bank tells new customers they need a million dollars to qualify for jumbo refi
Wells fargo Raise the bar for new customers to get a popular mortgage product, CNBC has exclusively learned.
The bank now requires new customers to bring a balance of at least $ 1 million if they want to refinance a jumbo mortgage, up from $ 250,000 previously, according to people familiar with the policy.
The change came on July 1 during an overhaul of lending guidelines that significantly lowered product barriers for existing customers, while making it much more difficult to qualify new customers, said the people, who declined to say. ‘be identified by talking about this decision.
This decision shows how Wells Fargo, America’s largest mortgage lender, is operating under the double pressure of the Coronavirus pandemic and a Federal Reserve cap on its balance sheet. While the the whole industry tightened access to mortgages amid the pandemic, the decline was more pronounced at Wells Fargo, which cannot increase its balance sheet thanks to the Fed’s order, one of twelve regulatory constraints linked to the scandal fake bank accounts in 2016.
In early April, as the bank grappled with the initial upheaval caused by the pandemic, Wells Fargo pulled back the jumbo mortgage market, which is too large a loan to sell to US-backed Fannie Mae and Freddie Mac. The lender said at the time that it would avoid riskier loans and only refinance jumbo mortgages for customers with balances of at least $ 250,000.
The move angered some of the bank’s mortgage staff, who had to turn away clients seeking to take advantage of falling mortgage rates.
Demand for home loan refinancing has been skyrocketing in recent months, and requests for refinancing have been booming. 111% higher than a year ago, according to the Mortgage Bankers Association index this week. Wells Fargo was the biggest player in jumbo mortgages last year, according to research firm Inside Mortgage Finance.
In response, bank managers told their staff that changes were coming that would ease some of these restrictions.
Last week, the bank released an “extended guidelines” that removed the $ 250,000 requirement for existing customers: people with a Wells Fargo bank or brokerage account of any level, or those who already had a loan at the end of June had access to jumbo refinancing.
“The changes we implemented on July 1 dramatically increased the number of borrowers from whom we will accept non-compliant refinancing requests,” Wells Fargo spokesman Tom Goyda said in a mailed statement. electronic.
But for new customers, who previously could bring $ 250,000 to the bank if they wanted a jumbo refinance, the lender has become more demanding. The $ 1 million requirement can be met with a combination of deposits or investment balances, the people said.
“They don’t want to take someone else’s balance sheet and put it in theirs,” one of the sources said. “We are very busy and they wanted to slow down the number of incoming loans.”
The changes come at a difficult time for Wells Fargo. Its revenue is under pressure due to the pandemic, and the lender is the only US mega-bank to disclose it must cut his dividend because it is setting aside billions more for loan losses when it releases second quarter results next week.
The bank also tightened lending standards in its mortgage business during the July 1 overhaul, which could affect anyone applying for a home loan, not just jumbo refinances, according to one. For primary and secondary mortgages, the bank lowered the amount of loans it would approve relative to the value of a property by 5%. For example, loan / value limits for second homes have been reduced from 80% to 75%.
It also increased the amount of money buyers need to have on hand after buying a home, known as the “after-close liquidity requirement,” from 12 months of spending to 18 months, the person said.
And in other areas of activity, the bank always takes precautions. A moratorium on home equity lines of credit, which are a popular way for homeowners to extract equity from their homes, is still in place, residents said. Bank stopped taking HELOC requests in late April, CNBC reported at the time.
And the bank has not resumed its third-party mortgage business, where it buys jumbo loans underwritten by other banks and credit unions, the people said. Wells Fargo closed that part of its correspondent lending business in April.