More on Wells Fargo
Wells Fargo is just the latest non-prime lender to pull out of Canada, and it caught most observers by complete surprise.
Wells didn’t go into reasons in its press release. All it would say is:
“In response to recent analysis of our operations and the current market environment, at this time, we have made the decision to stop originating consumer real estate loan products in Canada.”
Industry observers, however, speculate that Wells Canada closed the doors because it’s US parent was unhappy with its financial performance.
Sources tell us that the company simply wasn’t able to get approval from its US head office for the products it needed. Without the right products or rates, it was too hard for Wells to generate the volume required to meet its Canadian targets. We heard (and this can’t be verified) that Wells’ Canadian unit did make money, but not enough.
As for defaults, they were reportedly not a problem. We heard that Wells’ defaults were actually under industry averages—which is notable for a non-prime lender.
CAAMP president, Jim Murphy, says, "It's going to have a very large impact on segments of the market.” He said, “We’ve seen a pattern of a number of namely U.S.-based lenders that have exited the field as things have become difficult in the market…It’ll mean less choice, less options for Canadians.”
On the other hand, the effects of Wells' departure may be more psychological to the industry than limiting. While Wells had a few very niche products, its pricing was high and its guidelines often rigid or complex—even for the markets it was targeting. As a result, some feel that Wells didn’t do enough business for this news to be a major market changing event.
This development, of course, is great for lenders like VFC Home Mortgage, Home Trust (which only does subprime business in Ontario now), Equitable Trust, and the other remaining subprime players.
Wells Fargo’s Canadian unit was a $5.5 billion business and has operated in Canada for over 60 years. Its parent, Wells Fargo & Company, is the biggest mortgage originator in the US.
