Clearly Wells Fargo doesn't want the worthless homes anytime soon.....

NEW YORK (Dow Jones)–Wells Fargo & Co.’s (WFC) strategy for modifying its billions in troubled Pick-A-Pay mortgages looks a lot like a game of kick-the-can-down-the-road.

Wells Fargo, the fourth-largest U.S. bank by assets, holds more than $107 billion in debt tied to option-adjustable rate mortgages, a quintessential loan product from the housing boom that allowed borrowers to make small monthly payments in return for increasing their mortgage balance. Now, many Pick-A-Pay borrowers own homes worth far less than they owe in mortgage debt, even as many of them can afford a full monthly payment that pays down principal.

To solve that conundrum, Wells Fargo is taking a gamble: The bank is issuing thousands of interest-only loans that will defer borrowers’ balances for as long as six to 10 years. Wells Fargo is wagering that an eventual rise in housing prices in the country’s worst-hit regions, along with a rise in consumers’ income, will eventually combine to cover the bank’s billions in underwater Pick-A-Pay debt.

“We’re banking on the fact the economy will improve and recover over time,” Michael Heid, co-president of Wells Fargo Home Mortgage, said in an interview.

The only thing they are trying to do is avoid people defaulting today. If a good chunk of people default today then the bank gets shut down but if they can make people think that in 6 years their house that they paid $300K for and is worth $200K now will bounce back to $300K then the bank can get people to default later. The bank knows these people will default they just don't want them all to do it now.

All good points. Wells Fargo clearly inherited a really bad book when buying Wachovia. It's the least bad solution.