To begin with, Wells Fargo announced significant changes to its rate structure yesterday. These include major rate decreases that make Wells’ products considerably more reasonable. Loans over $300,000 have especially improved, with an additional 1.10% discount off Wells’ traditional rates. Brokers can check all the latest rates here.
Secondly, Wells is planning major revisions to its broker compensation programs. According to VP, Steve Malone, Wells is “currently analyzing approval rates, funding ratios and a number of other key metrics, to streamline our business and provide better service to our preferred brokers."
Wells says that “in today's lending environment, it's increasingly important to allocate resources to brokers that have a historically higher propensity of submitting deals that fit our criteria and actually close. It is extremely important to reward and strengthen & develop relationships with key partners that understand and support our business model." [That’s a familiar tune.]
Third, Wells has some nice new product sheets on its website. Check them out if you haven’t already.
Last but not least, there’s Wells Fargo’s new open mortgage. Over the last year there’s been a dearth of new mortgage products in the non-prime market. It was therefore nice to see Wells Fargo come to market with this one.
For those not familiar with Wells Fargo in Canada, they are one of the country’s biggest alternative lenders. In 2006, it shifted its focus from traditional subprime lending to lower-risk borrowers who just happen to be uninsurable for whatever reason.
Wells Fargo's primary market is now borrowers with problems documenting their income, and otherwise capable borrowers who simply can’t get financing with a conventional lender. This includes self-employed borrowers with complicated income sources, people with temporarily high debt ratios, and borrowers with weak co-applicants, among others.
Wells Fargo tends to be a temporary lender due to its interest rate premiums. The typical borrower stays with Wells for an average of 15-18 months. Wells is basically a stop for people who need a year or two to build their finances and qualify with an “A” lender.
More Wells Fargo factoids:
For mortgages with co-borrowers Wells bases its lending decisions on the primary borrower (the applicant who makes the most money).
Wells’ interest rates are based on a “Credit matrix” that factors in a client’s credit, down payment, and other factors. Wells also charges a lender fee instead of mortgage insurance (Wells is a portfolio lender that self-insures).
Wells is the only lender left with both 100% financing and 40-year amortizations.
The income of 2nd applicants can be used, even with a poor credit score, because Wells doesn’t hold the 2nd applicant’s credit score against them.
Wells has no restrictions on lending area. Wells will look at rural properties, as well as those in depressed areas.
Wells’ new open mortgage is designed specifically for people whose life events leave them in a situation where they need temporary financing (to repair bruised credit for example).
Steve Malone, Vice President Wells Fargo Home Plan Mortgage, says, “Its ‘open’ feature allows customers to stay with us as long as it takes to rebuild or enhance their personal situation to where they can be placed in a conventional mortgage.”
For pricing, Wells' charges a ½% premium over base rates for its open term. While that premium is very reasonable, the base rate currently starts at 7-8% depending on loan size. So, this is clearly an option meant for difficult-to-qualify applicants who need short-term financing.
The open mortgage is available in 3-year or 5-year terms and applies to purchases, refinances, and business-for-self ( BFS ) applications. As noted above, the maximum loan-to-value is 100% (Note: you need a 640 credit score for 100% financing). Maximum amortization is 40 years.
As with all alternative lenders, the value of the property (i.e. appraisal) is heavily factored into approvals.
If you require more information on this or any of Wells Fargo's mortgage products, any mortgage planner should be able to help.