The Securities and Exchange Commission questioned how Wells Fargo & Co. valued and accounted for a portfolio of soured loans, but the agency concluded its review without further action, after the bank provided more information, the Wall Street Journal reported today. In a newly released exchange of letters between the SEC and the bank, the commission asked Wells Fargo in September about why the value at which it was carrying its “purchased-credit-impaired,” or PCI, mortgages was declining, as the cash the bank expected to realize from those loans was increasing relative to that value. PCI mortgages are loans of deteriorating credit quality that Wells Fargo assumed when it bought Wachovia Corp. about eight years ago during the financial crisis. Wells Fargo responded in an October letter that the portfolio was affected by the bank’s loan-modification efforts and by stronger economic conditions and rising home prices. That led to lower expected defaults and losses on PCI loans and made it possible for more PCI borrowers to prepay or refinance their mortgages, the bank said.
