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

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...
 
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...
 
Consult well about Adjustable mortgage rates before selecting
Published by Jack Smith on July 23rd 2012 | Mortgage
Adjustable mortgage rates are turning worldwide popular because they offer variations on the rate of...
 
Looking for refinance mortgage loan - How to find the right one
Published by Apil Gupta on June 24th 2012 | Mortgage
In case you are looking to refinance mortgage loan for your home, there are many things that need co...
 
Understand and consult bad credit mortgage rates
Published by Jack Smith on July 23rd 2012 | Mortgage
The people seeking bad credit mortgage rates first require to conduct complete research and pay atte...
 
Should you go for a 15 or 30 year mortgage?
Published by Apil Gupta on June 24th 2012 | Mortgage
There are many times in life when one wants to possess something due to the sheer need of it, but is...
 
Your guide to getting the best mortgage rates
Published by Jack Smith on April 18th 2012 | Mortgage
A systematic and well guided approach will certainly assist you in achieving the best mortgage rate ...
 
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...
 
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...
 
A mortgage club benefits individual lenders to increase their business
Published by Graves Cruz on June 6th 2012 | Mortgage
We have worked alongside The Buy to Let Business since its incorporation....
 
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...
 
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 ...
 
Consultants to guide you for bad credit mortgage rates
Published by Jack Smith on July 26th 2012 | Mortgage
In the process of hunting for bad credit mortgage rates there has been seen an immense rise. But, to...
 
Search well in the market and get best mortgage rates
Published by Jack Smith on June 25th 2012 | Mortgage
For getting best mortgage rates from the market, you need to pull up your shocks and search well in ...
 
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 ...
 
The best mortgage rate is only a systematic approach away!
Published by Jack Smith on May 22nd 2012 | Mortgage
Investigate the property market well and fulfill your dream of achieving the best mortgage rate for ...
 
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...
 
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...
 
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...
 
How to procure loans at Best adjustable mortgage rates?
Published by Jack Smith on June 24th 2012 | Mortgage
The above points can easily help a borrower to seek loans at best rates while saving his money and m...