Seeking Alpha

Banks ease standards as mortgage business slows down

  • Wells Fargo (WFC) has lowered the minimum FICO score for borrowers applying for FHA loans to 600 from 640, and JPMorgan (JPM +0.1%) plans to lower LTV standards for both jumbos and conforming mortgages, reports TheStreet.
  • The moves come as the MBA predicts 1-4 family mortgage originations will fall to $1.16T this year from $1.755T in 2013. An early estimate from Inside Mortgage Finance pegs MBS issuance by the GSEs in January of just $67.8B, off 10% since December and the lowest amount since January 2009.
  • "The wall has begun to come down," writes FBR's Paul Miller of the Wells Fargo news. Miller has been calling for easier standards to combat slowing activity, and if Wells is now approving FHA product to riskier borrowers, other large originators are likely to follow suit. In this case, his own estimate of $1.3T in mortgage originations this year could prove conservative, and bank earnings surprises going forward might be on the upside.
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Comments (23)
  • JohnBinTN
    , contributor
    Comments (2638) | Send Message
     
    Nice move. Relaxed lending standards have worked so well in the past...
    12 Feb 2014, 01:12 PM Reply Like
  • wyostocks
    , contributor
    Comments (8852) | Send Message
     
    I seem to think I've seen this move before but I can't remember where or when.
    12 Feb 2014, 01:15 PM Reply Like
  • MEKhoury
    , contributor
    Comments (308) | Send Message
     
    Just the tip
    12 Feb 2014, 01:16 PM Reply Like
  • labas112
    , contributor
    Comments (392) | Send Message
     
    The rip on FHA loans is now three dollars!! LOL
    12 Feb 2014, 01:17 PM Reply Like
  • jlalbalos
    , contributor
    Comments (136) | Send Message
     
    I sure hope zero down is part of the plan as well.
    12 Feb 2014, 01:26 PM Reply Like
  • Phr3d
    , contributor
    Comments (326) | Send Message
     
    quite a large difference between FICO 600 and NINJA..
    just sayin'..
    12 Feb 2014, 01:42 PM Reply Like
  • Mike Andrewes
    , contributor
    Comments (75) | Send Message
     
    I'd like to get a zero down mortgage and at the same time do a reverse mortgage. Can anyone help me out?
    12 Feb 2014, 01:45 PM Reply Like
  • omarbradley
    , contributor
    Comments (964) | Send Message
     
    yeah it's called cash.
    throw in massive propane shortages in the midst of the biggest energy boom in US history and I think we could have a real wild week starting as early as tomorrow.
    12 Feb 2014, 06:30 PM Reply Like
  • User66224
    , contributor
    Comments (207) | Send Message
     
    Many folks have held on to a job and made their payments but couldn't get a sniff from their mortgage holder because their FICO scores just weren't up there. This gives them a little hope.
    12 Feb 2014, 02:01 PM Reply Like
  • june1234
    , contributor
    Comments (3265) | Send Message
     
    Hope it helps . The current 640 is considered average/standard, 600 is considered subprime. 450 score should do the trick though.
    12 Feb 2014, 02:16 PM Reply Like
  • caupachow
    , contributor
    Comments (491) | Send Message
     
    Sheer Desperation Folks!
    12 Feb 2014, 02:22 PM Reply Like
  • SoCalNative
    , contributor
    Comments (601) | Send Message
     
    Wait? What?
    12 Feb 2014, 02:45 PM Reply Like
  • Darren McCammon
    , contributor
    Comments (2134) | Send Message
     
    If I were a bank CEO I would too. That way I could make my options worth something. Pump things up for a few years. If they crash, oh well, maybe I'm out of a job but not before I cash in tens of millions worth of options and shares. Besides, I might not even be out of a job. The US taxpayers might step in to bail me out. After all, the elected government officials are pressuring me to make more loans so they can 'help foster home ownership and the recovery' thus get more votes anyway.

     

    The senior executives at the banks are just doing what we incentivize them to do.
    12 Feb 2014, 03:24 PM Reply Like
  • medzjohn
    , contributor
    Comments (330) | Send Message
     
    Now that the PE and other vultures have vacuumed up the foreclosure deals from the housing crash it's time to let the subprime buyers back in.
    12 Feb 2014, 04:22 PM Reply Like
  • caupachow
    , contributor
    Comments (491) | Send Message
     
    I think Daren McCammon's explanation is so perfect, so brief and simple that even a congressman could understand. EVEN a democrat congressman!
    12 Feb 2014, 05:38 PM Reply Like
  • The Geoffster
    , contributor
    Comments (4221) | Send Message
     
    Every American or anyone living in America or desiring to move to America should receive credit notwithstanding credit worthiness and Congress should repeal the Debt Limit legislation. Let them borrow and spend to their hearts' content and watch your hard assets soar.
    12 Feb 2014, 08:17 PM Reply Like
  • bankingqueen
    , contributor
    Comments (134) | Send Message
     
    Hopey change!
    12 Feb 2014, 09:55 PM Reply Like
  • TAS
    , contributor
    Comments (2616) | Send Message
     
    Here we go again...circa 1998-2008.
    13 Feb 2014, 12:40 AM Reply Like
  • rainmn60016
    , contributor
    Comments (101) | Send Message
     
    Every American should have his or her own home. 0% 1 year adjustable. 110% ltv
    government guarantee. Right to keep home in bankruptcy for everyone!
    13 Feb 2014, 12:44 AM Reply Like
  • ilikemoney
    , contributor
    Comments (17) | Send Message
     
    What could possibly go wrong?
    13 Feb 2014, 01:09 AM Reply Like
  • CassandraSees
    , contributor
    Comments (429) | Send Message
     
    Will all dead applicants please submit your "no documentation needed" applications as soon as possible?
    13 Feb 2014, 06:49 PM Reply Like
  • Ironic_Man3
    , contributor
    Comment (1) | Send Message
     
    Again, who sets minimum FICO scores? is it FHA or WFC? (hint: its FHA). Hate the game folks, don't hate the player.
    14 Feb 2014, 09:17 AM Reply Like
  • terrychauvin
    , contributor
    Comments (23) | Send Message
     
    Remember folks, we buys stocks when we are comfortable with the risks, 640+ is tapped out and banks with there padded balance sheets can afford the risk. Besides what better natural stimuli than a flow of future homeowners who, like the banks, are just recovering themselves. I think another wave up in housing will do wonders for the state of our economy. JOBS,JOBS,JOBS!
    23 Feb 2014, 09:37 PM Reply Like
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