Wells Fargo profit rises as loan defaults ease By Palavi Gogoi and Stephen Bernard Summary: Although Wells

Fargo & Co. has been under scrutiny due to the foreclosure mess that created great disorder in the banking industry, their profit has increased by 19% in its third quarter income. The reason why this is the case is because the losses from bad loans have steadily been declining. Fewer of their customers have been defaulting on their loans, as well as being late on their payments of their mortgages and credit cards. Wells Fargo’s competitors have seen this trend as well, which is a hopeful sign for the future of the industry because it is showing more stability financially. In the third quarter, losses from bad loans were down 20%, at $4.1 billion, from third quarter in 2009. They are setting $3.45 billion aside to cover their future losses, which is much less than last year’s $6.11 billion. In addition to the losses from bad loans decreasing, Well Fargo has also seen a 17% increase in new loans to businesses and consumers. Mortgage applications have reached the second-highest level in Wells Fargo’s history. Unfortunately, overall demand for borrowing has not increased very much. At the end of September, the total amount of loans on the books decreased to $753.7 billion, which is over $10 billion less than the previous quarter. The CEO John Stumpf decided that he would not follow in Bank of America and JPMorgan Chase’s footsteps in suspending foreclosures. The rival banks found evidence that thousands of documents were not properly handled, but Wells Fargo insists that all of their “practices, procedures, and documentation for both foreclosures and mortgage securitizations are sound and accurate.” Foreclosure: when a lender/creditor legally repossesses collateral for a loan that has not been paid and is in default
http://www.google.com/search? hl=en&client=safari&rls=en&defl=en&q=define:foreclosure&sa=X&ei=mcLyTJSHKoX 6lwfy58zVDA&ved=0CBwQkAE

Mortgage securitizations: Banks create new “companies” that own a certain number of mortgages and then external investors buy shares in the company for a slightly higher price than the loaned amount. The bank still does the administrative work and the investors received the income from the

customers (people who took out the loans). For the investors, this was a “liquid” asset (they could sell off shares as they please).
http://markharrison.wordpress.com/2007/11/26/what-is-mortgage-securitisation-anyway-and-does-itmatter-it-did-to-northern-rock/

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