Wells Fargo CEO says housing worst since Great Depression

[leftyf]

Not really bankruptcy, but a related topic...
http://sanfrancisco.bizjournals.com/sanfrancisco/stories/2007/11/12/daily48.html?b=1194843600^1552679&ana=e_abd

[leftyf]

The actual text:

Friday, November 16, 2007 - 1:04 PM PST
Wells Fargo CEO says housing worst since Great DepressionSan Francisco Business Times - by Mark Calvey

Wells Fargo CEO John Stumpf said Thursday that housing is in the worst shape since the economic devastation of the 1930s.

"We have not seen a nationwide decline in housing like this since the Great Depression," Stumpf told those attending a Merrill Lynch & Co. (NYSE: MER) investment conference.

He anticipates hard times ahead for home owners in financial straits -- and their bankers.

"I don't think we're in the ninth inning of winding this," Stumpf said. "If we are, it's an extra-inning game.

"The losses have turned out to be greater than expected because home prices have declined faster and deeper than expected," said Stumpf, who took the reins at the nation's fifth-largest bank earlier in June. California's Central Valley and the Midwest's auto-manufacturing states (namely, Michigan and Ohio) are creating significant mortgage losses for Wells Fargo (NYSE: WFC) and other lenders.

Wells expects additional loan losses in the current quarter and into 2008, especially in its home equity loan portfolio. The bank realized $153 million in home equity loan losses in the third quarter.

Still, Stumpf said the bank has "minimal" exposure to collateralized debt obligations and other troubled mortgage-related securities that have prompted other banks to write off a total of $40 billion -- so far.

On Friday, Keefe, Bruyette & Woods downgraded its rating on Wells Fargo's shares to "underperform" from "market perform." In a note to clients, KBW analyst Frederick Cannon said the San Francisco bank enjoys a strong franchise but it will suffer significant loan losses in the declining housing market.

Stumpf told investors that he was unaware of some of exotic mortgage-related investments being made by competitors until reading about them in the newspaper.

"It's interesting that the industry has invented new ways to lose money when the old ways seemed to work just fine," he quipped.

Stumpf's comments this week were more pessimistic than his luncheon remarks last month to the Financial Women's Association of San Francisco.

At that time, he was critical of some of the risky, exotic mortgages offered by competitors in recent years, such as adjustable-rate mortgages that give borrowers a choice on what monthly payment they'd like to make each month. The so-called option ARMs can have negative amortization which means the loan balance rises over time instead of being paid off.

Stumpf said Wells didn't offer such mortgages because it didn't seem right. The San Francisco bank's federal regulators don't allow negative amortization to occur with credit card debt, Stumpf observed, so why offer such loans on the typical borrower's largest and most important asset?

[TroubleinCalif]

The actual text:

Friday, November 16, 2007 - 1:04 PM PST
Wells Fargo CEO says housing worst since Great DepressionSan Francisco Business Times - by Mark Calvey

Wells Fargo CEO John Stumpf said Thursday that housing is in the worst shape since the economic devastation of the 1930s.

"We have not seen a nationwide decline in housing like this since the Great Depression," Stumpf told those attending a Merrill Lynch & Co. (NYSE: MER) investment conference.

He anticipates hard times ahead for home owners in financial straits -- and their bankers.

"I don't think we're in the ninth inning of winding this," Stumpf said. "If we are, it's an extra-inning game.

"The losses have turned out to be greater than expected because home prices have declined faster and deeper than expected," said Stumpf, who took the reins at the nation's fifth-largest bank earlier in June. California's Central Valley and the Midwest's auto-manufacturing states (namely, Michigan and Ohio) are creating significant mortgage losses for Wells Fargo (NYSE: WFC) and other lenders.

Wells expects additional loan losses in the current quarter and into 2008, especially in its home equity loan portfolio. The bank realized $153 million in home equity loan losses in the third quarter.

Still, Stumpf said the bank has "minimal" exposure to collateralized debt obligations and other troubled mortgage-related securities that have prompted other banks to write off a total of $40 billion -- so far.

On Friday, Keefe, Bruyette & Woods downgraded its rating on Wells Fargo's shares to "underperform" from "market perform." In a note to clients, KBW analyst Frederick Cannon said the San Francisco bank enjoys a strong franchise but it will suffer significant loan losses in the declining housing market.

Stumpf told investors that he was unaware of some of exotic mortgage-related investments being made by competitors until reading about them in the newspaper.

"It's interesting that the industry has invented new ways to lose money when the old ways seemed to work just fine," he quipped.

Stumpf's comments this week were more pessimistic than his luncheon remarks last month to the Financial Women's Association of San Francisco.

At that time, he was critical of some of the risky, exotic mortgages offered by competitors in recent years, such as adjustable-rate mortgages that give borrowers a choice on what monthly payment they'd like to make each month. The so-called option ARMs can have negative amortization which means the loan balance rises over time instead of being paid off.

Stumpf said Wells didn't offer such mortgages because it didn't seem right. The San Francisco bank's federal regulators don't allow negative amortization to occur with credit card debt, Stumpf observed, so why offer such loans on the typical borrower's largest and most important asset?

Thats what happens when they loan to anyone. I mean, alot of them did not even check the applicants pay stub for that matter. Just get em signed up and sell the loan. Let somebody else worry about.......

There own fault, Its going to get worse as we go into 08.......

[leftyf]

Wells has always been ridiculous. They would just send checks to me in the mail and I only had to deposit them and the money was mine. I ripped them up for years, then finally, when closing on my house, I needed one to pay the realtor fees. I never felt like such a scumbag as I did then, trying to get cash from anywhere to be able to sell my house. That one will leave a mark. I was walking around with thousands of dollars of cash advances in my pocket from various creditors so I could hand them over to the realtor. I always intended to pay it back, until that day when I finally realized i was in too deep. I was very scared of a foreclosure for some reason. Well, at least the realtor gave me a $50.00 gift card to Target when it was all over. Yep, couldn't even cover realtor costs on the sale of my home, so I cashed the Wells Fargo check with the intention of paying it back when I consolidated my debt...needless to say, I'm filing a 7 or 13 on them. And they call all the time acting surprised that I haven't paid them...if they had taken a look at my credit report they would have never sent the check, or maybe that's why they sent the check? They gambled on the fact that I have always paid my debts off...until now, that is.
Lefty

[chpxiii]

Frankly, I have no pity for banks or "housing investors" who inflated housing prices to RIDICULOUS levels. Housing prices are sorely over inflated and all of those "investors" who were expecting the housing boom to keep going up (when really, that wave could *NOT* last long) and are now whining about how it's so deflated. I doubt it's as bad as The Great Depression. Personally, I'm hoping for a continued decrease in housing prices as I plan to buy next year.

[HRx]

Frankly, I have no pity for banks or "housing investors" who inflated housing prices to RIDICULOUS levels. Housing prices are sorely over inflated and all of those "investors" who were expecting the housing boom to keep going up (when really, that wave could *NOT* last long) and are now whining about how it's so deflated. I doubt it's as bad as The Great Depression. Personally, I'm hoping for a continued decrease in housing prices as I plan to buy next year.

I agree...I also think that homeowners that were listing there homes for sale at 200% type-profit prices are to blame too, and are now getting smacked it the face for being greedy too.

[treehugger1]

There is no reason to ever feel sorry for turning down money "offered" to you. There are always TWO sides to every debt transaction.

I expect the collection agencies to get very busy in the next year. Or, perhaps some of these financial institutions will get some deals out there to those folks (like me) holding some of the unsecured debt at 29.9%!!! It could be that my and other's financial woes will finally bring my last few creditors to negotiate. I'm sure that I (and others) will soon test these new waters.

[TroubleinCalif]

There is no reason to ever feel sorry for turning down money "offered" to you. There are always TWO sides to every debt transaction.

I expect the collection agencies to get very busy in the next year. Or, perhaps some of these financial institutions will get some deals out there to those folks (like me) holding some of the unsecured debt at 29.9%!!! It could be that my and other's financial woes will finally bring my last few creditors to negotiate. I'm sure that I (and others) will soon test these new waters.

I think before its over, We are going to see some interesting things come about with credit and housing and such. We are only seeing the begining's and its all going to go down hill alot farther in the next year.

[HRx]

I mean c'mon...it doesn't take a rocket scientist to figure out that if you bought your house in say, 2002 for $225k, and are selling in 2006 for $500k+ that this sort of artificial price inflation isn't good for the house market as a whole, and is making the market growing to fast...which is going to cause the rapid growth bubble to burst.

More importantly, a person really doesn't have to be a mathematician to also figure out that a $275k appreciation in value over a four year span is obscenley expensive. The way the real estate market has been inflated...your modest townhome, or small single family home would've reached $1M within the next 5 years!! lol

[chpxiii]

I mean c'mon...it doesn't take a rocket scientist to figure out that if you bought your house in say, 2002 for $225k, and are selling in 2006 for $500k+ that this sort of artificial price inflation isn't good for the house market as a whole, and is making the market growing to fast...which is going to cause the rapid growth bubble to burst.

More importantly, a person really doesn't have to be a mathematician to also figure out that a $275k appreciation in value over a four year span is obscenley expensive. The way the real estate market has been inflated...your modest townhome, or small single family home would've reached $1M within the next 5 years!! lol

PRECISELY!!!

I was just talking to someone who lives in Whittier, California. They purchased their home in 2000 for $82k-$85k (depending on if you spoke to the wife or husband, ) Anyway, their house is now appraised for, get this, and this is ONLY SEVEN years later, hold on to your hats... are you sitting? ok, their house is appraised at $550k! It is a 4bd, 2bth 1365 sq ft.

Unbelievable. That is what, a 600% to 700% increase? I was just thinking that in a few years, itty bitty houses would cost $1M.

It's insane. I think the market NEEDS to deflate, to readjust for prices.

[NotFun]

I agree with you all. I have been in the mortgage business for the last 4 years, and this has been a wild ride. My bank that I work for is cutting back on every single parameter. Its getting to the point where if your not in the 700's, and your parents are not in the 700's we won't write you a loan.

It's just crazy!!