Wells Fargo & Co., the nation's largest mortgage lender, is easing some of its lending standards for the high-priced "jumbo mortgages" that it acquires from other banks too large to receive guarantees from government-backed mortgage companies, like Fannie Mae and Freddie Mac, Reuters reports.
Are Banks Loosening Up?
"The purchase market is softer than we thought that it would be," John Shrewsberry, Wells Fargo's chief financial officer, told analysts on a July conference call. "We're not seeing breakout returns to pre-crisis levels of enthusiasm around home ownership."
To make up for the industry-wide drop in mortgage volumes, Wells Fargo began to lower the minimum credit score on fixed-rate jumbo mortgages from 720 to 700 in late July. Wells Fargo also says it's more willing to purchase jumbo loans from other lenders that go toward the purchase of a second home.
On the refinancing front, Wells Fargo officials say they will purchase mortgages where the balance exceeds the size of the borrower's previous loans, also known as "cash-out refinancing," Reuters reports.
The latest loosening of credit comes a few months after the bank announced it would begin to issue home loans to borrowers with credit scores as low as 600 who were eligible for insurance with the Federal Housing Administration. Previously, the bank required a minimum credit score of 640 on FHA-insured loans.
Source: “Wells Fargo Loosens Standards for Jumbo Mortgages,” Reuters (Aug. 6, 2014)
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