Wells Fargo Joins Mortgage Muck

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Up until now Wells Fargo has dodged a bullet with the sub-prime credit crisis. But their luck finally ran out, as it has for everyone who dipped into that pool of “less than perfect credit” loans. The bank has been hit hard, in particular, by the California market, which is increasing in delinguencies and defaults.

The first whiff of Wells Fargo’s home equity woes surfaced last month when the bank reported it lost $153 million on the portfolio in the third quarter, up from $27 million at the same last year.

Wells Fargo’s chief executive, John Stumpf, spooked investors even further two weeks ago when he described the current real estate slump as the worst since the Great Depression and reiterated earlier projections that the bank’s home equity losses would continue to rise next year.

Given that so many other banks had disclosed plans to write off huge losses in the fourth quarter, Wells Fargo might have decided it was an opportune time to clean its financial house too, Morford said.

Of course, the news could have been worse. The losses are still much less than those experienced by fellow lenders. The company expects more write-offs as the months progress and the mortgage crisis deepens.

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