National Mortgage News reports Wells Fargo recently sold $600 million in distressed subprime loans to Irvine-based Arch Bay Capital.
Paul Muolo of NMN says the loans were originally funded by two mid-sized subprime lenders: Accredited Home Loans and NovaStar Financial.
Arch Bay co-founder Steven Davis declined to comment on the purported sale to his firm, referring calls to his partner Shawn Miller who serves as Arch Bay’s CEO. Mr. Davis didn’t deny that the sale took place but he wouldn’t confirm it either. Mr. Miller could not be reached for comment.
Meanwhile, one question the sale raises is this: How exactly did the publicly traded Wells wind up with so many crummy non-prime loans from these once highflying firms? Answer: I don’t know and Wells isn’t talking. A company spokesman said the bank’s corporate policy is to not discuss its loan auctions.
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The nice thing about the private non-performing loan market is that none of these messy details have to see the light of day, including the price paid. One banker told me that the 35 cents on the dollar that Arch Bay reportedly paid was twice what some hedge fund bidders were offering.
I have calls into Wells and Arch Bay and will update the post if and when I hear back.
Does such a sizable deal signal we really don’t need PPIP? Or, looking at it another way, if paying 35 cents on the dollar is a high bid, then I don’t see how PPIP could help banks’ books.
More from this blog…
- Look who’s doing loan mods
- Lenders abandon houses in some states
- Mortgage rates slide
- Think twice before using one mortgage to pay another
- Obama officials pressure banks for more home-loan aid
- Irvine attorney is first to face discipline over loan mods
- These O.C. homes are about to be foreclosed
- Foreclosure backlog grows in O.C.
- Pimco passes on U.S. toxic-asset plan
- How to make an unaffordable mortgage affordable
- Mortgage fraud is ‘rampant’
- Delinquencies on home-equity loans, credit cards hit records
- Loan servicers prefer big losses to loan forgiveness
- Profiting from an Irvine bank failure
What I’d like to know is whether Wells Fargo (and the other banks) are holding their subprime portfolios on their books at 35 cents (or lower). Somehow I doubt it.
I suspect Wells Fargo is merely the asset manager for MBS portfolios, and as asset manager, they were asked to dispose of these assets. That would explain why they have a portfolio of loans they control that they did not orginate and that they do not have on their own books.
This really isn’t that sizable of a deal in the scheme of things… probably about 3,000 loans, which is just a drop in the bucket compared to the number loans Wells owns and services. Still it’s good to see some deals being made. The borrowers will likely be offered much better modification terms based on what I’ve seen with other distressed asset investors.
The secrecy involved doesn’t surprise me one bit. There have been a lot of deals like this inked between major banks and distressed asset funds, but the banks don’t want attention focused on their subpar assets. Hedge funds aren’t known for their love of media attention under any circumstances.
More US property sold to China and Arab investors.
i’ll tell you, go look at the FTc, Wells Fargo is being investigated by the govt, FTc for home loans administered in California. Wells Fargo has big progblems and they will be much bigger soon. Crooks, all of them
Just got a call from potential new client that used one of these loan mod companies…..she received an email stating that once they receive about $2k more they will complete stage 4 of 4 of their great plan. Unfortunately, she also just received a 3-day Notice to Quit on her front door because she lost her property to foreclosure 3 days before the email. Response from Loan Mod Company? Sorry, nevermind…we are closing our file. As a lawyer, I see too much of this crap and suspect my new specialty will be going after these crooks, frauds and their rent a lawyers license cohorts.