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That follows the same action Bank of America. Wondering what impact this has to home loans? Personally, and as a WB shareholder who has lost lots, I think it is a good thing. We had lier loans and other fraud by "bad apple" brokers. Most are honest. Most of all I blame the bank for ever buying Golden West and putting their head in the sand.
Last edited by ntrh; 07-22-2008 at 06:30 AM..
Reason: clarify
Any lender's loan portfolio is as good or bad as their Underwriting guidelines and quality control. In my humble opinion, many of these lenders knew exactly what they were buying and considered any potential losses cost of doing business.
Having said that ... yes, there are many Mortgage Brokers who should NOT be in business, as well as many realtors and appraisers. Many of the fraudulent loans made involve shady actions by ethically challenged members of all three professions.
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It doesn't really impact me per se. The products that made Wachovia popular with brokers and borrowers were the Pick-a-Pay Option ARM, which will bite them in the butt mark my words, and their Foreign National program. Being that I've NEVER originated an Option ARM and that I don't work with foreign investors the only impact Wachovia will have on me is the greater economic impact should they end up going under due to that portfolio of neg am loans.
It's not that the loans were 'fraudelent' ...it's that the ppl can't pay!
Pay Option Arms have payment plans that even a 5th grader can pay.
These ppl are walking away from their homes because they dont want to be upside down. Compared to the billions of loans that were done, there are very few fraudelent loans. There's no way that this was the main factor for the losses.
Wachovia was already being 'blackballed' by many brokers. They were notorious for stealing borrowers from the wholesale side. A lot of these companies would offer great programs, then have the Underwriter deny it, and surprisingly the retail department would close the loan.
The ruins that are left of Wachovia are going to be "radioactive" for a long time and no other bank will buy it except for some crazy discount.
This is not a bad thing short term, as there is no real surge of borrowers that will miss any of the offerings that Golden West / Wachovia could offer, but long term it does mean that there will be fewer choices and that usually translates into higher costs...
May excellent comments- a lot of the programs at Wachovia are not the fault of "fraud by bad apple brokers", but because the standards to qualify for their Option ARM was so weak that anyone could qualify. Wachovia also had some of the best standards, so there are worse out there.
Sure there were greedy, uneducated, unlicensed brokers committing fraud. There were also greedy, deceptive borrowers applying for these loans to be the next "real estate millionaire" or to live beyong their income. It did not help that greedy, irresonsible lenders made, promoted and approved these programs. Everyone shares the blame from Wall Street down to the Realtors and home owners.
Reality was suspended much like when "eyeballs" became the mark of a good investment and internet stocks would jump 1000% on their first day on the market. Wachovia should have known when they bough Golden West, much as Bank of America is askign for trouble with CountryWide and their Option ARM portfolio.
That said, anytime there is less choice for brokers/consumers to shop it is bad for them. I could easily bank loans and limit my clients to the programs/rates I offer. With 1 less wholesale lender (even though I never closed a loan with them) it restricts competition, limits choice and usually leads to higher prices.
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