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Wells Fargo picks and prays re pick and pays

The Wall Street Journal had on article here about Wells Fargo’s loan modification strategy for it’s portfolio of negative amortization “pick a pay” loans which allowed owners to make interest only payments or even less while the balance would grow and while equity has shrunk… especially in this market.  Wells Fargo has nearly $107 billion worth of these loans.

Most homes with these loans are way underwater… and many of the home owners still can’t afford payments amortized for this century. What is Wells Fargo doing to solve their problem?  They are making thousands of interest only loans that will defer borrowers balances for as long as 10 years.

This strategy reminds me a bit of what Fannie Mae is doing right now with their lease for deed program and it also reminds me of a time years ago when a certain very large lender rented out its portfolio of real estate owned (REO) homes and managed to actually never lose any money even in a down market.

Is it smart to post pone the inevitable loss?  It’s hard to say.  What the market will do in the next 10 years is anybody’s guess but if Wells Fargo can keep people in their homes long enough the market will eventually recover barring massive catastrophe.  As much as I dislike Wells Fargo I think finally they have a good strategy… although I am slightly cynical about if they will actually follow through with their plan… or if there will be some interesting catches.

If it doesn’t work out and the market goes down or doesn’t recover sufficiently you have my number… guys like me will be there to do more short sales and create more win win situations… mitigating loss for lenders and freeing borrowers from massive debt and credit issues.

Wells Fargo Sign

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Andy Morris is an Ohio real estate broker with an expertise in selling homes on a short sale.  If your Ohio home is heading towards foreclosure or you owe more than your property is worth, please call Andy at 888-4-STOP-IT  to see if you qualify for a short sale with your lender.

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