Chart of the day: Wells Fargo’s construction loans

By Felix Salmon
September 17, 2009
Teri Buhl found this chart at WLMlab.com. It shows the percentage of Wells Fargo's $38 billion in construction and development loans which are in default, compared to nationwide figures:

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Teri Buhl found this chart at WLMlab.com. It shows the percentage of Wells Fargo’s $38 billion in construction and development loans which are in default, compared to nationwide figures:

wfc.tiff

“Alarming, Alarming, Alarming” is right — especially the last line, which shows that the loans more than three months in arrears are running at more than nine times the national rate. And that’s before the spike in delinquencies which seems certain to hit:

The bank specialized in underwriting short-term loans up to five years during the credit boom of 2005-2007. The standard terms for such loans included interest-only payments on a floating rate with a huge balloon payment in the final year of the loan. If these loans cannot be refinanced, more waves of defaults are inevitable.

“The bank”, here, is Wachovia, not Wells, but it’s all Wells Fargo’s problem now, along with untold billions in contingent CDS liabilities which no one seems to be able to estimate.

I fear that Wells Fargo is representative of the banking system as a whole: since MLEC and TARP and PPIP all failed in their original intent of ridding the system of its toxic loans, those loans remain stinking up balance sheets across the nation. Wells is bad — but then again, so might everybody else be, too.

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Comments
3 comments so far

Not just their construction loans, to be sure. Anyone ever look into how many funky high ltv loans they passed through to fnma? Well Fargo was very happy to do SBA loans as well — anyone checking to see how those are holding up? One example I was told about: Just last year, well after the point where we knew banks needed or had to get very conservative, a young businessman decides he needs an office building to suit his position in life. He talks it over with his buddy at Wells Fargo. Not a problem! SBA loan. Great Terms. Couple of problems though — need to occupy at least 51% of the building, and requires 25% equity. No problem! Nobody checks… just *tell them* you’re going to occupy 51%, and then don’t. Take 500 sq. ft and rent out the rest. Don’t have 25%? That’s ok, 10% will be fine. We’ll just arrange a second loan that the first one doesn’t know about. $400k gets you a $4,000,000 bldg. You’ll have that thing rented out in a jiffy. Income won’t even come close to covering debt service? NOT A PROBLEM Flip it next year for double!

OPEN LETTER TO PRESIDENT OBAMA

re: Disregarding Blatant Proof of Wells Fargo’s Egregious Deceptive Practices Could Result In A Worse-Than-Madoff Situation

Mr. President:

PLEASE launch probes into self-evident false IRS form 1099-A’s connected with foreclosures.

A mere look at Wells Fargo’s false 1099-A’s will expose various White Collar real estate & foreclosure fraud (carried out for years)–likely, another S&L mess! Further, the recent controversy about former Wells Fargo (WF) senior vice president, Cheronda Guyton’s use of the Malibu home which the owners lost due to Bernie Madoff, is unwitting exposition of deceits associated with foreclosure and repossessions. Moreover, Wells Fargo’s internal investigation into the Malibu matter has glaring appearances of coverup –particularly because WF implausibly announced Ms. Guyton acted solely. . .

ENTIRE letter posted at: http://www.pr-inside.com/open-letter-to- president-obama-on-foreclosure-crisis-r1 505916.htm

Posted by Barbara Ann Jackson | Report as abusive

We would like help or comments regarding our “toxic” commercial loan obtained from Wells Fargo Sterling Colorado Nov. 25, 2008 and in default after only 6 months. How is this possible under the current loans “watch dog”? We lost over $275,000 ( our 30% down payment and additional funds to run a restaurant incorporated in this loan), lost our excellent credit rating that we maintained our entire lives, maybe facing foreclosure ( according to Wells Fargo threatening letters, anytime now)and the loss of everything we worked for sofar. We are well into our 50′s and desperate. How did Wells Fargo Sterling Colorado approve such a loan when we had ABSOLUTELY no restaurant experience and the probability of failure and default was extremely high. Was Wells Fargo determined to get the loan fees ($5,000), higher than average interest rate and pretty much anything they could acquire from us, AT ANY COST ? How is this possible in this time and age ? Has Wells Fargo lost its INTEGRITY, FAIRNESS and JUDGEMENT in favor of making money AT ANY COST. Please help with comments or any feedback you may have. Tim Burnett (970) 470-1760

Posted by Tim Burnett | Report as abusive
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