Wells Fargo & Co create underwriting group to keep mortgages inhouse
Wells Fargo & Co has assigned around 400 underwriters to originate mortgages for the largest US home lender, Bloomberg reported. An estimated 40% of the loans will most likely not qualify under the government guidelines that are slated to take effect this week, the report said.
Brad Blackwell, the Head of Portfolio Lending for Wells Fargo & Co, told Bloomberg that the bank is training the underwriting group so that Wells Fargo can ramp up its lending without sacrificing quality. He added that the underwriters will evaluate the loans, including those loans containing terms that will prevent them from qualifying for protections stipulated by the Consumer Financial Protection Bureau or CFPB under the new guidelines.
Wells Fargo is furthering the initiative to try to win over richer clients who are looking for non-conventional loans like those that provide for interest-only payments, the report said. Bloomberg reported that a rising demand for that segment will come at a time when increasing interest rates are reducing the demand for borrowing and lenders are facing the largest regulatory overhaul since the Great Depression.
Zillow Inc Director of Mortgages Erin Lantz told Bloomberg, "As rates continue to rise and refinancing volume continues to contract, lenders are going to be looking for a way to keep their staffs busy."
After blame was placed on the lenders for helping fuel the 2008 credit crisis when it issued mortgages to those who could not afford them, CFPB was directed by Congress to come up with the qualified mortgage rule. The regulations give a degree of legal protection to lenders that meet the guidelines. However, they would also face legal liabilities if they charged more expensive fees for the loans or if they require total debt payments that go over 43% of the income of the borrowers, the report said.