Wells Fargo is elevating the bar for brand new prospects to get a well-liked mortgage product, CNBC has realized solely.The bank is now requiring new shoppers to deliver a minimum of $1 million in balances in the event that they wish to refinance a jumbo mortgage, up from a earlier stage of $250,000, in line with individuals with data of the coverage.The change got here in a July 1 overhaul of lending pointers that broadly lowered obstacles to the product for present prospects, whereas making it far tougher for brand new ones to qualify, mentioned the individuals, who declined to be recognized talking concerning the transfer.The transfer reveals how Wells Fargo, the most important U.S. mortgage lender, is working underneath the twin pressures of the coronavirus pandemic and a Federal Reserve cap on its stability sheet. Whereas the complete trade has tightened entry to mortgages amid the pandemic, the pullback has been extra pronounced at Wells Fargo, which may’t develop its stability sheet because of the Fed order, one among a dozen regulatory constraints tied to the bank’s 2016 faux accounts scandal.In early April, because the bank grappled with the preliminary upheaval attributable to the pandemic, Wells Fargo pulled again from the marketplace for jumbo mortgages, that are loans which are too huge to be offered to U.S.-backed Fannie Mae and Freddie Mac. The lender mentioned on the time that it will shun riskier loans and solely refinance jumbo mortgages for purchasers with a minimum of $250,000 in balances.That transfer angered a few of the bank’s mortgage personnel, who needed to flip down prospects looking for to reap the benefits of falling mortgage charges.Demand to refinance house loans has been torrid the previous few months, and refinance purposes had been 111% increased than a 12 months in the past, in line with the Mortgage Bankers Affiliation’s index this week. Wells Fargo was the largest participant in jumbo mortgages final 12 months, in line with analysis agency Inside Mortgage Finance.In response, bank managers informed their personnel that adjustments had been coming that will chill out a few of these restrictions.Final week, the bank issued an “growth of pointers” that did away with the $250,000 requirement for present prospects: Folks with a Wells Fargo bank or brokerage account of any stage, or those that already had a mortgage with the agency, as of the top of June had been granted entry to jumbo refinances.”The adjustments we applied on July 1 considerably elevated the variety of debtors from which we’ll settle for purposes for non-conforming refinances,” Wells Fargo spokesman Tom Goyda mentioned in an emailed assertion.However for brand new prospects, who may beforehand deliver $250,000 to the bank in the event that they wished a jumbo refinance, the lender has change into extra discerning. The $1 million requirement may be happy with a mix of deposits or funding balances, the individuals mentioned.”They do not wish to take any person else’s stability sheet and put it in on theirs,” mentioned one of many sources. “We’re very busy and so they wished to decelerate the variety of loans coming in.”The adjustments come at a tough second for Wells Fargo. Its earnings are underneath stress due to the pandemic, and the lender is the one U.S. megabank to reveal that it has to chop its dividend because it units apart billions extra for loan losses when it reviews second-quarter outcomes subsequent week. The bank additionally tightened lending requirements in its mortgage enterprise within the July 1 overhaul, which doubtlessly impacts anybody making use of for a house loan, not simply jumbo refinancings, in line with one of many individuals. For main and secondary house mortgages, the bank lowered by 5% the dimensions of loans it will approve relative to a property’s value. As an example, loan-to-value limits for second houses went from 80% to 75%.It additionally boosted the quantity of cash that consumers have to have readily available after they’ve bought a house, referred to as a “post-closing liquidity requirement,” from 12 months of bills to 18 months, mentioned the individual.And in different areas of the enterprise, the bank remains to be taking precautions. A moratorium on house fairness strains of credit score, that are a well-liked approach for householders to extract fairness from their house, remains to be in place, mentioned the individuals. The bank stopped taking HELOC purposes in late April, CNBC reported on the time.And the bank has not resumed its third-party mortgage enterprise, the place it purchases jumbo loans underwritten by different banks and credit score unions, the individuals mentioned. Wells Fargo shut down that a part of its correspondent lending enterprise in April.
