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Wells Fargo considers entering the option-ARM business


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2006 Jun 14, 7:56am   10,931 views  147 comments

by HARM   ➕follow (0)   💰tip   ignore  

future Wells Fargo loan customers

Mortgage slowdown forces Wells Fargo to consider lending options

A few choice excerpts...

Wells Fargo Home Mortgage is looking to less creditworthy borrowers and other niches to boost lending amid an industry slowdown.

"We see a huge opportunity for Wells Fargo to play in that segment in a a very fair and responsible way," Cara Heiden, a co-head of Wells Fargo Home Mortgage, told American Banker.

...Looking to new customer groups to target also helps Wells try to offset the slowdown seen in the mortgage industry as interest rates rise and the pace of home sales declines.

The trade newspaper also said Wells might be considering offering controversial so-called option ARMs, which are adjustable-rate mortgages that give borrowers greater flexibility in repaying the loan but also incurs negative amortization so that the loan balance can actually rise over time.

Heiden told American Banker that option ARMs are an "excellent product" for some borrowers because they offer "wonderful flexibility."

Gee, I don't see *any* problem with Wells entering the NAAVLP biz right at this particular moment, do you?

Let's see: housing affordability in CA now at record lows/close to single digits (hard to say exactly how low, of course, because CAR refuses to release any Housing Affordability Index (HAI) numbers beyond last December). Plus, borrowers already showing signs of stress due to higher rates & option-ARM resets, delinquency & foreclosure activity is on the rise, many sub-prime lenders already laying off staff, etc...

Yup! Looks like a good time to get into the neg-am bid'ness to me!

Discuss, enjoy...
HARM

#housing

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111   Jimbo   2006 Jun 15, 4:26am  

ww2, you say

Me and my wife carpool. Cost is roughly $26 a week combined.

Is this the total cost, including depreciation, insurance, etc? I think if you added up the total cost of ownership of an automobile, you would be astonished.

112   Different Sean   2006 Jun 15, 4:27am  

most econ maths is a waste of time, and politicians etc never pay any attention to it anyway...

the only reasonable economics is asking simple questions like, if i lower interest rates, will it cause a housing boom?

(when randy's away, the econ luddites will play, hee hee)

113   edvard   2006 Jun 15, 4:27am  

Sugar cane Vs Corn... Not sure if there is much of a diffrence in the final product. I have a book at home that goes into great detail on how to produce moonshine, a process that yields 200 proof whiskey, which of course you must cut to 60 proof or it will kill you. But at 200 proof, the stuff is pretty much ethanol. Sugar, Corn, or some variety of grain can be used either seperatly or combined to produce it. Whatever grows in the biggest abundance in the US would be the most ideal. Sugarcane only grows in very limited areas here; It needs to be HOT year round. That Vs corn that will grow anywhere and is somewhat temperature resistant.
I am very interested in the possibility of making non-medicinal hemp legal. You can make TONS of stuff out of it. Oil, Fuel, Plastics, clothes, rope, and so on. It would make a great fuel, and it grows lightning fast, and in most of the country. The ONLY reason it is illegal is because of William Randolph Hurst when he found out that a few companies found a way to make super-cheap paper out of it, thus making his empire of pulp plants obsolete, hence the production of "reefer madness" movies and lobbying in congress to ban it. Totally stupid.

114   Jimbo   2006 Jun 15, 4:28am  

The Alameda ferry is a lot more expensive than that. $10 is what they -charge- not what it costs. In February 2006 the ferry recovered 44.79% of its operating costs from passenger fares. That’s operating costs only. Fares would be closer to $40 to break even under normal business accounting. Ouch.

Very good, you have shown us that you know how to calculate the true cost of riding the ferry.

Now can you calculate the true cost of operating the automobile?

115   edvard   2006 Jun 15, 4:30am  

Jimbo,
The truck is 11 years old. Gas is $26 a week. It has 200k on the odometer. hardly anything has gone wrong with it. Perhaps $500 in parts have been replaced. I do all the work myself. I change the oil. Cost is roughly $7 for the oil and filter at Wal-Mart.
I don't care about depreciation. A vehicle to me is good as long as it runs reliably. I know people with toyota trucks with over 500k on them and still kicking. I know most people trade when they get tired of their car, which is like every 3 years. But I'm not that kind of person, so again for transportation costs, it is a person by person basis. In my case, driving is still way cheaper.

116   edvard   2006 Jun 15, 4:33am  

Oh- the truck was $8500 11 years ago, so if you stretched the vehicle costs out over 11 years, that's $772.72 a year so far. Pretty cheap if you ask me. I think you aught to count time as money too. I get to work in 15 minutes. It would take an hour or more by train. I save hundreds of hours a year at the very least.

117   Different Sean   2006 Jun 15, 4:34am  

Oil, Fuel, Plastics, clothes, rope, and so on. The ONLY reason it is illegal is because of William Randolph Hurst when he found out that a few companies found a way to make super-cheap paper out of it, thus making his empire of pulp plants obsolete, hence the production of “reefer madness” movies and lobbying in congress to ban it.

I've heard that. Can they breed low THC hemp for paper and textile production?

118   DinOR   2006 Jun 15, 4:34am  

WW2,

I'd heard that hemp is really a miracle fiber. You can even make work boots out of it! In so far as it being addictive or contributing to the drug problem all I can say is I've heard if you try to smoke it all you'll get is a terrible headache. Given the quality of alternatives available I don't ever see this becoming a problem.

119   Jimbo   2006 Jun 15, 4:34am  

Most people don’t just go back and forth to work. They may have to drop off or pick up children at daycare, shop for their families etc. I’d have to say I’m in that camp. No one would like to see it work more than me, but we’ve tried.

I have not owned a car for ten years and even with a child, I don't miss it. I live 1/2 block from three bus lines, a produce store is a block away, a butcher two blocks and Safeways is three blocks away.

About twice a month the wife rents a car for three or four hours from City Carshare for about $25 and goes to Costco and Trader Joe's. Every once in a long while we will rent a car or truck to go to Home Depot or for longer trips. I take a cab about once a month.

I figure we save $5,000/yr, conservatively. Put aside $5,000/yr and it starts to add up to real money after a decade.

Sure, not everyone prefers to live the urban lifestyle, but it is a choice almost everyone can make if they choose.

120   Jimbo   2006 Jun 15, 4:39am  

ww2,

What is your insurance cost, if you don't mind me asking? $770/yr depreciation, plus 26*52=$1352/yr fuel costs plus. Your maintenance cost of $50 is unbelievable, I am sorry to say. Even changing your oil and tires costs more than that.

Time is worth a lot, no doubt about it. The main reason I live close in is for the short commute. But you can't even get to the toll booth plaza in 15 minutes from Alameda during the day. Do you work at night or something?

Please time your door to door commute tommorrow so we can get an idea of how much time it really takes.

121   edvard   2006 Jun 15, 4:41am  

Dinor,
Hemp has almost no medicinal quality. You would have to smoke 2 metric tons to get the same effect of a single joint. I highly doubt people would partake of it anymore than smoking dried banana peels.

122   Different Sean   2006 Jun 15, 4:43am  

I get to work in 15 minutes. It would take an hour or more by train. I save hundreds of hours a year at the very least.

there's a trade-off in convenience, but it can work both ways. you can read on the train, and the train will cut through peak hour without stress, whereas the road system wll be completely logjammed... and it requires all your concentration not to have an accident...

what about tolls?

anyhow, if you add up your insurance and rego and consumables like oil and tyres and repairs (and fuel)... it costs me 2 Gs a year just to register and insure the car...

123   edvard   2006 Jun 15, 4:46am  

Sean,
I leave early so I avoid traffic. When you carpool in California, you don't have to pay tolls. I get home at 4:30, thus plenty of time to do the things I like doing vs sitting on a train. I've never had an accident. My insurance is cheap.
Lastly? I like to drive. While it is cheaper for me to drive, even if it were the same or more, I'd probably still drive. We are allowed life's pleasures you know...

124   DinOR   2006 Jun 15, 4:49am  

WW2,

Only 2 metric tons? Light it up dude!

Absolutely, farmers here in Oregon have tried to get some sort of exemption for years! To no avail. You know it could even provide "some" kind of re-birth in a U.S based textile industry. Wouldn't that be strange?

125   Jimbo   2006 Jun 15, 4:50am  

ww2,

The Bay Bridge alone is 11 miles long. At 50 MPH that takes 13 minutes to traverse. Maybe you don't drive the speed limit, though :-)

If you enjoy driving, that is fine, just don't try to make the economic argument when it doesn't really make sense.

126   Peter P   2006 Jun 15, 4:53am  

If you enjoy driving, that is fine, just don’t try to make the economic argument when it doesn’t really make sense.

I hate driving. But I live in the South Bay and I have no choice.

Also, too many scary people in the transit system here. SJPD should start arresting them.

127   Different Sean   2006 Jun 15, 4:54am  

We are allowed life’s pleasures you know…

like smoking cuban cigars!

i virtually did my second degree in the bus going back and forth to work, i could get through a fair amount of reading. not that the degree got me anywhere...

i've had a couple of scrapes in the car, another guy just pulled into me from another lane for some reason while i was going past. i bumped a guy's towbar once when i wasn't watching. but the comprehensive insurance will always be about 1 G every year regardless.

128   Jimbo   2006 Jun 15, 4:55am  

It has been fun talking about transit, probably my number one hobby, but I have to get Ava to the doctor. The poor thing is getting her shots today and daddy has to get her there (on the bus and walking).

I will check back later to see if anyone has offered any serious criticism of my analysis.

129   DinOR   2006 Jun 15, 4:56am  

Jimbo,

No offense but if I want to get lectured by the "commute police" all I have to do is pick up the phone and get the same from any number of my Portland friends that pretend they don't own a car. Especially when they are walking downtown. Pedestrians have over run the city and now cross any where they please against the light with the light whatever. Don't get me started about cyclists. Everyone stuck in urban hell has to create some kind of rationalization as to why their sacrifices are saving the world. If you choose to live THAT close in God love ya' but it's when your crowd hogs all the resources for "bike paths" and walking trails that lead no where is when we have a problem. People in Portland are getting militant about their pedestrian rights and I've heard about enough. No offense.

130   Different Sean   2006 Jun 15, 4:58am  

this one looks interesting:

Snakes in Suits : When Psychopaths Go to Work

131   Jimbo   2006 Jun 15, 5:01am  

The IRS calculates 43.5 cents per mile Robert. That is not close to 23 cents per mile, is 89% more!

AAA says that it is 56.2 cents per mile!

http://www.csaa.com/global/articledetail/0%2C%2C1008010000%257c4512%2C00.html?zip=94131

Here is another set of figures from AAA, which have cost per mile ranging from 37.6/cents per mile to 72.6 cents/per mile. And we have not even started to get into the costs not borne by the driver.

http://www.pacebus.com/sub/vanpool/cost_of_driving.asp

At least be intellectual honest. And you still haven't given me a source, nor attempted to estimate the value of free parking that car drivers recieve.

There Ain't No Such Thing As A Free Lunch.

132   Different Sean   2006 Jun 15, 5:02am  

if I want to get lectured by the “commute police”

maybe they're right when they tell you you're wrong!
(aopologies to denis leary)

133   Jimbo   2006 Jun 15, 5:12am  

Asking someone to calculate the total cost of automobile usage is a "value judgement"?

Please tell me you are making a pun...

134   Different Sean   2006 Jun 15, 5:14am  

it's late... i'm off... (add 17 hours to the timestamp for my TZ)

135   DinOR   2006 Jun 15, 5:27am  

Jon,

Folks that feel that strongly about their position on a "world without autos" really needs to move to Portland. They will be in very good company with all sour grapes and coffee crowd that line 23rd. St. flipping off everyone that drives by. Sour grapes? B/c when their company moves, transfers or just plain folds they refuse to "join the madness" and get a car so they move down the food chain (emp. wise) vice up.

136   DinOR   2006 Jun 15, 5:32am  

Robert Cote'

Thank you. As you are fond of saying PDX is a lightning rod and we have all the failed models to prove it. I think the Post Office even bought a few "Segway's" for delivery. Hm? Funny, just don't see them around anymore!

137   Peter P   2006 Jun 15, 5:36am  

New thread: Bay Area inventory observations

138   HeadSet   2006 Jun 15, 7:15am  

DS says:

whereas FDR got nothing but a cursory ‘thanks’ for entering the war and saving england from the hun (altho he did die inconveniently)…

Uh, England saved itself from the Hun. Then a group of English speakers (American, Canadian, British) pushed the Hun out of France. Of course, this was greatly aided by the Red Army putting pressure on the Hun from the other end of Europe.

139   Jimbo   2006 Jun 15, 9:04am  

Well no one has really added anything of note to the transit discussion.

Ava was such a brave girl, only crying for about 30 seconds during her shots, until I could pick her up. I gave her Tylenol about an hour before, I think that helped. She cried for like two hours after her first set of shots, when her mom brought her.

I am not trying to claim transit is the cheaper solution in all cases: it might make more sense to travel by automobile in Portland, where land is cheaper, trips are shorter, and the population is spread out more. I really have no opinion on it, not having spent any time with the studies. I do know that it is considered some kind of labratory of New Urbanism, which is a movement I am mostly symapthetic with.

But it really irks me when people complain about all the "subsidisies" that transit users get and then refuse to even admit that automobile users get subsidized, too. It smacks of hypocrisy.

140   Jimbo   2006 Jun 15, 11:30am  

Well at least you came back, but still, I notice without any citation for the 28 cents/mile that you pulled out of thin air. And still no estimate what the cost of all that free parking you enjoy.

The truth is that you are not really qualified to participate in this debate and you are trying to cover it up by changing the topic, engaging in ad hominem attacks and when all else fails, just making numbers up. You don't even know what an exteranilty is? Did you know that the 1986 Nobel Prize in Economics went to the person who formalized the study of them?

Our friend is an excellent example of a “liberal rationalizer.” Oh, yes those darn "liberal" disciplines of economics and engineering really can be a bugger can't they? Facts are such inconvenient stubborn things, aren't they?

"A 1994 U.S. Congressional study found that highway-related taxes only covered between 53 percent and 68 percent of the total cost of highway programs when factoring in the external costs of road congestion, accidents and injuries, highway patrols, and air quality impacts to public health." This is from the Saving Energy in U.S. Transportation study by the Office of Technology Assessment. Since the total cost of road construction and maintanence in the US was $330B in 2004, that means that fully $120B was drawn from general taxes. Your laughable .4 cents/mile comes out to $52/year at 13000 per driver per year. Do you honestly expect anyone to take that at face value?

The most amusing part is that you claim that transit is nasty, dirty, expensive, congestion causing and time wasting. Is this a severe case of transferance or what?

Calculations of the impact of a car in use make the generous
assumption that the car has a three-way catalytic converter and
uses 10 litres of lead-free petrol for every 100 km. Over 10
years, the Heidelberg researchers believe that one car will
produce:
 44.3 tonnes of carbon dioxide;
 4.8 kg of sulphur dioxide;
 46.8 kg of nitrogen dioxide;
 325 kg of carbon monoxide;
 36 kg of hydrocarbons.
Each car is moreover responsible for 1,016 million cubic metres
of polluted air and a number of abrasion products from tyres,
brakes and road surfaces;
 17,500 grams of road surface abrasion products;
 750 grams of tyre abrasion products;
 150 grams of brake abrasion products.
 Each car also pollutes soils and groundwater and this
calculated for oil, cadmium, chrome, lead, copper and zinc.
The environmental impact continues beyond the end of the car's
useful life. Disposal of the vehicle produces a further 102
million cubic metres of polluted air and quantities of PCBs and
hydrocarbons.

http://afo.sandelman.ca/cc1.html

141   Jimbo   2006 Jun 15, 11:43am  

One easy way to tell if something is being subsidized is if people will stand in line to get it. I notice there is a 30 minute wait at the toll plaza every day for people crossing the Bay Bridge. How can this be unless automobile drivers are getting something for nothing? Who in their right mind would do this otherwise?

There is no one, I think, qualifed on this blog, to make accurate predictions, on the cost/beneift to society of public transit.

There is only one prediction that is accurate. That is, that if some had their way, they wouldn’t be paying for it.

The exact same thing could be said about the automobile.

142   Jimbo   2006 Jun 15, 12:29pm  

I have to admit though, I find your estimate of 71 cents per mile reasonable.

Each transit mile reduces automobile usage by a factor of three to four times, so cost per user is less for transit, even using your low numbers for automobile costs.

QED

143   Jimbo   2006 Jun 15, 12:30pm  

Sure I made a mistake in translating your numbers. I was in a hurry. Mea Culpa.

144   Jimbo   2006 Jun 15, 12:40pm  

Sorry I can't spend all evening posting here, my wife gets mad which has negative externalities of its own :-)

Nice chatting with you though, in spite of occasional snarkiness. On my side too, I must admit.

145   Different Sean   2006 Jun 15, 6:50pm  

DS says:
whereas FDR got nothing but a cursory ‘thanks’ for entering the war and saving england from the hun (altho he did die inconveniently)…

Uh, England saved itself from the Hun. Then a group of English speakers (American, Canadian, British) pushed the Hun out of France. Of course, this was greatly aided by the Red Army putting pressure on the Hun from the other end of Europe.

well, not really -- england was reeling from the effects of the war, and bombardment and invasion was imminent. churchill was begging FDR to get involved, and isolationist sentiment stopped him from some time. then there was pearl harbour, of course. if germany hadn't overreached, and had stayed just in france and a few other austro-hungarian places like poland, czech territories, etc, it may have regrouped for a subsequent annexation of england. i don't know how long a fascist german european empire would have lasted even if they were successful in invading britain and other places -- it was lucky england had enough foresight to set up a pool of reserves in the north american continent a few hundred years earlier ;)

of course, there were a few self-interested twists in the tale as it developed -- the US hitting Japan hard before the Russians could get there, the general attempt to stop the USSR from taking too many possessions as the next most likely enemy, and so on...

146   Different Sean   2006 Jun 17, 2:04pm  

Where do you think Hitler would have gone after England?

hard to know. you really might have seen a 1984 style world of oceania, eurasia, etc, with russia, the US and some germanic empire the 3 superpowers -- england might genuinely have ended up as 'airstrip one'. there would have been a 3 way arms race. i think there would be some pretty stiff resistance if hitler tried to cross the atlantic and take on the US.

the US at one level wanted to remain neutral and remain isolationist mercantilists and saw it as a 'european war'. and, in retrospect, the devastating effects of total war between evenly matched opponents are so great that it allows a relatively 'peaceful' country like the US to surge ahead economically while the warring countries drive themselves into economic ruin at great loss of life. but that was the european way for centuries, the idiot ideas were deeply ingrained, and at last there has been 60 years of peace (in western europe at least) under modernity.

once again, it's hard to know how long a despotic empire can last ruled by a charismatic leader -- what happens when the leader dies? -- it really started out as a european, french-german war with overtones of millennial movements and imperial ambition. of course hitler got bogged down in the russian winter just like napoleon. and when it all went pear-shaped, he said 'the german people were too weak' to realise his ambitions.

Now you know why the US invaded Iraq. Not the b.s Bush reason to secure Peace of Democracy in the middle east. That’s a crock fed to idiot flag wavers who, now Iraq has turned into a mess, are not waving flags so much.

oh really? i should stop listening to my toby keith CDs then. i haven't posted anything on the PNAC and caspian sea resource ambitions here before, of course ;) i think it's a shame that the last 60 years have seen some increasingly offensive political interference from the US in international politics escalating in this latest rather transparent manoeuvre.

once iraq started going pear-shaped, dubya started talking about nuclear. good thing australia, an ally, has 40% of the world's known uranium resources. maybe that's why halliburton managed to suddenly build a rail link from alice springs to darwin overnight when they had been talking about building one for 100 years without it happening...

147   astrid   2006 Jun 22, 8:09pm  

DS,

I don't think all Chinese goods are crap. There's lots of high quality stuff produced there. It all depends on QC. Apple and many of the major designer labels assemble there. I have an aunt who has a very successful career of managing a major QC testing lab there, so I know good stuff exists, as long as the buyer company puts in the effort.

Walmart stuff, on the other hand, are always crap regardless of place of assembly. The only exception are major brand name goods like Clorox and P&G, who are big enough to resist Walmart's race to the bottom.

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