Wachovia Corp.'s acknowledgment that it has hired investment bank Goldman Sachs Group Inc. to study its troubled portfolios of mortgages means the Charlotte, N.C., bank is likely gauging the market value of those loans in order to eventually sell them.

The final price, market observers say, could mean ugly losses for Wachovia were the bank to actually sell them. The sale of the portfolio could also have implications for whether Wachovia itself might be acquired.

A spokesman for Wachovia said, "Goldman Sachs is performing analytics on our loan portfolio to evaluate various alternatives."

Goldman Sachs declined to comment.

At the heart of Wachovia's troubles are more than $120 billion of "Pick-a-Pay" mortgages — or what analysts call "option-ARM" loans — that allow borrowers to choose their monthly payment, including an interest-only option that actually increases the loan's balance. Wachovia inherited the business of writing and serving Pick-a-Pay loans with its ill-advised 2005 purchase of Golden West, a West Coast lender. Golden West has exposed Wachovia to large mortgage losses.

Now, analysts say Wachovia has hired Goldman — an expert player in the secondary market for souring loans — to find how much those Pick-A-Pay loans, or even the entire Golden West operation, will fetch on the secondary market.

That could be a tough task, says Matt Stadler, chief financial officer at National Asset Direct, a buyer of distressed mortgage portfolios, because the prices for option-ARM loans vary widely compared with other types of mortgages that banks and lenders sell.

"There are a lot of unknowns," Stadler said, including whether the underlying properties are depreciating, even while the loan balances are increasing. "I'm interested to see how this situation with Wachovia resolves itself."

Wachovia's apparent decision to shop some of its loans, and likely take losses now to shed the risk that the loans could deteriorate further, suggests that the bank will not find a buyer for the entire bank, says Dick Bove, analyst at Ladenburg Thalmann Inc.

There are "very few or almost no potential buyers for Wachovia in the market," Bove said. He called Wachovia's hiring of Goldman "strange" and said it's puzzling that Wachovia doesn't seem to know how much its loans are worth.

"One would think that Wachovia has as much knowledge of the distressed loan market as Goldman Sachs does because they operate in that market," Bove said. "Did they hire Goldman Sachs to find a buyer for Wachovia, or did they hire Goldman Sachs to find a buyer for Golden West?"

The Charlotte Observer reported on Tuesday that Goldman had been hired to analyze the bank's loans. The newspaper reported that "a knowledgeable source" said Goldman Sachs is not offering Wachovia advice regarding possible takeovers, although banker Ken Wilson, who has advised on big bank deals in the past, is part of the Goldman team.

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