,000 under water on his home.”

The use of the phrase “initial interest rate” generates the need for follow-up investigation.

Several observations.

Accounts are imprecise whether what is being offered is a loan modification or a refinance into a new loan. If the latter, non-recourse purchase loans may be converted into recourse loans, with dire consequences down the road.

There is probably no principal reduction involved. The balance reduction is probably in the amount of interest not paid by the borrower during the negative amortization period. Wells Fargo reportedly acquired these loans from Wachovia at a 20.4 percent discount from book value, which my arithmetic says may be a good approximation of the percentage of balances attributable to negative amortization (income claimed even though not received).

From the information available so far, there is nothing about this plan that should be appealing to a borrower (from a financial point of view).

[analyst]

[quote=ctr70]

Who said there was no free lunch? You get to make a 1% teaser payment for 6 years and then have your balance reduced, and convert to a 4.5% 40 yr fixed IO.[/quote]

Please tell us where we can read about this deal.

The example given in most accounts was of a 6-year interest-only, with no statement about what was to happen after 6 years.

“One borrower, Danny Annan, an Orange County, Calif., engineer, just finished weighing one of Wells Fargo’s loan modifications. The bank offered to reduce his loan balance by $100,000 and transfer the remaining balance to a six-year interest-only loan with an initial interest rate of about 4.9%, Annan said. The offer will still leave Annan more than $100,000 under water on his home.”

The use of the phrase “initial interest rate” generates the need for follow-up investigation.

Several observations.

Accounts are imprecise whether what is being offered is a loan modification or a refinance into a new loan. If the latter, non-recourse purchase loans may be converted into recourse loans, with dire consequences down the road.

There is probably no principal reduction involved. The balance reduction is probably in the amount of interest not paid by the borrower during the negative amortization period. Wells Fargo reportedly acquired these loans from Wachovia at a 20.4 percent discount from book value, which my arithmetic says may be a good approximation of the percentage of balances attributable to negative amortization (income claimed even though not received).

From the information available so far, there is nothing about this plan that should be appealing to a borrower (from a financial point of view).

[Anonymous]

Why would anyone want a 40-year interest only loan? What exactly do you own? I believe that is called renting. That has got to be the dumbest plan ever!

[Anonymous]

Why would anyone want a 40-year interest only loan? What exactly do you own? I believe that is called renting. That has got to be the dumbest plan ever!

[Anonymous]

Why would anyone want a 40-year interest only loan? What exactly do you own? I believe that is called renting. That has got to be the dumbest plan ever!

[Anonymous]

Why would anyone want a 40-year interest only loan? What exactly do you own? I believe that is called renting. That has got to be the dumbest plan ever!

[Author]

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