Wells Fargo to Curb Credit
December 4, 2007
Another huge company takes a hit as Wells Fargo & Company announced it will have to tighten its home equity lending standards. The company will also take a special fourth quarter 2007 provision of $1.4 billion (pre-tax), this due in large part to higher losses that the company currently expects.
At issue is the company’s decision to stop acquiring new home equity loans through various indirect means. Wells Fargo and Company does expect to continue to provide home equity loans to its customers, however.
Accordingly, Wells Fargo will discontinue originating home equity loans through wholesalers when the combined total loan-to-value ratio of the second and first mortgages equal 90 percent or more. In addition it will not accept business where the second mortgage is not secured behind a Wells Fargo first mortgage.
As well, it will not acquire home equity mortgages via correspondent relationships, including other mortgage companies or financial institutions.
Those mortgages that have already been accepted through these various means will be put into a liquidating status that will be directed by a dedicated management team who will be responsible for directing the $11 billion dollar portfolio. This amount represents about three percent of the company’s outstanding loan total.