The world of home loans can be more than a little bit complex. Between things like Adjustable Rate Mortgages, cross subsidizing and other exotic products, it can be frustrating for a person looking to get a basic home loan. There is often a high learning curve as the buyer struggles to keep up with and understand many of the complex terms out there.

The largest home loan company in the country, Wells Fargo & Company, believes they have the answer to the information overload dilemma. In an effort to boost profits, they’re selling what can only be called “plain vanilla” mortgages. In a market where home loan companies who are offering exotic products either fail or scale back, Wells Fargo is taking advantage of what they believe to be a real opportunity.

The switch is due, at least in part, to the overall housing slump that has come along with the recent recession. The housing slump was particularly hard on the weaker home lenders. Many of those weaker home lenders had to either close altogether, or to stop making the types of loans that were most profitable, that produced the highest default rates.

Why, exactly, did these loans cause problems? You first need to understand a little bit about some of these types of home loans. Option-ARMs, for example, allow the borrower to defer their interest while they make payments on the principal balance. That’s all well and good until there is a housing slump. When that happens, payment spikes and deferred interest payments cause the mortgage to actually increase as the market price for the home drops. This creates a huge potential loss for the lender.

To underscore the point, you only need to look at what’s happened to mortgage companies in the past couple of years. The biggest home loan providers that offered adjustable rate mortgages included companies like IndyMac, Bancorp Inc., Washington Mutual Inc., Downey Financial Corp., Wachovia Corp., and Countrywide Financial Corp. Each of these has either failed or bought since the recession began.

Wells Fargo was hit by the housing slump, too. They reduced their broker network in size, and now works with around 3,000 brokers. The Wells Fargo Home Mortgage wholesale lending group reduced its staff as well, coming down to around 2,500 employees.

The appeal of the vanilla home loan is obvious. In fact, the vanilla home loan concept has an advocate in the President of the United States, Barak Obama. The administration is proposing legislation that would automatically make any new home loan a vanilla loan without all of the risks associated with more complex loan types. Unless the borrower specifically opts for a riskier loan, they would get a vanilla loan, such as a 30-year fixed mortgage.