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Wells Fargo is betting that improving home prices and an increase in consumer income will make their new loan modification strategy a success. The nation’s fourth-largest bank (in terms of assets) has introduced a new, and frankly quite interesting, strategy to modify their large portion of Payment Option adjustable-rate mortgages (ARMs).

If you recall the latest mortgage metrics report, Payment Option ARMs are failing at a rate of three times more than the other products in the marketplace, causing trouble to lender and borrower alike.

Here’s a follow up to a story we first published back in early October: Shareholders from Wells Fargo and Wachovia voted today to approve the merger of the two financial institutions, resulting in the formation of one of the nation’s largest banks. In a deal that began back in late October, Well’s Fargo outbid Citigroup to takeover a struggling Wachovia.

“We are pleased that Wachovia’s shareholders agree that the Wells Fargo/Wachovia combination will provide superior growth and long-term value to shareholders, customers, employees and our communities,” said Robert K. Steel, CEO of Wachovia.

According to MarketWatch, Citigroup plans on filing a suit in opposition to Wachovia’s newly announced merger with Wells Fargo:

“Wells Fargo’s conduct constitutes tortious interference with the Exclusivity Agreement,” Citi said in a statement. Citigroup demanded that Wachovia and Wells Fargo abandon a $15 billion stock swap deal that was announced earlier in the day. Citi said it “has substantial legal rights regarding Wachovia and this transaction.”