According to CNBC, Wells Fargo raises the bar for new customers to get a popular mortgage product.
The bank is now asking new customers to bring in at least $ 1 million in credit if they want to refinance a jumbo mortgage, according to people who are familiar with the $ 250,000 policy.
The change came in a July 1 revision of the Lending Policy, which largely reduced the barriers to the product for existing customers and made it more difficult for new customers to qualify, said those who refused to be identified and discussed the move.
The move shows how Wells Fargo, the largest US mortgage lender, is operating under double pressure from the coronavirus pandemic and a Federal Reserve cap on its balance sheet. While the entire industry has tightened mortgage access as a result of the pandemic, Wells Fargo's withdrawal has been more pronounced, thanks to the Fed regulation, one of a dozen regulatory restrictions associated with the bank's fake accounts for 2016, can not enlarge its balance sheet scandal.
In early April, when the bank dealt with the initial pandemic turmoil, Wells Fargo withdrew from the jumbo mortgage market, which is too large a loan to US-backed Fannie Mae and being sold to Freddie Mac. The lender said at the time that he was avoiding riskier loans and would only refinance jumbo mortgages for customers with at least $ 250,000 in credit.
This move angered some of the bank's mortgage workers, who had to decline customers to take advantage of falling mortgage rates.
Demand for home loan refinancing has skyrocketed in recent months, and refinancing applications were 111% higher this week than a year ago, according to the Mortgage Bankers Association Index. According to research firm Inside Mortgage Finance, Wells Fargo was the largest provider of jumbo mortgages last year.
In response, bank managers informed their employees that changes would come that would ease some of these restrictions.
Last week, the bank issued an "Policy Extension" that abolished the $ 250,000 requirement for existing customers: people with a Wells Fargo bank or brokerage account of any level, or people who already had a mortgage with the company Access to jumbo refinancing was granted at the end of June.
"The changes we made on July 1 have significantly increased the number of borrowers from whom we accept non-compliant refinancing applications," said Tom Goyda, spokesman for Wells Fargo, in an emailed statement .
But for new customers who previously could bring $ 250,000 to the bank if they wanted jumbo refinancing, the lender has become more demanding. The $ 1 million requirement can be met with a combination of deposits or investment funds.
"They don't want to take someone else's balance sheet and include it in theirs," said one of the sources. "We are very busy and they wanted to slow down the number of loans they received."
The changes come at a difficult time for Wells Fargo. Profits are under pressure due to the pandemic, and the lender is the only U.S. megabank to announce that it will have to cut its dividend as it earmarks billions more for credit losses when it releases second quarter results next week.
The bank also tightened lending standards in its mortgage business in the July 1 overhaul, which, according to one respondent, could potentially impact anyone applying for a home loan, not just jumbo refinancing. For primary and secondary home mortgages, the bank reduced the amount of loans it would approve by 5% of the value of a property. For example, the value added limits for second homes rose from 80% to 75%.
It also increased the amount of cash that buyers must have after buying a home, which is referred to as "liquidity needs after completion," from 12 months of spending to 18 months, the person said.
The bank still takes precautionary measures in other business areas. A moratorium on home loan lines, which is a popular method for homeowners to extract equity from their home, is still in effect. The bank received HELOC applications in late April, CNBC reported at that time.
And the bank has not resumed mortgage business with third parties, where it buys jumbo loans drawn by other banks and credit unions. Wells Fargo closed this part of its correspondence business in April.