Interest Rate Roundup

Tuesday, November 27, 2007

Wells announces a $1.4 Bln hit ... and Freddie's ready to ask for $6 Bln

Two late-breaking news developments are worth highlighting in mortgage-land ...

* First, Wells Fargo is announcing a hefty $1.4 billion charge to account for losses on home equity loans (what used to be called second mortgages before everything went politically correct). It also plans to stop originating certain loans through indirect channels -- meaning, through brokers and through correspondent arrangements, rather than its own retail branches.

Specifically, it won't make home equity loans to borrowers with CLTV (combined loan-to-value) ratios of 90% or greater, or to borrowers where Wells isn't also the first mortgage lender. Wells is also going to out its $11.9 billion bundle of 90%+ CLTV, wholesale-channel-originated home equity loans, its correspondent channel home equity loans, and all of the second loans where Wells isn't also the first mortgage holder into a "special liquidating portfolio." Wells estimates it will lose $1 billion in 2008 and 2009 on the portfolio.

* Second, Freddie Mac is going to sell $6 billion in preferred shares -- and slash its dividend by half -- to shore up its capital position. Freddie Mac didn't release any pricing details other than to say its offering is "expected to price in the near term."


Post a Comment

<< Home

Site Meter