Wells Fargo, the largest U.S. mortgage lender, is edging back into subprime home loans, Reuters reported Friday.
The move comes at a time when the bank is looking to stem declining revenue as its mortgage lending plunges, in large part because of slowdown in the refinancing of home loans. Rising interest rates have led to a drop in refinancing volume at Wells Fargo and other lenders.
According to Reuters, San Francisco-based Wells Fargo feels comfortable lending to some borrowers who pose higher credit risks now that the bank has worked through a lot of its financial crisis-era mortgage problems.
After the crisis, which was driven by a bust in the subprime mortgage industry, banks have steered clear of giving home loans to consumers seen as posing high credit risks.
But, Reuters says:
Any loosening of credit standards could boost housing demand from borrowers who have been forced to sit out the recovery in home prices in the past couple of years, but could also stoke fears that U.S. lenders will make the same mistakes that had triggered the crisis.
Friday, February 14, 2014
Report: Wells Fargo tiptoeing back into subprime home loans
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4 comments:
Here we go again.
I wouldn't worry too much about Wells Fargo. There is a reason they survived the mortgage crisis and that was because they were more conservative than most of their competitors. Most of the subprime fallout they dealt with was inherited from Wachovia - which inherited the mess as a result of the Golden West acquisition. The product Golden West (and Wachovia continued to) promote is not offered and will probably not ever be offered again.
There are sub prime *products* and sub prime borrowers. They should not be confused. lending to people with credit below 720 isn't the same as lending to people with with bad credit and stated income and/or interest only adjustable rate mortgages with lax or no underwriting standards (i.e no income verification or high DTIs na d high LTVs. (Not to mention they aren't tacking on HELOC/HELOANS)
Simply put they are lending to people with bad credit which has to happen and will happen due to all of the government guidelines and programs - WITHOUT all of the above mentioned product attributes and lax guidelines.
Much to do about nothing.
They may boost their lending but not significantly enough to erase the loss of all the Wachovia retail customers they continue to drive away with poor customer service, a horrible on-line banking site, huge restrictions on withdrawing funds from checking accounts and fees for things I have never been charged for in the past. I cannot get away from them fast enough.
Pitiful. My sympathies are with the Wachovia branch personnel whose hands are tied.
We just did a refinance with them and have better than a 720 credit score, and they held both the original mortgage and our second. I have about a 3" file folder of paperwork we had to submit. The reason they aren't making any money is that their focus is messed up.
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