Wells Fargo & Co., the biggest U.S. home lender, is boosting profits by selling plain-vanilla mortgages after competitors offering exotic products failed or scaled back, the division head of wholesale lending said.

"There was a lot of cross subsidizing, so if your subprime or option ARMs were making 100 basis points you could plow that into your more generic products," Kathleen Vaughan, who runs Wells Fargo Home Mortgage's network of independent brokers, said Tuesday in an interview at a Mortgage Bankers Association conference in San Diego.

"Since those products have gone away there is a much more level playing field; we're paid for the risk and there's a lot less competition."

The housing slump that led to the deepest recession in seven decades forced weaker home lenders to close or stop making the most profitable loans that produced the highest default rates. The biggest providers of option-adjustable rate mortgages -- Wachovia Corp., Washington Mutual Inc., Countrywide Financial Corp., IndyMac Bancorp Inc. and Downey Financial Corp. -- failed or were bought in the past year.

Amid the housing slump, Wells Fargo "greatly reduced" its broker network and does most of its business with about 3,000 brokers, Vaughan said. The wholesale lending group has about 2,500 employees within Wells Fargo Home Mortgage.

Option-ARMs let borrowers defer interest while making payments on principal loan balances. The loans can backfire during a housing

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slump because potential payment spikes and deferred interest payments mean the mortgage increases as the home price falls, boosting a lender's potential loss.

Wells has an $89 billion option-ARM portfolio gained in the acquisition of Wachovia last year. Chief Executive Officer John Stumpf said last month that the risks of loss in those loans have been reduced.