The Enablers

Wall Street hammered the financial sector again today.  It is almost getting to the point where I could trade in my used Audi and buy CitiGroup in its entirety.  The smoke has drifted away and the mirrors have been shattered, and we are finally coming to see what dire condition our major financial institutions are in.  They got there by being stupid.  They encouraged suicidal financial decisions from their clients / borrowers.  They totally missed the turns in the economy and the real estate industry, and kept on lending.  It’s time to atone.

Granite Ridge is a pretty nice development by Lakemont in NW Reno.  Not great by Somersett standards amenity wise, but decent houses with nice views none the less.  The house I’m profiling was bought new in December 2003 for $415,866 and if probably worth about that today.  Wells Fargo provided the first loan of $322,000 and second HELOC for $52,190. for a total of 90% financing.  Pretty standard for the time.  But then they continued to "enable" the owner down the path of financial ruin:

January 2004 – One month later, Refied for $406,000 plus a $100,000 HELOC.

August 2004 – Opened what looks like a second $100,000 HELOC.

April 2005 – Refi for $571.900.

June 2005 – HELOC opened for $25,000.

August 2005 – HELOC upped to $80,000.

February 2006 – Refi for $616,000 Option ARM, plus a $77,000 HELOC.

September 2006 – Refi $720,000, plus a $89,000 HELOC.

January 2009 – NOD.

Over a 5 year span, WFB allowed their loyal borrower to withdraw $435,000 in equity on their property.  Hey, I’d work for a salary like that.  Around the time of the market peak, the loan values were around $650,000.  and Wells allowed 2 more refinancings that brought the loan balance up to $809,000. 

I’m all about personal responsibility, and pride myself in being able to manage my financial matters, be they up or down.  And I’m not defending the choices made by this buyer.  But would I be able to resist the lure of the candy if I had a "conservitive" bank like Wells in my corner offering me $80,000 a year on my home’s equity and telling me I could afford it?  What were they thinking on this one?  And should I feel one iota of pity for WFB now that their ass is on the platter and they are living off TARP funding?  Where was their due diligence?   Who the heck was their appraiser?

Through all the blame games going on, the banks who initially funded the bad loans are getting the least flak, and I think they probably deserve the most.  So much for consumer protection.  WFB has TARP.  I hope Mr. and Mrs.Granite Ridge at least got an RV to live in out of the deal.

11 comments

  1. steve

    “They got there by being stupid” ha ha ha ha

    “Ass on the platter” “living off TARP funding” ha ha ha ha

    Mike you’ve got this business down! I want some TARP funding! ha ha ha ha

  2. Sean

    Check out 370 Jackson springs in the sterling point subdivision. Bought for $638. I actually made a shortsale offer of 325k this last summer. After no answer after 2 months i walked away. The home was foreclosed on in december. The same floorplan in the same subdivision around the corner is for sale as a bank owned for 313k right now with no offers, I would say this house will sell for less than 300k when it comes back on the market. The kicker is the home was financed by countrywide but the “investor” is actually wells fargo. While Wells Fargo says everything is fine with them financially I think we will see them get hurt in the next 6 months, their stock price went down 24% just today! I hate wells fargo, everytime i go in there to deposit or withdraw all they care about is trying to upsell me something i dont want which is why i put my money into a smaller private bank in town that is in the top 20 safest banks in the country! Anytime i have more than $2000 in wells fargo I withdraw it and put it into my other bank! Let the good time roll! Sean

  3. Reno Ignoramus

    Well Mike, this thread must be thread Number 217 in the history of this blog about a bank and a borrower and a Voodoo money fueled symbiotic dance to hell. Many of these threads have been the result of your fine research over the past 2 years or so. But at this point, what’s left to say here that hasn’t been said dozens of times already about the greed and the stupidity and the the irresponsibility on the part of both the bank and the borrower?

  4. BanteringBear

    Sean posted:

    “I hate wells fargo, everytime i go in there to deposit or withdraw all they care about is trying to upsell me something i dont want which is why i put my money into a smaller private bank in town that is in the top 20 safest banks in the country! Anytime i have more than $2000 in wells fargo I withdraw it and put it into my other bank! Let the good time roll!”

    Good for you. Now, if only we could convince the rest of the population to do the same. Seriously, it’s time to start boycotting the bailed out banks. Eff them. For real.

  5. SkrapGuy

    It isn’t just Wells. The stench arising from all these “too big to fail” banks is making me ill. Citi is probably beyond salvation now without an effective nationalization by the govt. BofA has $300 billion in guarantees which have done nothing to stabilize it. Wells is internally rotting.
    Sean, what local bank do you do with business with if I may ask?

  6. smarten

    Last spring, in anticipation of my market bottom call, we started shopping for HELOCs so we’d have a down payment to make a purchase. One of the ONLY institutions we could find that was still making HELOCs was Wells Fargo. During the loan process the private mortgage banker we were using made the representation that UNLIKE many of the other biggies [like Citibank and B of A], it was sitting on NO subprime mortgage foreclosures because it had not engaged in the stupid lending practices which were dragging down others. She represented Wells Fargo was the safest financial institution in the U.S., and within the top ten in the world!

    Since then we’ve hooked up with an agent who gets all of Wells Fargo’s REOs. I’m not saying his cup is running over, but for a financial institution that supposedly made none of those stupid mortgages…well Mike is demonstrating otherwise.

    I guess if you live by the sword, that’s the way you’ll die.

  7. Sully

    I did some research on local banks for the very reasons mentioned above. I’m now in favor of Heritage Bank. The local version, not the CA bank that was taken over by FDIC.

    It has an A- rating.

  8. KB

    I just looked at the link inclinejj left, i sorted it for washoe county only and saw at least 8 units from the less than grand sierra

  9. KB

    At 137 in washoe county, that is not as bad as I would have thought. I think NV State Bank had more than that just in builder’s REO

    disclaimer: I own stock in WFC and I was killed yesterday, today was a little better

  10. inclinejj

    Wells Fargo also changed the way they report non proforming loans to propt up the stock price..they moved the 30 day late loans out to 90 days late hoping they could modify the loan terms with the borrower so they don’t have to classify the loan as “non performing after 30 days”

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