by Calculated Risk on 2/06/2009 04:49:00 PM

From Bloomberg: Wells Fargo May Cut Loans for Some Wachovia Customers

Wells Fargo ... offered to cut mortgage balances for some Wachovia Corp. customers by 20 percent ... Wells Fargo mailed letters to those borrowers, asking for proof of current income and a 2007 income-tax statement, bank spokeswoman Debora Blume said today in an e-mail. ...

“We are encouraged by the response we are getting to our outreach efforts, as it means we will be able to help more people with a solution that works,” Blume wrote.

... San Francisco-based Wells Fargo inherited billions of dollars in future losses when it bought Wachovia for $12.7 billion. Wells Fargo said last week that Wachovia’s option adjustable-rate mortgage portfolio has close to $60 billion of impaired loans.

The real cost of the Wachovia purchase was the pending losses on the Wachovia loan portfolio - and most of those losses will come from the $118.7 billion portfolio of “Pick-a-Pay” option ARMs Wachovia acquired in the Golden West Financial acquisition in 2006.

The Wells offer is probably mostly to ex-Golden West borrowers. We can be pretty sure that Wells thinks this will minimize their losses on these loans. Remember Wells is also receiving favorable tax treatment that makes this more palatable (a somewhat hidden bailout from the taxpayers).