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Wells Dumps Subprime Correspondents

No new business starting today

June 29, 2007


photo of Coco Salazar

Wells Fargo Home Mortgage is no longer accepting nonprime loans from correspondents.

Effective today, Wells has terminated its correspondent alternative lending operations, the company said in an e-mail statement.

"Wells Fargo Home Mortgage continuously reviews its operations and makes changes to best manage the dynamic mortgage industry," the company stated. "As a result of changing market conditions, we will no longer operate our Correspondent Alternative Lending channel, which purchases nonprime closed loans from correspondent lenders."

The Des Moines, Iowa-based mortgage lender said it exploring alternative options for fulfilling the nonprime needs of correspondent clients, but will continue to serve the nonprime segment through its retail and wholesale channels.

Wells recently restated 2006 annual production lower by about $100 billion, with the bulk of the loss coming from the correspondent-wholesale channel, which had volume revised down to $128 billion from $232 billion.

Correspondent/wholesale production accounted for nearly 46 percent of the total $68 billion fundings in the first quarter, while retail added about 38 percent, Wells reported. Nonprime production, including home equity loans and lines and Wells Fargo Financial volume, amounted to $11 billion.

The correspondent nonprime exit "directly affects our nonprime loan volume, which in turn impacts staffing levels in the areas devoted to managing these loans," Wells said.

Consequently, about 13 employees were laid off in Baton Rouge, La. The affected workers may be eligible for separation benefits and the opportunity to seek other positions within the company, according to the statement.

Earlier in the year, Wells eliminated 320 jobs in California and South Carolina after the February updates to its credit policy for certain nonprime segments generally defined by high loan-to-value, high debt-to-income ratios, lower credit scores and low documentation.

Coco Salazar is an associate editor and staff writer for MortgageDaily.com.

e-mail: [email protected]

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