Article Side

Online Article Directory!

Hello Guest! Login or Register to submit articles!

Wells Fargo faces mortgage risk

By Apil Gupta Subscribe to RSS | July 16th 2012 | Views:
loading
 
  



One out of every three home loans in the USA is currently being funded by Wells Fargo and Co., which scaled back its subprime lending in 2004, around 4 years before the housing boom. Besides this move, the bank’s reduced exposure to investment banking and Europe is the reason why Wells Fargo was able to escape depreciation in ratings by Moody’s recently. However, banking experts and ex regulators are concerned over the fact that Wells Fargo, which is the fourth largest bank in the USA, may begin to get over-exposed to the housing market. The firm is adding mortgages to its books as the economy is slowing down and interest rates are near record lows.

However, if there in an improvement in the economy and the rates increase, mortgages will suffer more than other kind of loans, and the income of the firm will reduce. There may be the case that another recession has an impact on the bank, since there defaults would rise. According to Wells Fargo, it has the capacity to manage the risk and does not see a reason to stop expanding. Hundreds, probably thousands of underwriters, loan processors and call center employees are being hired, and the bank is also investing billions in new loans and tens of millions in the infrastructure to manage the same.

For a very long time, investors have praised Wells Fargo for their allegiance to traditional commercial and consumer banking, ignoring risky initiatives like credit derivatives trading. However, this also does not take away the fact that even traditional banking can be pretty risky, and by expanding its operations to such an extent in the mortgage industry, Wells Fargo is inherently dependent for its revenues on just one kind of loan. It is no secret that diversification is of vital significance in the banking industry, and Wells Fargo does not seem to be following this time-tested principle. However, the bank is confident of pulling this off, owing to its decades of experience in risk management, and its officials also mentioned that it is expanding operations even as underwriting standards are conspicuously strict and property values are also quite low. The combination of its delinquency and foreclosure rate was 6.89 percent at the end of the first quarter, which was nearly half of the Bank of America Corp, one of its chief rivals.

Besides the obvious risk to Wells Fargo, the mortgage growth is also raising eyebrows owing to the fact that just one company is having such unparalleled dominance in one of the industries that is so critical to the economy of the USA. According to a senior official at the Federal Housing Finance Agency, it’s important that the mortgage market should become more competitive. However, Wells Fargo sell them on is also a key source of funding for many smaller banks that issue mortgages and to lenders and the company, in the form of correspondent lending. Hence, in a way, the firm is also helping the economy recover.

Apil Gupta - About Author:
Contact author for Low mortgage rates, Home loans, Home refinance, Adjustable rate mortgage, Mortgage loan and Fha loans.

Share on Facebook Tweet It Stumbleupon this post This post is delicious !

Article Source:
http://www.articleside.com/mortgage-articles/wells-fargo-faces-mortgage-risk.htm

Related Mortgage Articles Subscribe to RSS

The top 5 most preferred mortgage types
Published by Apil Gupta on June 24th 2012 | Mortgage
When it comes to choosing the mortgage types that are available to a home buyer, the options are apl...
 
Be informed about Colorado mortgage or Denver mortgage and make a wise decision
Published by Serena Woods on February 15th 2012 | Mortgage
Being informed is never bad especially when you need to make an important financial decision....
 
Find the perfect california mortgage broker online
Published by Apil Gupta on June 24th 2012 | Mortgage
The importance of finding a good California mortgage broker online is paramount in today's times, pa...
 
Get smart about mortgage rates
Published by Jack Smith on April 12th 2012 | Mortgage
The huge variety of mortgage rates makes it much simpler for the buyer to identify and take up the r...
 
You can still borrow money with bad credit mortgage
Published by Jack Smith on June 24th 2012 | Mortgage
Bad credit mortgage is really helpful for those who have bad history in past, and with the help of t...
 
Tips to taken into consideration while choosing mortgage brokers
Published by Geno on March 28th 2012 | Finance
Majority of the home buyers get struck off when it comes to mortgage loans. Lack of knowledge about ...
 
Get out of a bad credit mortgage situation
Published by Jack Smith on June 20th 2012 | Mortgage
If you need a bad credit mortgage, there is no doubt that you are in a tight fix. But bail yourself ...
 
Wells Fargo faces mortgage risk
Published by Apil Gupta on July 16th 2012 | Mortgage
One out of every three home loans in the USA is currently being funded by Wells Fargo and Co., which...
 
The coming back of the long-term fixed rate mortgage
Published by DavidVila on February 14th 2012 | Mortgage
There is a return of long-term deal of mortgage that is as long as 7 years as well as 10 years. Skip...
 
Why is an adjustable rate mortgage so popular?
Published by Apil Gupta on June 24th 2012 | Mortgage
An Adjustable Rate Mortgage (mortgage ARM, for short), also known as the lender's Standard Variable ...
 
Most excellent home mortgage calculator plus home buying tips
Published by Andrew Watson on December 30th 2011 | Finance
For a number of people it certainly is very much common to look around for best mortgage calculator....
 
The real truth about mortgage rates
Published by Jack Smith on April 16th 2012 | Mortgage
While mortgage rates may differ with several companies and diverse plans¸ a good, hard-working barg...
 
Appeal for best adjustable mortgage rates
Published by Jack Smith on July 25th 2012 | Mortgage
In the field of getting adjustable interest rates via the options of best adjustable mortgage rates ...
 
Bad credit and mortgage refinance option
Published by Kam Brar on December 16th 2011 | Finance
As people think, it is not easy to get mortgage refinance with bad credit. There are various factors...
 
Your guide to finding the best mortgage rates
Published by Jack Smith on April 13th 2012 | Mortgage
The best mortgage rate may have to be decided upon after exploring several options but will be certa...
 
The best mortgage rate can make your dream come true
Published by Jack Smith on April 12th 2012 | Mortgage
The best mortgage rates can fulfill your dreams at a dreamlike cost. Get yourself the best deal in t...
 
US mortgage rates hit record low at 3.66%
Published by Apil Gupta on July 16th 2012 | Mortgage
There was a significant drop in the US mortgage rates for 30 year fixed loans...
 
Explore the different options of mortgage rates available
Published by Jack Smith on April 14th 2012 | Mortgage
It is advisable to first thoroughly investigate about the most lucrative mortgage rate in the market...
 
Top 3 benefits of mortgage services for real estate investors
Published by Lending Expertsca on May 11th 2012 | Mortgage
Mortgage services offer several types of financial services for real estate investors as well as for...
 
US mortgage reforms on the way
Published by Apil Gupta on July 16th 2012 | Mortgage
The US mortgage industry is set for reforms in the form of shorter forms, if the Consumer Financial ...