MOTGAGE LOANS ARE STILL A FESTERING LONG TERM PROBLEM-BAILOUTS OF BANKS DO NOT HELP UNEMPLOYED HOMEOWNERS MAKE THEIR MORTGAGE PAYMENTS

The government will help homeowners stay in their homes-NOT!

Not if the homeowner lost his job, not if the homeowners can not pay a set amount, not if he is too far behind, not if the homeowner does not meet the income guideline, not if the homeowner this and that ,etc... As usual, all the government sponsored programs have nice headlines or names for the help program, but in reality few people qualify for confusing requirements for eligibility or it is too little too late.

Wells Fargo & Co., the biggest U.S. home lender this year, said bad loans jumped in the second quarter as the recession made it harder for borrowers to keep up with payments. The bank dropped 6.6 percent in New York trading.

Assets no longer collecting interest climbed 45 percent to $18.3 billion as of June 30 from the first quarter, the San Francisco-based bank said today in a statement. The increase was disclosed as Wells Fargo reported second-quarter net income soared 81 percent to a record $3.17 billion.

Wells Fargo added to credit reserves amid a 26-year high in unemployment and rising commercial real estate delinquencies. While the acquisition of Wachovia Corp. in January bolstered deposits and home lending, the bank must stanch losses from defaults in California and option adjustable-rate mortgages, ranked among the riskiest loans issued during the housing boom.

“We’re not out of the woods in terms of credit quality,” said Jennifer Thompson, an analyst at Portales Partners LLC in New York. She has a “hold” rating on Wells Fargo, because “with the company more exposed to some higher-risk markets, I’d rather wait for a better entry point,” Thompson said.

Wells Fargo, whose biggest shareholder is Warren Buffett’s Berkshire Hathaway Inc., fell $1.68 to $23.67 at 9:31 a.m. in New York Stock Exchange composite trading, and sold for as little as $23.51. The bank declined 14 percent this year through yesterday.

Profit for the quarter equaled 57 cents per diluted share, compared with $1.75 billion, or 53 cents, a year earlier, the bank said. Revenue almost doubled to $22.5 billion.

Wachovia Loans

The increase in bad assets, including a $5.3 billion rise in loans that aren’t accruing interest, was tied to Wachovia mortgages, the cost of modifications, the difficulty of liquidating holdings, and the deterioration of commercial real estate, Wells Fargo said.

The cost of loans written off as uncollectible jumped 35 percent from the first quarter to $4.39 billion, including $984 million of Wachovia assets, more than double the previous period. The charge-offs widened to 2.11 percent of loans from 1.54 percent in the first quarter, exceeding the 1.85 percent estimate of Sterne Agee & Leach Inc. analyst Adam Barkstrom.

Wells Fargo took writedowns on Wachovia’s riskiest loans at the time of the takeover through so-called purchase accounting. The company said today that losses increased in the portion of the Wachovia portfolio that hadn’t been viewed as impaired at the time.

TARP Repayment

The bank said it generated $14.2 billion toward satisfying the Federal Reserve’s Supervisory Capital Assessment Program, surpassing the $13.7 billion requirement. The process will be completed at the end of the third quarter, Wells Fargo said.

Wells Fargo is the last of the top four U.S. banks to post results. Bank of America Corp., the biggest U.S. lender, said last week that second quarter profit fell 5.5 percent on higher loan losses. JPMorgan Chase & Co., the second-largest U.S. bank reported its first profit increase since 2007 on record investment-banking fees. Citigroup Inc. had a loss, excluding a $6.7 billion gain from selling control of the Smith Barney brokerage unit, as consumer and business loan defaults rose.

Of the four, only New York-based JPMorgan has repaid its bailout funds distributed by the Treasury last year. Wells Fargo said last month it will repay its $25 billion loan “at the earliest practical date.”

Credit Reserves

The lender probably won’t be able to pay back the funds within the next year to 18 months unless it raises more capital, wrote Sanford C. Bernstein & Co. analyst John McDonald, in a report this week.

Wells Fargo added $700 million to build credit reserves, a decline from the first quarter’s $1.3 billion increase. The company incurred a $565 million special assessment fee from the Federal Deposit Insurance Corp. along with a merger-related and restructuring expense of $244 million.

Mortgage originations in the U.S. surged 40 percent in the second quarter to $625 billion, according to estimates from Inside Mortgage Finance publisher Guy Cecala. Wells Fargo reported mortgage banking income of $3 billion in the quarter on $129 billion of originations.

In California, unemployment hovered at a record 11.6 percent in June, compared with a nationwide average of 9.5 percent. Six of the state’s cities are among the 10 with the highest foreclosure rates in the U.S., according to RealtyTrac Inc., an Irvine, California-based company that keeps data on repossessed homes.

“Credit quality is going to get worse,” said Thompson at Portales Partners. “The question is how much does it deteriorate and in what categories.”

It does not take a genius to figure out that loans will continue to go bad as long as people who own homes lose their jobs.

Banks have been at times helpful in lowering interest rates on existing mortgages, however, often the way to get a better loan rate on an existing mortgage is to first default on it. If a homeowner is current, he has little chance of restructuring or modifying his loan, since the bank has no incentive to cut its profit on a "good" loan.

Homeowners have been counseled to first skip a few payments and then the bank will modify the loan....of course this means that the bank may be getting a payment to do so from the government...a way to get money from the taxpayers to redistribute to others.

Is this the way to save the homeowners in the USA, by having others pay their mortgages?