2007-09-27 - Correspondent Home Equity Lending closure
Wells is done doing outside home equity business, effective September 28th, 2007. Here are the key parts of a notice forwarded to us from them on September 20th:
ATTENTION: Correspondent Clients Correspondent Home Equity Lending to be Discontinued
September 20, 2007
Wells Fargo regularly analyzes the market and makes changes that align with our prudent lending practices. We have determined that we cannot competitively offer home equity products through the correspondent channel with a level of profitability commensurate with the associated risks and our stringent portfolio return requirements given reduced liquidity in today's capital markets. Consequently, we have decided to discontinue offering our home equity products through the correspondent channel.
Wells Fargo Funding remains committed to serving your business needs by offering a variety of first mortgage products. Additionally, we are exploring other referral options to help minimize the impact of this change. Timing of the Change Effective on Friday, September 28, 2007 at 5 p.m. Central Time, we will no longer accept new home equity registrations through Wells Fargo Funding, our Correspondent channel. All loans must fund as committed by 5 p.m. CT on Friday, Nov. 30, 2007. We value our relationship with you and appreciate being the investor of choice for your first mortgage needs. Please contact a member of your regional sales team with any questions you may have.
No concrete word on the staff impact of this change as of yet.
2007-07-27 - Original Alternative Lending Wholesale post
As has become well known in only 24 hours, Wells Fargo has closed down their Alternative Lending Wholesale division, which is their wholesale subprime operations (Retail still operating). Word started trickling in that the closure had been announced internally. Communication was sent that:
Effective on Thursday, July 26 at 5 p.m. CT, we will no longer accept new applications through our Wholesale Alternative Lending channel.
- Loan packages postmarked on or before Thursday, July 26 will be honored.
- Walk-ins will not be accepted as of this announcement.
- All loans must be closed and funded by 5 p.m. CT on August 31, 2007. Files that remain unclosed after August 31 will be returned to the client.
News agencies began reporting on the closure shortly after internal communication had been sent. CNN Money reported:
Wells Fargo & Co.'s (WFC), the nation's second-largest home lender, said Thursday it will stop making subprime mortgages through brokers, in a move aimed at reducing late payments and defaults that have been plaguing the entire mortgage industry.
Many banks sell loans through third-party brokers in addition to their own sales force. Industry data show that mortgage brokers and state-licensed lenders generate about 68% of all residential mortgages in the U.S. In recent months, however, rising delinquencies on mortgages made to less-than-creditworthy borrowers have forced lenders to re-examine their relationships with brokers.
Some lenders have severed ties with brokers deemed as responsible for the chunk of soured loans, while others have been vetting brokers more closely.
Wells Fargo said its subprime "wholesale lending" business accounted for 1.6% of its total residential mortgages of $397.6 billion last year. Cara Heiden, head of the San Francisco bank's home loan unit, said Wells Fargo will continue to offer subprime loans "in channels where the company has direct relationships with consumers."
As part of the move, Wells Fargo will close its subprime wholesale operations in Baton Rouge, La., and Des Moines, Iowa. The move will affect 170 employees in Baton Rouge and 67 in Des Moines.
We note that 1.6% of $397.6 billion is about $6.3 billion.
2007-06-29 - Correspondent Non-Prime (original post)
As of today, Wells is suspending operations for its corresponding non-prime ("alternative") lending division. Text put out by the company and forwarded to us by a number of sources states:
Wells Fargo Correspondent Alternative Lending to No Longer Accept New Registrations or Locks
In recent months, the mortgage industry has faced volatile times associated with slowing housing appreciation, a flat yield curve and dramatic changes in the nonprime market. As a result, Wells Fargo has had to make difficult decisions about the businesses we support.
In Correspondent Alternative Lending, we have found that we simply cannot continue to meet acceptable standards of success while remaining fully committed to our responsible lending practices. For this reason, we have chosen to discontinue doing business under our existing structure. We are reviewing alternatives to help Correspondent Alternative Lending clients meet their nonprime mortgage needs. A Wells Fargo representative will contact you soon to discuss options with you.
Effective on Friday, June 29 at 5 p.m. Central time, we will no longer accept new registrations or locks through our existing Correspondent Alternative Lending program.
See more details here.
Wells was originally the #1 subprime lender as of the MBA's Q2 2006 scoreboard; however in recent months they ceased including their servicing activities, and thus dropped to some lower implied "rank".
As always, if you have any more information, please contact us.
We received this additional information overnight (unconfirmed):
Aside from correspondent being shut down, Well Fargo wholesale has just been "consolidated" Effective June 29th the entire Western Division of Wells Fargo Wholesale has been downsized. The following locations are shut down and every member in those locations have been issued 60 day notices with severance. Rancho Cordova, Ca; Fresno, Ca; Bakersfield, Ca; Portland, Or; Phoenix, Az and the Nevada office. Roughly 500 employees will be let go with no option of relocation or alternate employment by Wells Fargo.