Second liens. Fannie, Freddie preferred equity holdings. And, now, Wells Fargo & Co. (WFC) said after market close on Tuesday that it held roughly $250 million in exposure to now-bankrupt Lehman Brothers Holdings Inc. (LEH). The banking giant said in a filing with the Securities and Exchange Commission that it will record other-than-temporary impairment charge against Q3 earnings, likely the third such hit to earnings. Wells said it held approximately $90 million in senior unsecured notes, $109 million in preferred securities, and maintained roughly $50 million in counterparty exposure to the failed investment bank. The bank said last week that it would take a similar hit on preferred holdings of both Fannie Mae (FNM) and Freddie Mac (FRE), which were seized last week by the government amid concerns about solvency of both entities. The company holds roughly $480 million in GSE preferred equity securities, trading at roughly 5 to 10 percent of par value. The hits are clearly adding up: analysts at RBS Capital Markets on Tuesday cut their profit estimates for Wells, citing the impairment charges. They left the bank's rating at outperform, but lowered the Q3 earnings estimate to 40 cents from 53 cents a share, while the full-year outlook dropped to $2.07 a share from $2.20. Wells also maintains significant exposure to second liens. The bank has a substantial $84 billion portfolio of home equity loans — half of which are located in hard hit states like California and Florida; of that total, it has carved out the worst $11 billion for liquidation, with rest remaining as part of its “core” home equity portfolio. In the second lien portfolio set up for liquidation, the percent of loans that saw borrowers miss two or more payments rose during Q2 to 3.6 percent, up from 2.79 percent one quarter earlier. The $73 billion "core" home equity portfolio saw a similar rise to 1.88 percent in 60 day delinquencies, compared with 1.71 percent in Q1. The bank altered its management of second lien charge-offs, meaning that the brunt of mounting losses in the second lien portfolio weren't entirely felt during Q3, and may not have led to strong reserving activity relative to expected charge-offs. Nonetheless, shares in Wells were at 34.68, up nearly 12 percent, when this story was published; most financials had begun to rally in early afternoon trading on Tuesday, as news filtered in that troubled insurer American Insurance Group (AIG) might receive government aid to prevent its collapse. Disclosure: The author held no relevant positions when this story was published; indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.