- Wells Fargo reducing operational costs and lending risk as COVID crisis continues, according to BloombergNews
- Despite some major lenders pledging to pause cuts and preserve lending requirements in March, Wells on tract to tighten requirement for refinancing now, according to CNBC
Wells Fargo, the country’s largest US mortgage lender, last week reported its first quarterly loss (-$2.4B) since 2008. The bank is finessing the pressures of the COVID pandemic plus the 2016 asset cap imposed on it by the Federal Reserve for falsifying accounts by tightening its lending requirements.
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On top of its April 1 pull-back from the jumbo mortgage market by only refinancing jumbo mortgages for existing customers with at least $250,000 in balances, Wells recently announced its “expansion of guidelines” on July 1 by lifting the $250,000 balance requirement for existing customers and now requiring new clients to have at least $1M in balances in order to refinance a jumbo mortgage. Additionally, Wells lowered its loan size by 5% relative to a property’s value for primary and secondary mortgages. (For example, loan-to-value limits for second homes decreased from 80% to 75%.)
Obviously, these changes reflect lowered qualification lending barriers for existing customers and higher qualification barriers for new customers. New customers can satisfy the $1M requirement with a combination of deposits and/or investment balances.
Additionally, after a buyer has purchased a home, Wells has instituted a “post-closing liquidity requirement” that mandates buyers to have cash on hand equivalent to 18 months of home ownership expenses rather than the former 12 months of expenses.
Wells’ “expansion of guidelines” now includes…
- An extension of its moratorium on home equity lines of credit that stopped accepting HELOC applications in late April
- A closure to its correspondent lending business whereby it purchases jumbo loans underwritten by other banks and credit unions
- A dividend cut from$.51/share to $.10/share to the bank’s shareholders in order to set aside $8.4B for loan losses anticipated in Q2 results.
Thanks to The New York Times, BloombergNews, Business Insider and CNBC.
Also read: Podcast: How to Make Money NOW | What’s Working Now, Lead Gen, Winning Listings | Tim and Julie Harris, Applying of a HELOC? Do It Sooner Rather than Later, Podcast: What Happens Next For Housing, Economy And You? | Tim and Julie Harris